Pension advice needed

jamesd

Except in the public sector the only effectively government scheme might be NEST, which is only government to the extent that it is required to take all employers who want to use it. If it is NEST, it's still best to pay in enough to get all available employer matching. Beyond that, a personal penson would be a better choice, probably, so long as you're content to learn about investing.

The main reasons for not putting more into NEST are the high costs compared to some schemes, the ban on transferring out which is expected to be removed and the limited choice of investments. The employer matching is enough to overcome these disadvantages, usually.

The only other really bad deal I know of is Morrisons for employees under about age 45. This is because the value of their contributions decreases as you get younger, to the point that other pensions can be expected to beat it below that sort of age, even after allowing for giving up the employer contribution.

justme111

If you are suspicious about government pension how would you be trusting personal pension - that one can be raided by government as well. I would go for s&s ISA. I would still put whatever amount employer matches into work pension so as to use another basket with a bit different risks and benefits.

dunstonh

I just think putting all your money into 1 pension which is effectively a government pension scheme is unwise.

The only Govt pension schemes are the state pension and public sector pensions. If it is a Govt pension then it would likely be a final salary scheme.

Or are you mixing up auto-enrolment rules issued by the Govt with a pension scheme that is an auto-enrolment scheme but nothing to do with the Govt?

atush

yes, he is apparently.

TBH, I would not worry too much about pensions now, but would worry if Labour gets elected under the current leader.

autumn2012_2

Regardless of if it is or isnt a government backed pension scheme which is entirely why I put the word effectively - Im still going to be opening a private pension. Why would JC have anything to do with my pension? As far as Im aware he is a supporter of workplace pensions however the fact that the amount of tax relief and employer contributions is decreasing to practically nothing over the next 5 years defeats the object altogether

ajbell

You asked for advice. But you dont seem to like what you are getting. You are better off paying more into your employers scheme.

Mistermeaner

Op the work place pension auto enrolment has nothing to do with the government - all they did was pass a law forcing employers to provide them and people to opt in by default. It is for all intents and purposes a personal pension (albeit the provider is chosen by your employer not you - but it is well regulated so will be with a decent firm and if it's not you can lobby your employer to move it)

If/when you move jobs you can transfer whatever pot has been built up into your new employers scheme (I've done this twice myself)

If you choose not to go auto enrolment you are simply turning down free money for no advantage: and in fact will make your life more complicated as you will not have the Benefits of salary sacrifice simplifying your tax affairs.

Be careful as you seem to be ignoring alot of good advice and will make a silly mistake

Mistermeaner

Also tax relief isn't dropping over the next 5 years (or have I kissed something) and as far as I know legislation is nit changing around employer contributions - your company will still have to match the minimum.

dunstonh

Regardless of if it is or isnt a government backed pension scheme which is entirely why I put the word effectively

Its not effectively. It either is or it isnt. It is important you understand this as you are making decisions on assumptions that are wrong which could lead to an outcome that is not best for you.

As far as Im aware he is a supporter of workplace pensions however the fact that the amount of tax relief and employer contributions is decreasing to practically nothing over the next 5 years defeats the object altogether

What facts are those? Again, incorrect assumptions on your part.

jamesd

autumn2012 wrote: »

Regardless of if it is or isnt a government backed pension scheme which is entirely why I put the word effectively

Why do you believe that your work scheme is effectively government-backed?

So far you haven't said why you hold that belief, while we've told you that aside from the public sector pensions aren't government backed.

autumn2012 wrote: »

Im still going to be opening a private pension.

That might still be a good idea, we don't know because we don't know what your workplace scheme would provide in the way of NI savings and employer contributions for any increase in payments you make into it.

If it provides nothing beyond normal income tax relief, a personal pension as well might be a good idea for reasons like getting more investment choice and possibly lower costs.

What you shouldn't expect is any difference in when you can take your pension. The increase from age 50 to age 55 affected all pensions, workplace and personal. The increase expected to at least age 57 from 2028 will also affect both.

What does differ from age 55 is the rules for defined benefit pensions, like final or average salary. The minimum and normal retirement ages for those are set by the scheme rules and those are often 60 and 65 years. There are penalties for taking the pension earlier than that, if it's allowed at all. The solution to this is the one you're already planning to use, to take out a personal pension, the money in that can then be used to cover the gap between 55 and the normal retirement age for the defined benefit scheme. But this is probably irrelevant for you because in the private sector defined benefit pensions have been almost eliminated for new employees, so your workplace pension probably isn't one of this type.

To get around the age 55/57 minimum pension age, the stock s and shares ISA is the best way to go, for as much money as it takes to get your planned retirement date to the age you want and an afford, along with pension contributions to cover the years once pension money becomes available.

autumn2012 wrote: »

the fact that the amount of tax relief and employer contributions is decreasing to practically nothing over the next 5 years defeats the object altogether

The mandatory minimum contribution rules for pension schemes used for auto-enrolment require increases until 2018 as these percentages of eligible pay:

Now: employer 1%, you 0.8%, tax relief at basic rate 0.2%, total 2%
October 2017: employer 2%, you 2.4%, tax relief at basic rate 0.6%, total 5%
October 2018: employer 3%, you 4%, tax relief at basic rate 1%, total 8%

Given that the auto-enrolment rules say here has to be an increase, what is it about your particular workplace pension that causes there to be a decrease?