Pension advice needed

autumn2012_2

People are not reading my posts correctly. I already pay into a workplace pension - Im wanting to open a second personal pension.

Mistermeaner

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And here we are worrying about pensions

Mistermeaner

Fine but you've said lots of weird and incorrect things about your work pension and seem to want to ignore the advice you're getting.

Your reasoning seems confused so are you sure you're making the right decision

Perhaps you could explain why you think you need a personal pension in addition to your workplace one and we can test your logic - it's a pretty important decision after all and you came here for advice from knowledgeable peolle

autumn2012_2

Mistermeaner wrote: »

Fine but you've said lots of weird and incorrect things about your work pension and seem to want to ignore the advice you're getting.

Your reasoning seems confused so are you sure you're making the right decision

Perhaps you could explain why you think you need a personal pension in addition to your workplace one and we can test your logic - it's a pretty important decision after all and you came here for advice from knowledgeable peolle

Ok - Do you have only 1 savings account? Or do you have numerous? Im taking this approach with pensions - Id rather not put all my money in 1 pot. Its a pretty simple approach really

jem16

autumn2012 wrote: »

Ok - Do you have only 1 savings account? Or do you have numerous? Im taking this approach with pensions - Id rather not put all my money in 1 pot. Its a pretty simple approach really

Which again is fine. However you haven't answered some pretty basic questions which are needed to help you see whether you should pay extra into your works pension, pay only into another pension or perhaps do both.

So could you answer these questions?

1. What kind of pension is your works pension - Defined Benefit or Defined Contribution?

2. How are the contributions taken for your works pension - is it using salary sacrifice?

3. If you pay more into the works pension, will your employer pay more too?

bigadaj

autumn2012 wrote: »

Ok - Do you have only 1 savings account? Or do you have numerous? Im taking this approach with pensions - Id rather not put all my money in 1 pot. Its a pretty simple approach really

Yes, probably a misunderstanding of the difference Between the two.

Investments within pensions would typically be within a range of funds and pots held by different institutions and all these are held in trust. So whilst it's theoretically possible for fraud to occur it is virtually impossible, and the main risk is just the variation in investments and their returns.

There's no reason why you can't have separate pensions, and many people do, but understanding why you have them for the right reasons is important.

Mistermeaner

I only have one pension pot

A pension pot is just a wrapper for your money, which is then invested in lots of different things. Think of your pension as a cupboard in which you can store multiple pots.

A personal pension has tax advantages (identical to your work place pension) and because it's personal you choose the provider based on cost/service/products etc as you see fit. No-one will pit free money in a personal pension - you are the sole contributor.

A work place dc pension is identical to the above personal pension apart from you've not chosen the provider, so the cost/service/products are what your employer has chosen. Generally these tend to be lower cost than you could get personally but may have less investment options - they tend to be simpler because they are designed for 98% of the population and they're good at what they do. Remember you still determine how the money in this pension is invested and you have influence with your employer if the service is crap etc

The biggest advantage of work place pensions is that your employer is obliged by law to give you free money, up to certain amounts based on what you pay in. The amount of this free money is set to rise by law. You should as a minimum pay enough in to get the maximum out from your employer - noting the future rises.

Another advantage of the workplace pension is that your employer deals with all the tax stuff so you don't have to.

A separate personal pension is likely unnecessary for your needs at the moment, is likely to cost you more, will complicate your tax affairs and on the basis of some stuff you've said is a product you don't fully understand so presents a risk for making poor decisions.

There may be a place for a separate sipp alongside a workplace pension but this would generally be for people with significant sums saved, entering the twilight of their careers who need a more sophisticated set of tools at their disposal to meet their needs.

Your desire for a separate personal pension seems to be based on a lack of understanding of the products you are comparing, incorrect assumptions about changes in law and an unfounded suspicion of something that you have not explained.

But of course it's your call.

autumn2012_2

Thank you very much for your help and advice.

Mistermeaner

Regardless of what you re personal pension do come back and ask more questions regards investments - that's the next key thing to understand; once you've wrapper your money up in a pension what have you got it doing for you while it's in there.

jamesd

autumn2012 wrote: »

People are not reading my posts correctly. I already pay into a workplace pension - Im wanting to open a second personal pension.

We've read and understood that. What we're trying to do is work out whether it's going to hurt you to do that.

For example, does the workplace pension add more employer matching if you put in more than you do? If so, not using that is immediately discarding half of the money that could be going into your pension pot. So if this applies, we'd tell you to use the workplace pension instead in most cases, because you get twice as much money going into your pension pot for the same cost to you. But only up to the amount your employer matches.

Or say it's salary sacrifice. You'd save 12% employee NI if you're paid in the basic rate range and maybe some of the employer NI saving on top.

It's also worth knowing that it's often possible to transfer out of a workplace pension to a personal pension. So if you worries are long term you can get the benefit now and just move the money to a personal pension later. I'm in the process of setting up a transfer like this from my own work pension at the moment, to get into some investments it doesn't currently offer.

Employer pension scheme costs can be lower as well.

So we want to do two things: make sure you don't miss the potential benefits of your employer scheme and ensure that you don't do the personal pension as well just because of misunderstandings about long term risk.

If it turns out that your employer scheme offers none of those benefits then it makes no difference whether you use a personal pension as well or not, so you might as well go ahead. But before we write that we want to be sure you've checked to see whether it costs you not to use the work one.