Joining my company pension

frenchplonka

Hi guys starting a new position tomorrow for a big company and I got this pension joining letter and im wanting someones opinion on which is best.

I earn 16500 per year and im 35 years old my outgoings are minimal and I have no emergancy fund OR other investments these are the options available to me

I can chose to contribute 2 or 3% Obv more is better im guessing

This is where it gets a lil confusing for me I can allocate 100% of it into the lifestyle fund Or i can put % into the following categories

Global Eq Fund

Diversified Fund

World Emerging markets fund

All Stocks index linked gilts index fund

Cash Fund

Pre retirement fund

I can also do Add voluntary contributions and chose the amount % wise again I can match the choices above or invest at different % in each class

masonic

Is your employer matching the amount you pay in? Can you contribute by salary sacrifice? Clearly the choices are quite limited and it wouldn't be sensible to make assumptions just based on their names. Do you know if there are different charges applied depending on what you choose?

frenchplonka

Yes my employer is matching pound for pound

Im not sure what the salary sacrifice is as opposed to the AVC option?

I will get a handbook tomorrow im assuming going into more detail for each option

I will ask HR regarding the charges

masonic

frenchplonka wrote: »

Yes my employer is matching pound for pound

Well in that case you are right about wanting to contribute as much as you can afford.

Im not sure what the salary sacrifice is as opposed to the AVC option?

Salary sacrifice would mean that instead of the money coming out of your salary (and being subject to national insurance), the money you choose to pay in is funded by a reduction in your salary and paid as a contribution by your employer so you don't pay any tax on it.

AVC is a scheme allowing you to make extra contributions, which will give you additional pension benefits depending on the growth of your AVC pot.

frenchplonka

Ok I think its best to come back and ask you guys tomorrow regarding all this as we are just speculating atm.

As for the pound for pound its only up to a max of 3% no idea what that equates to per year tho no idea how to work it out

bigadaj

If I were you I'd contribute 3% to get teh matching contribution, choose the smart pension or salary sacrifice option as that is valuable to you as a basic rate taxpayer.

If you say who the pension is with, ie which insurance or financial company, then it might help, but I'd be tempted to put all into the global equity fund.

and get that emergency fund sorted asap!

ColdIron

Matched contributions via salary sacrifice are very efficient but I think I'd prioritise my emergency fund, you can always adjust your pension percentage later

PeacefulWaters

ColdIron wrote: »

Matched contributions via salary sacrifice are very efficient but I think I'd prioritise my emergency fund, you can always adjust your pension percentage later

Given the small amount of match I'd get the 3% in to pension regardless and focus on emergency fund next.

Once emergency fund is established then I'd be upping the 3%.

Bazofts_Revenge

I think the Global Equity option is a good choice as OP has a good few years to go. Lifestyle funds are in my view too cautious too early. As for putting more in than the 3% maximum that will be matched I wouldn't you would probably find a private pension with lower charges but the OP must find out what charges he will be getting as some Company schemes get a discount. OP have you any other pensions? You may want to look at what charges any of these may have and see if they are worth transferring.

richyg

With regards charges - some of the larger companies don't seem too bad now - the one I work for is 0.30% platform charge plus 0.12% on funds with no purchase/sale/rebalance charges. Reduces to .20% over low to mid 10k

All in at 0.42% including a fund charge isn't too bad in my opinion.

It might give the original poster something to thing about anyway. Better late than never with the savings.

Agree with the poster that said get it set up at the max match level via salary sacrifice and to be honest you wont miss the money as you wont have had a payslip without it being deduced.

Pincher

Presumably, the main pension attracts pound for pound employer contribution, but not the AVC. Obviously grab the pound for pound first.

I would leave the AVC till the end of the tax year, and put in what you can afford as a lump sum. £16,500 is not that much to live on.