Annual Decision on Savings!

Albermarle

It seems my pension is Standard Life Passive Plus III Pension Fund - workplace scheme
Currently with about £26.5k in it
Is this a fairly safe pension? I've had it 5 years and I remember when I took it out I was advised it was fairly low risk

Better to be clearer on the general nomenclature surrounding pensions.

The pension itself is neither safe or unsafe. It is just an administrative vehicle that deals with your payments in , tax relief etc and holds the investments for you .

Your money is actually in the Fund mentioned . As it is an investment based fund it is never going to be safe , in the sense that it will never go down in value. However this fund is relatively low(ish) risk ( even a bit staid ) and the volatility should not be too high. 

You could move funds within the pension to even lower risk or higher risk , or have more than fund. 

AlanP_2

Pension contributions will attract tax relief, sometimes this s handled within the payroll system (taxable pay is gross pay less pension contribution) or at the provider end (your contribution has tax relief added).

There is also the possibility that your employer operates a Salary Sacrifice scheme which saves NI as well but you would probabaly know if that was the case.

All investments have a degree of risk, as does your cash savings, the objective is to maximise returns without taking more risk than you are comfortable with. You could, for example, put all your savings in Bitcoin (very, very high risk of making a significant loss allied with what appears to be unlimited upside on the price); or buy Tesla shares (just very high risk  ).

The most sensible route would be something that has a good prospect of making money over time but little chance of falling dramatically and staying at the low point. This is what you are doing with your PP3 fund inside the pension.

Personally I would go further up the "risk ladder" and look at PP4 or even 5 if you wanted to stick with those SL offerings if I had many years before I needed to access the funds.

Bear in mind that you could be living off your pension investments until you are in your 90s. Subtract your age from 95, then subtract your answer from 2021 and then go to https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator and put your starting year in - that gives you an idea of how inflation can shred the value of uninvested cash.

virenque

Standard Life - Passive Plus III is roughly 50% equity, 40% bonds and 10% property. As Alan above says above, you're probably in PP3 due to being late forties/early fifties? Can ask to be moved to PP4 or 5 if you want more equity risk.

Ljc80_2

I'm actually 40, maybe I type in a older way!
I just remember when it was getting set up at work the guy said if i just wanted something that I didn't have to be too involved with and had low risk that was a good bet.

virenque

PP3 is pretty much Standard Life's version of VLS 60, so I probably should have said early forties ;-)

MaxiRobriguez

Ljc80_2 said:

I'm actually 40, maybe I type in a older way!
I just remember when it was getting set up at work the guy said if i just wanted something that I didn't have to be too involved with and had low risk that was a good bet.

£26.5k in a pension for someone who is 40 isn't particularly good, sorry to say. Time to address that, and what better way than additional contributions that allow you to avoid income (and maybe NI) tax.

Ljc80_2

MaxiRobriguez said:

Ljc80_2 said:

I'm actually 40, maybe I type in a older way!
I just remember when it was getting set up at work the guy said if i just wanted something that I didn't have to be too involved with and had low risk that was a good bet.

£26.5k in a pension for someone who is 40 isn't particularly good, sorry to say. Time to address that, and what better way than additional contributions that allow you to avoid income (and maybe NI) tax.

Yes I suspected that so I will look to address over the next few years. Now I have a savings pot and smallish mortgage I don't have any excuses!

Albermarle

virenque said:

PP3 is pretty much Standard Life's version of VLS 60, so I probably should have said early forties ;-)

It might be their version, but these Passive Plus funds are not great performers.
PP3 - one year + 2% ; VLS 60 + 7%
PP3 - five years + 30% : VLS 60 +60%
The SL funds have a large UK% ( even larger than VLS) and the general performance is poor.
PP3 was classed as the worst default fund in a recent list .
OP - Do not let this put you off adding more to the pension, as 'past performance is not a guide to the future' and whilst your pot is still small the effect of fund performance is low, compared to the benefits of adding more each month .
Just at some point in the future you may want to consider the fund choice.

virenque

Yeah 21% in UK equity and 16% in UK bonds will definitely have it lagging at the moment!

Ljc80_2

I will speak to my employers about increasing contributions. If they dont want to contribute more on their part then:
On the VLS type thing, are these investment schemes i could just open and contribute each month, like i do currently with my ISA? If so im thinking i could just leave my current ISA pot as it is so I keep that wrapped up. Leave my employee pension as it is as its a relatively safe no risk one, then open a Vangaurd one and contribute each month - effectively taking over from current saving payments and also overpay mortgages a little each month.