Pension advice for a rookie

SPRichards

Hello all,

I posted a week or so back asking for advice on savings, and I got some great advice, some of which was relating to my pension. Which is why I'm here now. I have been equally neglectful of my pension (perhaps more so) as I have my savings/finances in general. I'm 33 now and need to turn this around. I really want to become financially competent and enjoy all the benefits of doing so. I want to own property, I want to invest in funds and generally grow wealth. 

My pensions to date have always just been left on auto pilot. I've managed to locate my accounts for most of them (the last 3 at least). Their values range from about 2k - 7.5k

My work's autoenrollment pension is with The Peoples Pension, which doesn't have amazing review on googling. I'm new to this company so looking to get access to my pension account soon. Following the pension advice on this website, I'd be looking to contribute 16.5%~ (half my age). As a baseline. For the sake of doing the maths I earn 57k p.a from salary and £4k p.a from subletting. (both paid monthly). 

However, after looking into pensions a little more, and looking into investing a little more, a SIPP seems like a reasonable option... at least to my inexperienced eye. 

Would a SIPP be a good option? I'm not adverse to a little risk, and if I can use a platform like Vanguard for example, I could consolidate my existing pensions into that account and set it up to take £x amount per month. And while I'm learning just invest in index funds or something where I don't select everything I wish to buy; that can come once I've learned a lot more. The idea is I get some exposure to investing, save for retirement and maybe start getting some dividends and being able to reinvest. 

Or is just consolidating my old pensions into my new work one the best option? And start the SIPP with new funds alone (Or dont start a SIPP at all?). 

Any and all advice is most appreciated. 

Thanks! 

MX5huggy

Does your employer offer Salary Sacrifice for pension contributions? This is better than making SIPP contributions tax wise. 

Do you have children? If you make pension contributions to get your income below £50k you get to keep child benefit. 

Get a Global Index fund buy and forget for 30 years. You’ll buy accumulation funds so the dividends are reinvested automatically (compared to income units where the dividends are added to your account as cash.). 

I would put your old pensions into one new SIPP unless one of them was particularly good fees wise. The People pension is ok but I would consolidate to it. 

SPRichards

MX5huggy said:

Does your employer offer Salary Sacrifice for pension contributions? This is better than making SIPP contributions tax wise. 

I will have to find this out. Hope to have a chat about my pension at some point this week. 

MX5huggy said:

Do you have children? If you make pension contributions to get your income below £50k you get to keep child benefit. 

I do not have any children, so can't take advantage of that unfortunately. 

MX5huggy said:

Get a Global Index fund buy and forget for 30 years. You’ll buy accumulation funds so the dividends are reinvested automatically (compared to income units where the dividends are added to your account as cash.).  

So this would be in addition to the SIPP? Or is this a suggestion of what funds to get within the SIPP?
As for funds; something along the lines of the S&P 500 would be reasonable? 

MX5huggy said:

I would put your old pensions into one new SIPP unless one of them was particularly good fees wise. The People pension is ok but I would consolidate to it. 

Ok, sounds like a plan. Now, I assume I would continue to fund this with monthly deposits? I'm just trying to gauge how much I would put into this, if its in addition to a separate non-SIPP investment too. I feel like at most I'd want to do £500 per month, maybe a 50/50 split between the SIPP account and a general account?

Thanks again for the advice! 

penners324

You'll need to keep the People's Pension scheme going.

You could open an account with the likes of PensionBee, Vanguard, Hargreaves Landsdown, Nutmeg, just to name a few. Most ask what level of risk you're happy with and will invest it in funds for you. So no real work to do.

At your age a higher risk fund might be suitable. 

These are SIPPs, there's not a general pension account these days.

Marcon

MX5huggy said:

Does your employer offer Salary Sacrifice for pension contributions? This is better than making SIPP contributions tax wise. 

To be clear, salary sacrifice is better in terms of potential savings on NI. 

Albermarle

penners324 said:

You'll need to keep the People's Pension scheme going.

You could open an account with the likes of PensionBee, Vanguard, Hargreaves Landsdown, Nutmeg, just to name a few. Most ask what level of risk you're happy with and will invest it in funds for you. So no real work to do.

At your age a higher risk fund might be suitable. 

These are SIPPs, there's not a general pension account these days.

One advantage of the Peoples pension is that the fees are pretty low, especially once the fund size has built up. All the other options you mention would be more expensive, although Vanguard would be similar if you had a very low cost tracker fund.

Would a SIPP be a good option? I'm not adverse to a little risk
In the Peoples Pension there is a 100% equity fund (and an 85% one). This would be more than risky enough for most people.

The Peoples Pension, which doesn't have amazing review on googling.

Very few financial providers have amazing reviews, the opposite usually, as it is mainly people who have a problem who write the reviews.

 I'd be looking to contribute 16.5%~ This is the important bit !

As you are wanting to learn, it might be a good idea at some point to open a 'whole of market' SIPP, to give you a massive choice of investments to play around with. However this will be no guarantee your pension will perform better than sticking with the simple funds in PP, in fact may be the opposite.
An alternative is that you can access nearly all the info at SIPP providers, without actually being a customer. So you can scroll through factsheets, fund portfolios, past performance info etc to your hearts content. Have a look at HL, Fidelity or AJ Bell .

SPRichards

Thanks for all the advice/info. really appreciated. 

The plan now is going to be a bit of a split. So 16.5% into my company pension. Then a Vanguard SIPP invested in global index fund or two. I've consolidated my older pensions into the SIPP and will contribute £200/month~  going forward (need to balance against other savings and work pension). 

Then I will open a Vanguard ISA and pay in a similar £200/month~ This will be for initially investing in simple index funds to begin with, and be a bit of a tool for learning. 

This will eat quite a lot out of the savings plans I'd made in the other thread, but seem well worth it. Hopefully this will see me in good stead for a healthy retirement. 

Thanks again for the info and resources! 

Brie

I would certainly go along with maxing whatever you can pay into the work scheme - particularly if your employer ramps up their contributions with yours.  I've been in schemes in the past that if I paid 3% the employer paid 6% and if I paid 5% the employer paid 12% etc so I benefited significantly more the more I put in.  And the fees are generally very low.

But diversity is also good so an investment device outside of the pension is a great idea - whether it's an ISA or a SIPP.  What's great about this is that when you do want to collect your pension you don't have to do everything with all the money all at the same time.  So you might disinvest the ISA and leave the pension bubbling away accumulating value.

You don't say here if you are married or a home owner.  Obviously bricks and mortar are a popular investment and as you're already got a rental you'll know about the benefits that might bring with rising property values.  There are advantages that might be available with "marriage" as a combined income and combined financial planning can bring greater scope and more opportunities.  Obviously there can be downsides as well but I prefer to think positively!!

SPRichards

Brie said:

I would certainly go along with maxing whatever you can pay into the work scheme - particularly if your employer ramps up their contributions with yours.  I've been in schemes in the past that if I paid 3% the employer paid 6% and if I paid 5% the employer paid 12% etc so I benefited significantly more the more I put in.  And the fees are generally very low.

But diversity is also good so an investment device outside of the pension is a great idea - whether it's an ISA or a SIPP.  What's great about this is that when you do want to collect your pension you don't have to do everything with all the money all at the same time.  So you might disinvest the ISA and leave the pension bubbling away accumulating value.

You don't say here if you are married or a home owner.  Obviously bricks and mortar are a popular investment and as you're already got a rental you'll know about the benefits that might bring with rising property values.  There are advantages that might be available with "marriage" as a combined income and combined financial planning can bring greater scope and more opportunities.  Obviously there can be downsides as well but I prefer to think positively!!

Thanks! yes, property is definitely something I want to get into, even it's its just owning my own home. Have a LISA working away now, that with my new batch regular savers, I should hopefully be in a position to get a house in the next few years. 

And now my pension will hopefully also be in order. Taking a far bigger dent out of the income than I imagined, but well worth it come retirement. Thanks again!