Feel a bit lost what to do about pension contributions etc

2Sheds

Mutton_Geoff said:

Then you can recycle £4k of it back in and get double bubble on that bit.

   I need a pension adviser just when I was thinking I understand it, there's another option !
 

AlanP_2

Mutton_Geoff said:

2Sheds said:

At the age of 60, I've upped my pension payments on my present employer salary sacifice to 18% from 6%, employer pays 6%.

Possible I'd retire at 62 or before if I get laid off, 40% tax relief, option to take 25% and probably pay only 20% tax on the rest.

As long as it doesn't fall below what I've paid in it seemed like a good idea !!

Then you can recycle £4k of it back in and get double bubble on that bit.

£4K is the Money Purchase Annual Allowance. This is the limit that can be contributed to a DC pension once even a single 1p of taxable income has been taken from a DC pot - PROVIDED you have the relevant income to cover that amount i.e. in work. 

I think you are referring to the £3600 gross (£2880 net + £720 from HMRC) contribution that a non-earner may contribute each year up to their 75th birthday.

Mutton_Geoff

That's the one, thank you Alan. Very similar amounts but of course if one if still working then in addition, NI is payable on income so the latter one is better if you're inclined to retire completely. Sadly I've exceeded the LTA so that won't work for me when I retire as I'll pay an additional 25% LTA tax on it coming back out.

zAndy1

Regarding my contributions which I currently make as follows, 50% into the aviva stewardship managed, 25% into the blackrock world ex uk equity index tracker and 25% into the BNY Mellon multi asset balanced fund. I'm thinking of changing it to 40% stewardship managed, 20% blackrock world ex uk equity index tracker, 20% BNY Mellon multi asset balanced and 20% blackrock uk equity index tracker , would that be a better portfolio do you think by adding the uk equity index tracker into the mix? 

Grumpy_chap

zAndy1 said:

I pay my pension contributions by salary sacrifice and would pay 40% tax on the vast majority of the £9k a year I put into my pension so it's obviously good in that respect but I can't help thinking there are better ways to invest that money right now. I'm 55 so max 10 years to retirement (and hopefully a lot less) so you would hope the market will turn round before I retire and putting money in now when the market is low will probably prove to be a good move eventually but it's obviously very risky.
It's depressing looking at my pension fund value, it's down 10% and just seems to be stagnant regardless of the additional contributions I'm making so I feel like I'm throwing money down the drain right now.
How is everyone else feeling about pensions as a retirement income vehicle , better options out there in the current market or not?

I have much the same position as you in terms of current pension performance and the fund appearing to stagnate even though contributions are being made.

I have seen this time as the great opportunity to buy cheap units and therefore increased my contributions to the most that I can.

The market has to turn around and, if it doesn't, my pension fund will be the least of my concerns.

JohnWinder

Commiserations. You describe a messed up mindset well, even if you don’t have one. If lack of knowledge/information is contributing to your woes, help is coming. 

How good your pension turns out to be depends on how much is contributed to it, how long it has to grow by investment returns, and what the returns are. The first two are under your control; go for it.

Secondly, Morningstar do an analysis called ‘mind the gap’, the gap being the difference in returns that funds earn and what their investors get in returns, the difference on average is a loss for investors because they chop and change, try to time the markets etc, and it’s about 1%/year on average. Keep a steady hand and try to minimise that gap.

Thirdly, another ‘gap’ between fund earnings and what you get is how big the fund fees are. Choose low cost funds.

Fourthly, you need to get the your risk ‘level’ right(-ish); too much risk and you’ll bail out at the wrong time, and too little and you jeopardise the higher returns that usually come with more risk.

Serious about this? Watch these videos or read the text, or find something similarly comprehensive AND well based: https://boglecenter.net/bogleheads-university/