Should I stop paying pension contributions

eildon

First post , so hope I can ask this question here....

Am paying £70 a month into a Personal Pension. No employer pension.Hoping to retire in 6 1/2 years.
Have just been told by pension provider that I will get a pension of £441 pa (intermediate pre-retirement inflation of 2.5% and provision for spouse pension.
They have also said on 5% 7% and 9% assumption could get pension of £615, £865 or £1170 pa with no spouse provision?????? Obviously thought I knew what they were talking about.

When I phoned up to ask they said the pension of £441 pa was most likely.

It seems to me if I just bank the £70 a month that would give me £4,500 which is 10 years pension at £440.

Am I missing something here?Thinking of just stopping paying premiums now. Would this be a good idea?

Already have an ISA - easier to understand that idea.

Sorry if question too specific but no idea at all on this really.

Any help/advice much appreciated.

dunstonh

Have just been told by pension provider that I will get a pension of £441 pa (intermediate pre-retirement inflation of 2.5% and provision for spouse pension.
They have also said on 5% 7% and 9% assumption could get pension of £615, £865 or £1170 pa with no spouse provision?????? Obviously thought I knew what they were talking about

These are just examples, not guaranteed. The £441 is an SMPI basis illustration taking inflation into account. The 5,7 & 9% is monetary growth basis without inflation.

That is two different ways of giving projections. One in real terms, one in future terms.

It seems to me if I just bank the £70 a month that would give me £4,500 which is 10 years pension at £440.

You are not comparing like for like. Obviously, the bank option runs out of money after 10 years. The pension goes on for life.

Already have an ISA - easier to understand that idea.

The investment options in an ISA are virtually identical to a pension. If you can understand an ISA then you can understand a pension.

Ignoring capital (as that doesnt seem to be an issue for you), the pension is the product that will provide the highest income of all options available to you. Higher than ISA, savings accounts, unit trusts or whatever.

If you did 6 1/2 years in a savings account and got 5% interest you would end up with a pot of £6438. If that was then used to provide an income it would pay £321 a year.

If you did 6 1/2 years into a pension and got 5% return you would end up with a pot of £8596. If that was used to provide an income it would par around £644.70 a year (age 65, single male)

EdInvestor

Have a look at the annuities section on this site, which will give you a better idea of what capital buys what income.

https://www.fsa.gov.uk/tables

eildon

many thanks to dunstonh and Edinvestor. :T :T
This is really useful and what a great website EDinvestor. Explains my various options. Think I should just keep paying into this.

dunstonh

I think you should get the pension reviewed. Its an unwritten rule of mine that you should automatically review any pre 2001 pension to check its suitability. Pensions before this date were often set up with the old boom/bust economy in mind which means they have higher charges than modern plans and may be invested in funds that work well in that economy but not the low inflation, steady growth inflation we have now (erm meant to have now!).

From around 2001 onwards, charges dropped and investment options improved significantly and it may mean that your pension just needs to be brought up to date. However, you may have a good one and shouldnt assume all pre 2001 pensions are bad. My firm does a lot of pension transfers and I would estimate that we recommend 1 in 5 old schemes is kept. However, that does mean 4 in 5 are better off moved.

EdInvestor

Who is the pension provider and what fund(s) is the money invested in?

eildon

Post 2001 pension

Standard Life

From bumff I have

Split into 4 funds,

Property One 25%
Managed One 50%
Equity One 15%
Pacific Fund 10%

Think I may be able to switch funds, but assume will be cost to do this.

When I retire, it may be possible to cash in my Cash ISA and add this to pension pot and get bigger pension?? Or might be better just to hang on to the cash?

Really appreciate you both taking the time to help on this.

So glad I found MSE site too:j

EdInvestor

Is it the SL personal or stakeholder pension?If the former it now offers a chpoice of external funds.Take a look at these and add some of them to your list, this should perk up the performance.

You can check fund performance here:

https://www.citywire.co.uk/Funds/Home.aspx

Charges are fine.

eildon

Its a Personal Pension, not a Stakeholder.

You mean, I could ask them to stop investing in a SL fund and move some to say Scottish Widows.

If moving to another fund, would probably move out of the property fund just because of all the hype about falling property prices but would have no idea which sort of fund to move into

Don't suppose SL would advise me on this either.

EdInvestor

eildon wrote: »

You mean, I could ask them to stop investing in a SL fund and move some to say Scottish Widows.

Yes, though you wouldn't go to another insurer, you would choose funds from top investment houses such as Invesco Perpetual, JPM, Artemis, Jupiter etc."External" means non insurance company funds.

Don't suppose SL would advise me on this either.

No, you'd need to get an IFA to help if you didn't want to bother doing any research yourself.

thor

eildon wrote: »

They have also said on 5% 7% and 9% assumption could get pension of £615, £865 or £1170 pa with no spouse provision??????

Remember that 5% 7% and 9% are always given as examples but not neccessarily what you are going to get. In fact the stock market is lower than it was at the turn of the millenium so we would be talking about negative growth over the last decade.