Wher To Save My Money?

vigfan

hi everyone.
this is my first post hear thought i would ask a question as i dont have a clue about pensions. i am a married guy aged 36,2small kids.
i have been with my current employer for the last 11 yrs but i could not join the pension till i had served 5 yrs service.i have been in it now for the last 6 yrs and i was putting in £60 amonth and my employer was matching my contribution, thing is i left this company last month for a different job but it did not work out and my old employer offered me my job back. they have told me my pension has been frozen and i can not rejoin again for for atleast 3 yrs
i will be hitting nearly 40 then.i have since discussed with my wife and we have comr to the idea of just saving the £60 a month in some sort of high interest savings plan, i know its not an awfull amount but maybe we can up it a bit soon.i did not understand the company pension especially as they have changed the plan to different companies 3 times in 6 years. so basically wher shall i put the money to i dont want any risks but i would like to not be able to touch it say for at least 30 years, is there anything available ?
any advice would be much appreciated.
all the best mick

dunstonh

any advice would be much appreciated.

Nothing posted here is advice. Its suggestions to investigate and comments, remarks or discussion.

so basically wher shall i put the money to i dont want any risks but i would like to not be able to touch it say for at least 30 years, is there anything available ?

Depends on what you mean by no risk. Sticking money in a bank/building society account for 30 years is probably more risky than investing on the stockmarket. Risk is also not an off or on situation. Its a sliding scale. You can invest into areas which have risk but the risk is much lower than the stockmarket but offers greater potential for growth than the bank.

If you stick the money in the bank and save £60 pm for 30 years, then roughly you should only expect an income of around £60pm in retirement from that money. Unless you save in an area that has real potential for growth, then £60pm is just not good enough.

Seeing as you can join the pension again in 3 years and that is most likely what you should do then, you could save the money for just that 3 year period.

However, whether you look at pensions, ISAs or any other savings product, £60pm just is not enough. You seriously need to be looking to save more for your retirement.

EdInvestor

Hi vigfan

Do you have a mortgage?

If so you might like to consider putting the 60 quid a month towards reducing it for the next 3 years until the company pension is available again.

This will give you a risk free return higher than saving the money because no tax is payable on mortgage overpayments, and usually the mortgage interest rate is higher than the savings rate.You would need to check on any penalties in the mortgage for overpayment first.

I would also suggest that you get a state pension forecast and make sure there are no missing years that you should make up.

Forecast here:
http://www.thepensionservice.gov.uk/atoz/atozdetailed/rpforecast.asp

Were you "contracted out" of the state 2nd pension before?If so, what is happening to your Nat Ins rebate money now? Have you been contracted back in? Ask your company.

Milarky

Hi vigfan,

I agree with dunstonh that you should invest your long term savings [especially if it's for more than five years let's say] in a form that reflects the long-term view - and that means collective investments in equities such as investment trusts, and open-ended investment companies and this sort of product rather than cash investments.

The good thing is that new pension rules due out next year mean that as long as you save in some form you can later convert this much more quickly into pension form than at present.

Everyone gets nervous about stock market volatility, but a couple things can work in your favour to remove this gradually and give you the confidence to continue

1) Time: the stock market always rises after periods of falls...

2) 'pound cost averaging': if your investments are falling, subsequent investments buy you more units/shares. The market thus has to rise less quickly that before for you to get back from a position of 'loss' to one of 'profit' [Of course, because it doesn't have to rise as quickly, generally it won't either. Look at the FTSE - it has risen by about 50% of the fall from 2000 to 2003. Future gains are likely to be more sedate precisely because everyone has been able to claw back quite rapid losses over a more extended period of rise]

3) Flexibility: Why should you have to save the same amount each month for 30 years? Answer: You don't have to. You can start and stop saving into many equity-based plans or you can do so with just maintaining a small fixed amount to which you can add 'as and when'..

4) Collective investments - not individual company shares: These use the stock market to distribute 'risk' more evenly and the value of any investment held in these should 'track' the major indices

So I'd suggest you think about a regular [but modest] investment-based savings plan outside your pension with a view to saving into this at broadly the same amount for 30 years. The important thing is that this plan should carry no [or very few] restricitons on access. By aiming to save for this length of time you should be confident that most of the risks will be minimised.

And as dunstonh says, why not save more for the next three years - probably into a good cash based account [because the differential growth with 'shares' over [u]three[/u] years won't be substantial, anyway] and then consider re-entering the company scheme at that time. If the money you have saved cannot be put towards new contributions into a company plan [assuming they only allow percentages of salary] then look around for other places to keep it then [EDIT: I agree with EdInvestor about paying down a mortgage being most effective ahead of savings accounts..]

Good luck