should I buy a pension?

something_girl

Hi,

I am 39 at the end of this year. Female, work part time. REALLY small RAF pension that will pay out at age 55. No other pension at all, plus I am probably down on contributions etc.

I have about £120K split between ISAs, PEPS and online savings accounts. Should I be putting a lump sum into some kind of pension fund?

I like to feel safe financially, hence I am a big saver.

Any help appreciated.

Dithering_Dad

Your first step should be to check how you're doing on your state pension. You only need 30 years of contributions, so you should be OK especially given that you've got about 27 years to go. If you've missed any NI contributions over the last 6 years it may be worthwhile buying them back, especially if you're looking at having any breaks in the future.

As far as a traditional pension goes, you might see if your employer offers one, if not then it'd be worth setting up a stakeholder and paying into that. I wouldn't cash in any of your peps or ISAs to do this.

You have plenty of time to build a 'traditional' pension, so don't worry. You're already 120k along in your retirement savings, and the average UK personal pension pot is only 40k!

something_girl

Thanks. My employers don't offer a pension, so that's that out.

As for NI contributions, I have tried to find out a few times and given up, what is the score with women with children, do they get some sort of free contributions while they are of dependent age? Should I write to the NI office and ask them to give me an update of my contributions? It is something I have never even thought of investigating (probably because I don't want to know how far down I am)...

If I was to start up a personal pension now, are there any you would recommend?

Thanks again

Retired_I.F.A.

I would most definitely recommend a personal pension, stakeholder pensions are not even in the same league.

The best PP of which I know of is Skandia's available only through IFA's, however many have also improved since I retired from the business.

Dithering_Dad

something_girl wrote: »

Thanks. My employers don't offer a pension, so that's that out.

As for NI contributions, I have tried to find out a few times and given up, what is the score with women with children, do they get some sort of free contributions while they are of dependent age? Should I write to the NI office and ask them to give me an update of my contributions? It is something I have never even thought of investigating (probably because I don't want to know how far down I am)...

If I was to start up a personal pension now, are there any you would recommend?

Thanks again

If you are in receipt of child benefit then you're automatically registered for Home Responsibilities Protection. This reduces the amount of years you need to contribute to state pension but it doesn't make NI payments, so you will still need to make NI contributions towards your state pension.

I have a Legal & General Stakeholder that I set up via Cavendish Online as recommended by MSE (it reduces the annual management charge). I like stakeholders because you can stop and start them as you wish, pay lump sums when you like (up to certain limits). I don't think personal pensions allow you to do this, but I may be mistaken (or things may have changed since I set up my stakeholder).

I'm currently paying £300 per month into my wife's stakeholder (she's about the same age as you and we only started this up last year), she has a projection of a £120k if we keep this level of payment up. Naturally, we will increase this over time - especially once we've gotten rid/greatly reduced our mortgage.

EdInvestor

Dithering_Dad wrote: »

If you are in receipt of child benefit then you're automatically registered for Home Responsibilities Protection. This reduces the amount of years you need to contribute to state pension but it doesn't make NI payments..

After 2010 the rules which change on this, so each HRP year credited will count for a year of NI conts.

After October, contact https://www.thepensionservice.gov.uk and ask them for a state pension forecast.You could also try them now to find out how many years you have been credited, but the full forecast which includes the state second pension (S2P/Serps) amount won't be available till later.

You should aim at a pension income of 10k, including state pensions, so also find out how much the RAF pension will be when you retire (should be increased annually by inflation up to 5%).If the pension income is 10k or less, it will be tax free.

There is no need to save additional money in a pension, better to top up your s&s ISA every year, as this allowance is "use it or lose it".By contrast you can put large lump sums equivalent to the whole of your salary into a pension at any time. So if it's a beneficial idea to use the pension later, you can shift some of the ISA money in as a lump.But there's no need to do it now, better to keep the flexibility.The investment options are the same.

Retired_I.F.A.

Dithering_Dad wrote: »

I have a Legal & General Stakeholder that I set up via Cavendish Online as recommended by MSE (it reduces the annual management charge). I like stakeholders because you can stop and start them as you wish, pay lump sums when you like (up to certain limits). I don't think personal pensions allow you to do this, but I may be mistaken (or things may have changed since I set up my stakeholder).

PP's have always given you the same flexability and more. Going with a stakeholder ought to carry a "this could seriously damage your retirement income" label. as the fund choices are very few, you'll face further charges come retirement when you realise annuity purchase is a poor relation to drawdown and dealing through a bucket shop like Cavendish means you'll never get professional advice and the protection of the FSA.

Stakeholders are what the government intended though, a Travant for the masses. DD unfortunately was one of the few that bought one.

Dithering_Dad

Retired_I.F.A. wrote: »

PP's have always given you the same flexability and more. Going with a stakeholder ought to carry a "this could seriously damage your retirement income" label. as the fund choices are very few, you'll face further charges come retirement when you realise annuity purchase is a poor relation to drawdown and dealing through a bucket shop like Cavendish means you'll never get professional advice and the protection of the FSA.

Stakeholders are what the government intended though, a Travant for the masses. DD unfortunately was one of the few that bought one.

lol, you only need protection of the FSA to protect you from the bad advice of an IFA. As far as retirement is concerned, there are no exit charges with stakeholder so the OP could move it to a SIPP and do income drawdown if she prefers this to an annuity, so I'm not sure of your point here.

Before I set up my stakeholder, I asked an IFA where to put my money and he recommended a personal pension plan where my money would have been locked away for at least 10 years before I could have gotten it back without serious charges. There would also have been penalties if I missed any monthly premiums. He also recomended an arbitrary range of funds (10% here, 10% there) which seemed to have no strategy at all behind them and some were Manager of Manager schemes with v. large charges. For all of 30 mins work his commission was going to be 6k with no trail (perhaps he was also trying to become a 'Retired IFA'?)

Instead, I set up a stakeholder, transferred my 2 company MP pensions into it over the last 12 months (it takes a while to do transfers :rolleyes:) and learned a LOT more about pensions. I am now in the position where my £85k pension pot is poised to be moved (without exit charges) to a SIPP once they allow Protected Rights transfers.

When first starting out, stakeholders are great because they provide a safe harbour for your pension cash to grow while learn enough about pensions and fund choices to know if your IFA is giving sound advice.

Alternatively, we can all pile in with PP, Stakeholder, SIPP, S&S ISA, Fund advice, etc. etc. while the OP exits stage left more confused than ever.

Retired_I.F.A.

DD I could type a reply that'd shoot your lies down in flames but I couldn't be arsed it just isn't worth the effort.

Dithering_Dad

Retired_I.F.A. wrote: »

DD I could type a reply that'd shoot your lies down in flames but I couldn't be arsed it just isn't worth the effort.

"lies"?

dunstonh

When stakeholders were introduced it nearly killed off personal pensions. Over the last 5 years or so personal pensions have been relaunched with a variety of options which can make them a lot cheaper than stakeholder pensions over the term of the pension but some may have a short term initial tie in or claw back period. 10 years sounds a bit like the Scot Equitable flexible pension which was one of the first modern PPPs to have a cheaper charging option in the long run but more expensive in the short term.

Currently, some of the best personal pensions factory gate charge the annual management charge allowing you to get around 0.3% annual management charge on internal funds whilst still paying the IFA for their advice.

The stakeholder charges are defined but you will have limited investment options. The personal pension allows a variety of charging methods and some will be very good and some could be awful. The mainstream options typically mirror the stakeholder with many more external funds.