Pension advice needed

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
17 replies 1.6K views
RiderOnTheStormRiderOnTheStorm Forumite
54 Posts
Hi there folks

I am hoping that someone can help advise me on my pension choices.

I am 29 and my company has allowed me to join their pension scheme, and they will contribute 1.5% towards it.

But I was wondering if that was my best option or would I be better getting a private pension. I have seen some information saying that I can get better returns on my private pension, something like SIPP.

I have read some literature about these things but they just blend into one after a while.

Thank
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Replies

  • Joe_BloggsJoe_Bloggs Forumite
    4.5K Posts
    Wellcome to the forum. I am a dunce. Tell me what
    1.5% of what will your company pay. There are no stupid questions but if you read the posts you can learn a lot. There is no need to make any rash decisions in your case.
    I would consider a new job if my company offered me 1.5% of whatever for my pension. But that is my uninformed opinion.
    Regards J_B.
  • PalPal Forumite
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    1.5% is a very low company contribution rate, but it is still money for nothing suggesting you should join the company plan. Can you please check that figure is correct? It seems so low as to be an error.

    Either way, whatever they contribute it is still extra money so the company scheme is likely to be better than your own personal pension.

    My personal rule of thumb is that if someone needs to ask questions about pension types on a forum they should avoid investing in a SIPP simply because they are highly unlikely to understand what is involved.

    In order to successfully invest in a SIPP without relying entirely on luck you need to be a real investment expert. For this reason I also recommend that anyone who understands pensions or investments doesn't invest in a SIPP either, because they are almost always deluding themselves! ;D

    I would not touch a SIPP with a bargepole except for very specialist investment situations.

    There are however a few deluded people who have the nerve to disagree with me ;). See the FAQ for links to further discussions on SIPPS.
  • dunstonhdunstonh Forumite
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    Hi.

    As Joe says, there isnt enough info in your post. However, i will elaborate as the post hasnt arrived yet and i'm bored.

    Assuming its a money purchase scheme and the company pays 1.5% and you nothing. Assuming you are on 30k pa. That would mean £450pa going into the pension. At age 29 and retiring at 65, you may get around £2000pa in retirement (in todays terms).

    Free money from company is good. Relying on it as the sole provision is bad if its only 1.5% on a money purchase scheme.
  • MilarkyMilarky Forumite
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    ROTS,

    What's not been mentioned is that you may be perfectaly able to join the company scheme - to get the 1.5% [you pay a minimal contribution, I assume] - AND start your own pension elsewhere also - which will be a 'Stakeholder' 99 times out of a 100. Why yoke yourself to this particular scheme when you don't have to?

    On Stakeholders, there is a 'charge cap' on the annual management fee [no upfront charging allowed] of 1%. But it has recently been proposed to raise this to 1.5% for new policies taken out after April next year [not far off!] DD [above] has posted elsewhere that the 1% cap may be retained for existing plans - those taken out before the deadline. If DD's right, therefore, it might be worth starting a stakeholder plan (on minimum contributions) before then to enjoy lower charges on any future monies paid in?

    This suggestion could also make 'moving' a policy less likely from a lower capped product to a higher capped one. But in those circumstances it ought to become a 'sellers' market - where the policyholder could say to the company; "Do you want half a loaf [charges] or none?" and negotiate a fee reduction?

    DD?
    .....under construction....
  • dunstonhdunstonh Forumite
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    There is no confirmation yet, just what the IFA support staff (reps) seem to think what will happen.

    The general feeling with those i have discussed it with is that modern charged Personal Pensions will take over as the main advice product for younger contributers as the reduction in yield over the term is already lower than stakeholders now and in turn moreso with stakeholder mk2.

    It will be those closer to retirement and starting regular contributions that will be worse off under the new charging arrangement as they are the least profitable. Single premiums will quite possibly retain the current charging as that is where the real profit is. Perhaps an arguement for people to do regular ISAs and then periodically moving a lump sum into the pension?
  • tomS_4tomS_4 Forumite
    104 Posts
    was that english? ;D

    I'm thinking about topping up my penson in some way too, but i'm not clear on whether you are saying i should get a stakeholder one quick, get a mk2 one later or that a mcpp (whatever that is) would be best.

    (29, in a gov final salary scheme for 2.5 years, pay 3.5% plus get a good contribution - but planning to leave job in 6 months or so. have 6g in a cash isa and 2g in ING savings).
    stay lucky!
    Steve.
  • dunstonhdunstonh Forumite
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    If you buy a Stakeholder before April, you may get lower charges than if you buy one after.

    However, we dont know what whether it will apply to existing plans or not. The general feeling is that it will not apply to existing plans which would then favour getting one before April. ie, get in before the charge goes up.

    MCPP is not a term used. I was just using modern charged to indicate that some personal pensions available today can offer lower charges over the term than a stakeholder and are considerably different intheir charging structures to pre stakeholder type personal pensions.

    If you are a bit of a floater and see yourself stopping and starting and moving about, you should probably forget personal pensions unless you are looking at single premiums.

    What about looking to buy extra years on the Govt final salary scheme.

    You are not going to get answers from a discussion board but you will get ideas to investigate.
  • tomS_4tomS_4 Forumite
    104 Posts
    i think i got that. So, in general, if you are going to be movng jobs a bit then a stakeholder pension (that is consistent over all jobs) is a better bet than a personal penson (i assume this means one through work).

    If i am in a final salary scheme now, but (with it's increasing rarity) may not get in one in future jobs, would it be worth buying a load of extra years now, then leaving it running and using a stakeholder one once i change jobs?

    (BTW, Up till now i've been mainly putting my cash into ISAs and ING, cos i don't have a house yet and this would be more flexible if i need a deposit for a mortgage. )
    stay lucky!
    Steve.
  • dunstonhdunstonh Forumite
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    i think i got that. So, in general, if you are going to be movng jobs a bit then a stakeholder pension (that is consistent over all jobs) is a better bet than a personal penson (i assume this means one through work).

    Personal Pensions are the same as stakeholder pensions but usually have a different charging structure. This can be better or worse. Both can be available as individual plans or through the workplace.

    When stakeholder plans were launched, it was expected to kill off personal pensions. However, a number of providers have relaunched personal pensions with different charging methods which may or may not be beneficial depending on circumstances.

    If i am in a final salary scheme now, but (with it's increasing rarity) may not get in one in future jobs, would it be worth buying a load of extra years now, then leaving it running and using a stakeholder one once i change jobs?

    Quite possibly but no-one can tell unless you ask for figures from your occ scheme as to how much its going to cost and what you get for it.
  • DD Said
    Personal Pensions are the same as stakeholder pensions but usually have a different charging structure.
    Sorry, but that's the last time I'm going to put up with you spouting that kind of nonsense >:(

    From the fsa website:
    But since April 2001, personal pensions that meet certain conditions have been able to qualify as Stakeholder Pensions. The conditions include low charges, flexible contributions and no extra charges if you transfer to another scheme.

    To paraphrase this means:
    They can't rip you off with high charges, you can start one with next to no money and if you decide you don't like the pension company, you free to take your all of your money elsewhere.
    Good or bad in your view, these conditions are designed to protect the consumer and they can't be ignored.

    To say PP are the *same* as SH's is simply not true.
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