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  • FIRST POST
    • gif1
    • By gif1 12th Feb 18, 8:46 PM
    • 34Posts
    • 6Thanks
    gif1
    Investing or Pension?
    • #1
    • 12th Feb 18, 8:46 PM
    Investing or Pension? 12th Feb 18 at 8:46 PM
    Hello,
    I would like a word of advice from the experts here.
    I am 46 with a little pension pot from previous employers, about 42K. Homeowner with a mortgage (19 years to go). I have a good job, and currently paying, via salary sacrifice, in the new workplace pension 10% (8% core, 1% myself, 1% matched). My employer would match up to 4%.
    I have also a fair amount of cash left every month and was considering to start investing in the likes of Vanguard, HL (I have been reading a lot in this forum). Drip feed every month, my strategy.
    But now I am not sure whether it would make more sense to up my pension contributions first to cash in the extra money from my employer. The cons would be that I won't be able to touch this money until, at least, I turn 55. While if I started investing I would not have such restriction, although I am aware of the long term view to adopt with investment as well. This freedom is very appealing to me.....probably I have been making too much of a deal, not sure.
    The pension fund seems to have a 0.13% AMC which seems fairly low.
    So what would you suggest as the most sensible option given my circumstances? All I know is that I don't want to leave anymore cash in saving accounts paying a meagre 1% or regular saver you have to start over every year.
    Many thanks for any help, much appreciated.
Page 2
    • atush
    • By atush 14th Feb 18, 1:23 PM
    • 16,807 Posts
    • 10,489 Thanks
    atush
    Why would the OP want a S&S ISA when they only have only accumulated a 42k pension pot so far? We obviously don't know their full circumstances but with such a small pension pot a fair proportion of the additional salary sacrifice pension contributions are likely to be drawn tax free.

    In their position I would be putting a lot more than the 4% into the pension pot. I would be behind sofas looking for coins, selling organs and sending our cat to get a job such that I could throw a high proportion of my income at the pension to improve retirement prospects and maximize this tax efficient opportunity.

    Alex
    Originally posted by Alexland
    Because a pension cant be accessed for many decades. They might want money before that. Upgrading property, marriage, children etc.

    I agree the pension is very attractive esp with SS. But they need wiggle room, so some of their extra cash could be put aside outside the pension.
    • ValiantSon
    • By ValiantSon 14th Feb 18, 2:49 PM
    • 2,013 Posts
    • 1,863 Thanks
    ValiantSon
    Because a pension cant be accessed for many decades. They might want money before that. Upgrading property, marriage, children etc.

    I agree the pension is very attractive esp with SS. But they need wiggle room, so some of their extra cash could be put aside outside the pension.
    Originally posted by atush
    It's very questionable as to whether investments are suitable for those things. Investments are best if they are for a known purpose and therefore structured to meet that purpose with regards to asset allocation and timescale (which should be at least one economic cycle). For the examples you give, cash savings would be most appropriate.
    • gif1
    • By gif1 14th Feb 18, 11:49 PM
    • 34 Posts
    • 6 Thanks
    gif1
    Thank you everyone. After careful consideration following your posts, I have decided to invest within the pension, contributing personally for 10%(4 + extra 6) of my salary, which will add up to the 12% (8+4) paid by my employer. I guess I will not have the benefits of SS Isa but i will by cashing in a 42% tax relief from day1 and maximizing my employer contributions. The only mental barrier to overcome is that I won't be able to touch the pot for at least 10 years; but with investment, as you teach me, I should be looking at the long term anyway....
    • enthusiasticsaver
    • By enthusiasticsaver 15th Feb 18, 12:26 AM
    • 6,609 Posts
    • 13,859 Thanks
    enthusiasticsaver
    Wise choice
    Debt free and mortgage free and early retiree. Living the dream

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • KeepOnKnitting
    • By KeepOnKnitting 15th Feb 18, 5:52 AM
    • 157 Posts
    • 226 Thanks
    KeepOnKnitting
    I suspect even a 38 year old might be disappointed with the outcome at retirement.
    Originally posted by Alexland
    I am 33 and my pension pots are around the mid 40k mark. I have had about 6 years with rubbish income and employer pension contributions, and I was pretty worried until I started my new job.

    Good decisions OP on upping your contribution. The more you put in, the more likely there is any point you accessing it before 65 or more.
    Save 12k in 2018 #62
    • chucknorris
    • By chucknorris 15th Feb 18, 7:23 AM
    • 9,581 Posts
    • 14,366 Thanks
    chucknorris
    Hello,

    I am 46

    The cons would be that I won't be able to touch this money until, at least, I turn 55. While if I started investing I would not have such restriction,
    Originally posted by gif1
    This doesn't make sense! First of all, your pension would be an investment (not an option to investing). Secondly, you should not invest for less than 9 years anyway, and you will be 55 in only 9 years time. Don't sleepwalk into being poor in your retirement, that would be a long time to endure poverty, instead of being comfortable.
    Chuck Norris can kill two stones with one bird
    The only time Chuck Norris was wrong was when he thought he had made a mistake
    Chuck Norris puts the "laughter" in "manslaughter".
    After running injuries I now mostly hike, gym classes and weight training (also a bit of cycling and swimming), less impact on my joints.
    • gif1
    • By gif1 15th Feb 18, 8:46 AM
    • 34 Posts
    • 6 Thanks
    gif1
    Hi Chuck Norris, indeed I have decided to invest in the pension.22% of my salary in total.
    Something I had forgotten to add is that I am also saving in a saye share save scheme 500 each month. On maturity -3 years - I just plan to sell the shares should I buy them
    • MallyGirl
    • By MallyGirl 15th Feb 18, 10:16 AM
    • 2,739 Posts
    • 7,746 Thanks
    MallyGirl
    The general wisdom is to not have too many eggs in the same basket - so don't hold investments in your employer. If they go bust you lose both. Just sell them when they mature and invest the money in something else
    • kidmugsy
    • By kidmugsy 15th Feb 18, 10:48 AM
    • 10,859 Posts
    • 7,424 Thanks
    kidmugsy
    a saye share save scheme 500 each month. On maturity -3 years - I just plan to sell the shares should I buy them
    Originally posted by gif1
    There is a tax-efficient stunt that lets you transfer them into a SIPP or ISA. Of course, in the SIPP/ISA you'd sell them as MallyGirl says.
    https://www.gov.uk/tax-employee-share-schemes/save-as-you-earn-saye
    Last edited by kidmugsy; 15-02-2018 at 10:51 AM.
    Free the dunston one next time too.
    • gif1
    • By gif1 15th Feb 18, 2:56 PM
    • 34 Posts
    • 6 Thanks
    gif1
    Thanks Kidmugsy, that's precisely my plan.
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