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Pensions


13 Jan 2013 9:11AM
Hi all,
Come April I'm due to be auto-enrolled in the new government pension scheme and just wanted to ask a couple of questions....
So say that I pay in 40pm and after 20 odd years the pension pays out at say 50pw will not the government of the day just deduct that amount from my state pension?
Would I not be better off just saving the 40pm in a high interest account? Is it also true that if I opt out now I have to repeat it every three years?
I know that's a bit basic but just wanted to get a general idea of how it works Tongue
Chris.

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Focus_Man 4 481 631 United Kingdom
13 Jan 2013 9:45AM

Quote:Would I not be better off just saving the 40pm in a high interest account? Chris.


There aren't any high interest rate accounts any more.

Generally when savings that you make are 1. taken from your pay before tax is deducted 2. Augmented by an employer. Then your deal is as good as anywhere.

Putting your money (which has been taken from your salary after tax has been deducted) into a savings account at about 2.5% is crap. I am not sure how much augmentation you will receive with this new pension scheme, but that together with the tax savings generally make it a better option.

The only way, in my opinion for what it is worth, to make a tidy sum is to invest monthly, the same amount, in share plans. The results are only as good as your skill in selecting the profitable companies or plans. One thing to look out for there is the commission deducted by financial advisors at the time of taking out those plans. Some allow self-select without deduction but you do not get any advice at all.

It would seem therefore that if you are to make any pension provision the best way if from salary by an employer in a recommended scheme.

There is another option, the best one available - get a job in the public sector. The best pensions are paid to Firemen and Policemen for obvious reasons and they are subsidised by about 30% as employers contributions. Some Civil service pensions are non contributory and some are not. Whatever, the public sector pension scheme is 'la creme de la creme' so if you are worried about your retirement and are young enough to do something about it, keep an eye on 'Sits. Vac.' columns.
User_Removed 10 17.9k 8 Norway
13 Jan 2013 10:21AM
See a professional Chris.

(No disrespect to anyone offering advice here... Wink)
13 Jan 2013 10:28AM
On my to do list Smile I also need to work out weather it's worth while to continue with my private pension or freeze it in favor of the company one...bloody minefield Tongue
Thanks for the info Frank.
Pete e2
13 18.7k 96 England
13 Jan 2013 10:52AM

Quote:See a professional Chris.

(No disrespect to anyone offering advice here... Wink)


Why not? Members on here will have had similar questions to resolve or done research to offer a helping hand. And we no doubt have many professionals in that field as members. You don't have to be narrow minded and only understand photography to be a member of ePHOTOzine. Yes of course, see a financial advisor, but at least you will be armed with the right questions if you've had some help/suggestions first.

(No disrespect to Mike just lets try to get out of the habit of asking people to google it or see a pro. Wink )
User_Removed 10 17.9k 8 Norway
13 Jan 2013 11:21AM

Quote:just lets try to get out of the habit of asking people to google it or see a pro.


Oh... so taking amateur advice about something as important as one's Pension - and all the ramifications that fall out of that - is the best way is it Pete??

As one who hit retirement last year - and has two pensions - and I still work - I can speak knowledgeably about the subject.

Our individual situations are just that - unique. And professional advice - rather than amateur advice in a Forum - is to be strongly considered as there are huge ramifications in the long-term if the wrong advice is followed.
daviewat 11 4.1k Scotland
13 Jan 2013 11:26AM
I am just sooooooooooooooooooooooooooo glad i kept up my MOD pension from RAF days. It matured on my 50th last year and lets just say it brought a smile to my face while it lasted.
Pete e2
13 18.7k 96 England
13 Jan 2013 11:28AM

Quote:Oh... so taking amateur advice about something as important as one's Pension - and all the ramifications that fall out of that - is the best way is it Pete??

Read my reply correctly Mike.
Yes of course, see a financial advisor, but at least you will be armed with the right questions if you've had some help/suggestions first.
User_Removed 10 17.9k 8 Norway
13 Jan 2013 11:55AM

Quote:Read my reply correctly Mike


I did Pete.

And got accused of


Quote:just lets try to get out of the habit of asking people to google it or see a pro.
Pete e2
13 18.7k 96 England
13 Jan 2013 12:00PM
Ok Mike
As you say Chris - it's a mindfield. It will be interesting to hear if anyone has grasped it and has some good suggestions or questions to arm yourself with when you seek the professional's advice
cats_123 e2
10 4.2k 25 Northern Ireland
13 Jan 2013 1:24PM
Hvaing taken early retirement with an index linked pension, I'm probably in no place to give advice Wink

...but remember that pension contributions are tax exempt so you have a lead over any private investment.

With the small amounts of capital we had left after an inheritance we invested in equity funds...which did really well (gaining up to 40% in about 3 years) but the bottom has dropped out of that market. We dabble in share portfolios (within an ISA) but you have to be prepared to take a hit now and then...but if you're sensible and spread your investments you can average between 8-10%. You just have to avoid trying to be greedy and cut your losses early.

Pestonally, I would have said that any `employment based' pension has to be worth it's weight due to the employer contributions...

The other thing you might consider is using any excess income to overpay any mortgage...we learnt (probably too late in life) that modest overpaying can save thousands of pounds in initerest payments and reduce the life of your mortgage by several years. Being mortgage free, I would suggest, is possibly the best aim Smile
thewilliam 6 4.8k
13 Jan 2013 1:41PM
You need to choose your IFA very carefully. Over too many pints one IFA acquaintence made a confession that their "free financial health-checks" were designed to see just how much money could be extracted from the punter each month. The IFA then advises whichever scheme pays the best commission.

Commercial pension funds aren't safe. One good friend saved for a couple of decades with Equitable Life. After their demise, he started another pension with another provider that seemed equally reputable and he's worried again.

State run pension funds are safe for the moment, but for how long?

I'd agree with the post above: first priority is to become debt-free. When you buy a house with a mortgage, you can pay out 3 or 4 times the proper purchase price.
Focus_Man 4 481 631 United Kingdom
13 Jan 2013 1:54PM

Quote:Oh... so taking amateur advice about something as important as one's Pension - and all the ramifications that fall out of that - is the best way is it Pete??




I was a trustee of a multi-national company pension fund for many years - so although I realise I may well now be out of touch, my advice is certainly based on pension fund experience and by no means amateurish. Following very early retirement (at 55) when the UK manufacturing facility was shut down I became self-employed but maintained my directorship (unpaid) of the pension fund until I completely retired at 65.
Focus_Man 4 481 631 United Kingdom
13 Jan 2013 2:12PM

Quote:See a professional Chris.


Well yes but one cannot just take that statement on its own.

Going back many years IFAs were always telling people with the same query "I can give you a better return than any pension fund" Those who then opted out of company pension funds lived to regret it - just look at how the stock market has performed over the last 10 years. The FTSE is still lower now than then when it was around 6500.

By all means ask a FSA but somebody you know and can trust but beware he/she will always direct you to one of their investment offerings because that is their job and the commission received is what they use to live on. Although I have my old company pension I have taken care of all my investments myself by studying the markets available and yes! taking advice of a friend who is a FSA as well. I used Chelsea financial services who did (and maybe still do) allow self selection of funds and because no fees are involved all of your money gets invested. at that time typical initial investment fees were around 5% so you lost quite a bit. In some cases where double commissions were involved, FSA and fund manager Chelsea would actually credit you with most of their commission as well so I once for a 6000 investment, instead of only finding 5700 invested I found 6,200. Strange but true, I don't know how that happened but it did.

The moral I guess is if you can get free independent advice take it, but remember these FSAs have to make a living and they will make it from you. Generally your company pension will be the best bet as they augment your contributions and guarantee your pension. The fund is covered by legislation having to be valued regularly and when the funds drop below 95% (In my time anyway) a plan to get it back to above 95% has to be introduced. I say in my time because my main caveat is things may have changed since I was a director of a pension fund.
Rev2 4 238 2 United Kingdom
13 Jan 2013 2:54PM

Quote:Hi all,
Come April I'm due to be auto-enrolled in the new government pension scheme and just wanted to ask a couple of questions....
So say that I pay in 40pm and after 20 odd years the pension pays out at say 50pw will not the government of the day just deduct that amount from my state pension?
Would I not be better off just saving the 40pm in a high interest account? Is it also true that if I opt out now I have to repeat it every three years?
I know that's a bit basic but just wanted to get a general idea of how it works Tongue
Chris.



Chris, if you pay money into a 'high interest' account you will pay 20% tax on the interest if you're a basic rate tax payer and your money will be eroded away by inflation over 20 years. If that same amount is paid into a pension you'll get tax relief therefore your 40 becomes 50 plus whatever the company pays in.

The reason N.E.S.T. is coming in is because we are living longer and there are more people taking from the pot. Whichever government is in at the time they won't be able to pay a state pension, it's being phased out.

I'm not a financial adviser although my job requires that I'm qualified to Diploma, Level 4 so I am qualified to talk on the subject. There's no need to see an IFA, they may charge a fee for advice your company representative will give you for free.

Please don't take advice from 'the bloke down the pub'. You wouldn't believe some of the nonsense people have believed against the advice given by professionals who do know what they're talking about.

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