Just been thinking, after 14 years in the working world, I still don’t have a pension. Will have a flat to rent out in my later years, so I’m not totally unprepared, but I’ve been thinking about topping up the fund.

Assuming 35 years of work left in me and a decent self-employed wage, how does 10% of earnings sound as a monthly pension amount? I really have no idea about these things.

Ta in advance.

speak to 3 professional consultants for advice.

However, flat, what happens to it when you’re dead ?

Find out how long your direct relatives etc have lived as once invested in a pension you won’t get it back other than as a pension (and 25% tax free at 55)

You will do money purchase (so money is invested on your behalf – stockmarket etc etc etc), so bear the following in mind very carefully, the salesman will get commission on the sale and an ongoing management charge, they will be paid IRRESPECTIVE of how well your pension does, the point I’m trying to make is that you NEED to take an active interest in your pension and see how the investment is doing it is in your interest and you need to manage it ongoing.

You should have a fund risk profile (and this is dog rough as an idea)
– ie young, take a gamble, hope good rewards, time to sort it out if losses (ie stock market)
– middle aged, 50% gamble, 50% safe
– nearer retirement – reduce % at risk etc etc (ie cash and gauranted investments)

See Hargreaves and Lansdown SIPP This is where you invest your own money in your own fund via their ‘umbrella’

Currently (and probably going to change for the better) you need to take an annuity at 75 (ie you give ALL your pension fund money to X and X gives you a sum per year till death)

An Annuity of 100,000 pounds built up by you will provide an pension at age 60, of about £6000 BUT BUT BUT this 6000 is NOT RPI linked…..(it DOES NOT GO UP EACH YEAR ) if you go for one with built in escalation you will get about 4000… (annuity vary on sex, age(get better the older you take, market etc, if you inclue partner etc – http://www.sharingpensions.co.uk/annuity_rates.htm#text1), and fixed or escalating), you can also do drawdown – ie take a % of your fund and I believe thelaw will move towards this.

Sory for brain dump
Take professional advice BUT take into account that salesmen are often COMMISSION driven………….
cleary understand comission and ongoing management charges
important bits – you can take 25% of fund tax free at anytime after age 55
understand the terms annuities, fixed, escalating, drawdown (* there are law changes due here)

it’s a gamble – if you have no penson and die before you need it you win (term used loosely), if you have no pension and live a long time it might mean you loose also ……………

does 10% sound ok ? well you do the maths, how big a pension do you want, if you want a pension of 12,000 a year (that will escalte) I’d suggest you need to accumulate a money pot of at least £300,000

As an anside has the above given you a feel for how vauable a final salary (aka public sector pension) is, as there the employee carries no real risk/worry/hassle while you have to invest money in the stock market to get a viable return……….

10%! Much more. Try doubling it and adding 5%. My scheme puts about 30% and at 15 years in I reckon I could be done in another 19.

Better to come at it from the other end…how much will you need in retirement? Obviously, you’ll probably need some help working this figure out, but a good financial planner (not a salesman or product driven IFA) will be able to do this for you.

If you want o chat things through, with zero obligation to take anything further, give me a bell – link to my website with contact details in profile.

djglover – I never said what it’s 10% of though.

Anyway, that’s A LOT of info gusamc. Thanks very much. I guess it’s going to be a bit of a chore, the whole thing. Probably why I’ve put it off this long…

As far as the flat is concerned, it’s just handed on to next-of-kin if I die. Is this bad?

The rough rule of thumb used to be whatever age you start try and put that percentage aside – eg a good company scheme was nominally 6% + 12% from age 18 – 21.

Now that’s on the safe side, but you’ll retire on half to 2/3s of what you earn I think.

No ox, so long as you are prepared for a massive drop in living standards then!

flat is very good, suggest taking proper legal advice, (** probably varies by Country) as under certain cases the state can take ownership of property to pay for care costs. (ie if your parents own it and and go into care there may be issues)

We’re already very switched on to the elderly care cost thing in my family, so hopefully that wouldn’t be too much of an issue.

The idea is that having the flat giving me an income means I don’t need to hand over as much of my income to a pension fund. I’m instead spending it on a mortgage for the flat. What’s making me wonder though is would the money spent on a mortgage (given that the flat should be paid for in about 10 years and should realise a rental amount maybe 20% more than the mortgage premium) be comparable to spending the same money on a pension fund but stretched out until I retire?

I guess it’s easier to talk things through cos I have LOADS of questions. I’ll give you a call tomorrow mcobie. Thanks for the offer.

15 years ago when I started doing my actuarial training my tutor did a quick calculation to work out what a full 40/60s defined benefit pension would be worth in money terms.

Over 40 years you would have to put in 15% of your salary every year. So, you can see how much a defined benefit pension is worth. It’s probably worth more nowadays as my tutor put some bullish investment returns into his calculation, so I guess you would need to be putting in 17% to 20%.

which is why i am staying put in my job as i took out one of their last final salary pensions befor they closed it, and also top it up with other bits