Viewing 40 posts - 1 through 40 (of 85 total)
  • Workplace Pension Scheme – is it worth enrolling?
  • davidtaylforth
    Free Member

    Apparently there’s now a workplace/government pension scheme that companies are legally required to enroll their employees into. Apparently I can pay in 1% of my earnings (before tax I think) and the company pays in 2%. This then increases to 5% and 4% in three years. I can opt out if I want though.

    Is this something that’s worth doing? Am I likely to see the money again? Am I better off just sticking it in an ISA? I’m 30 years old BTW.

    Any advice; appreciated as always!

    wwaswas
    Full Member

    pay in now would be my advice and if you get free money from the company then that’s a plus, it’ll cost you a lot more to get the same out if you leave it.

    (I am not a financial adviser)

    franksinatra
    Full Member

    i’ve always paid into pensions through work and just treated it a bit like a tax, as it is deducted at source I don’t really notice it. I wouldn’t trust myself to set up, and pay into, another pension pot.

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    tthew
    Full Member

    free money

    is the important part of wwaswas’s post. I know a lot of people are dismissive of pensions, but they are a very cost effective way of saving, just a bit long term.

    firestarter
    Free Member

    Depends I guess I’ve paid in 400 a month for 18 years and the government have just torn the entire agreement up. I now have to pay more for 8 years extra to get less. If if I were starting out I wouldn’t join its safer but worth less under your pillow

    edlong
    Free Member

    It’s free money from both the government and your employer – your employer puts their bit in and the government puts the tax that came off your bit back in as well. If it was phrased like this, would you say yes or no:

    And yes, the rates are going up between now and 2018.

    slowjo
    Free Member

    What tthew said, plus you need to save enough to make it worthwhile.

    The jury is out on the ISA/Pension question now. With the new pension freedoms, the rationale behind saving into an ISA has diminished somewhat, especially if you want to use it to generate long term income at some stage in your life. If you are saving up for some sort of capital expenditure however (paying off your mortgage etc) then an ISA is likely to be the better bet.

    The new AE enrolment thing – take the tax relief and employer contributions but make sure you think hard about how much you are putting in. It is better than nothing but if you simply stick to minimum contributions you may find a sting in the tale when you retire. By having private pensions albeit ones with minimal values, some people will find they are excluded from certain benefits (pension credits for example). This is my understanding based on current legislation and I could be wrong but it is worth checking.

    Retirement may seem like a long way away but it sort of rushes at you and before you know it……

    seosamh77
    Free Member

    I opted in. No had a pension for a few years, so time I started something, at least..

    Works 1% rise to 4% in 2018. I’m paying in 3% voluntarily, but I’ll bump that up year on year I reckon

    It’s not great, but I have another pension for another work, so least it’s 2 now.

    I reckon I’m actually going to have to start thinking seriously about it over the next wee while.

    Reckoning if I just build up pension till I can take out 6-10k per year (I’ve no idea what my current stuff will pay out tbh) when I’m 55 and just retire to a beach in thailand is about the soundest thought I have at the moment! 😆

    I’ve spent my life saving diddly, so reckon some alternative pension plans are in order! Stuffed if I’m waiting till 68 to reitre!

    gonefishin
    Free Member

    Depends I guess I’ve paid in 400 a month for 18 years and the government have just torn the entire agreement up. I now have to pay more for 8 years extra to get less. If I were starting out I wouldn’t join its safer but worth less under your pillow

    Then you’d be an idiot. These schemes are defined contribution schemes so the money is yours and the only restriction is that you have to wait until retirement age to get your hands on it. Whilst your pension rules have changed (and yeah that’s bit shit) I’ll wager that they are still worth more than a defined contribution scheme with the same contributions over the same time period.

    slowjo
    Free Member

    The average pension fund at retirement is I think, sub £40k.

    At age 65, a male has a life expectancy of about 23 years (increasing all the time).

    All you need to do is work out how long £40k would last.

    Oh yes, by the way, don’t forget the new flat rate state pension that comes in in 2017. They say you will get £150pw, but vast numbers of people won’t. I read something yesterday that said if you had contracted out at any time in your working life, you would be more likely to get £115pw not £150.

    If you are in doubt about your state pension entitlement, get a BR19 online, fill it in, pop it in the post and you will get a free projection (of your state pension). It is a good place to start your pension planning.

    IHN
    Full Member

    Opt in, it’s free money from your employer if nothing else

    Apparently I can pay in 1% of my earnings (before tax I think) and the company pays in 2%. This then increases to 5% and 4% in three years.

    They are the bog basic minimums, don’t make the mistake of assuming that they’re enough to give you a decent amount of money at the end. Auto-enrollment is a great principle, but I’m concerned that it goves people the impression that they’re going to be fine when they retire, when the amount they’re actually saving towards their retirement through the schemes is really not sufficient to acheive any kind of decent income in the future.

    The rule of thumb is that you should take your age and halve it. That’s the percentage of your gross income that you should be saving towards your retirement. In your case, that would be 15%.

    twixhunter
    Free Member

    Usual balls about earlier you start and employer giving you free money, tax benefits etc are all true. better still if you have any kind of additional voluntary contribution scheme (AVCs) available.

    Fill your boots but don’t lose sight of today and spending money on fun stuff too.

    slowjo
    Free Member

    AVCs don’t apply for defined contribution schemes, they were generally for people with final salary arrangements. The idea is sound though, save as much as you can but get the balance right. Live for today a bit too.

    midlifecrashes
    Full Member

    Also, without putting a downer on it, how’s your dad, and grandad? If no-one in your family makes it to 70, it’d be an optimistic bet to load up a big pension pot and AVCs never to get your chance to spend it. If your tribe are all still dancing into their eighties and nineties, get saving!

    wwpaddler
    Free Member

    Think of it as a way of getting free money. If you earn an average salary of £25K then 1% is £250 per year but it only costs you £200 as the government pays the £50 and your employer is putting in £500. So for a cost of £200 to you you’ve got £750 in your pension. Try putting in a higher percentage if you can. A rough guideline that you hear is half your age when you started paying into a pension as a percentage of your salary.

    brooess
    Free Member

    The Workplace Pension was put in because we have a major pensions crisis – hardly anyone has saved enough to retire on and the current taxpayer (us) is going to have to foot the bill and still these people will be living in penury…

    I would make no assumptions about a state pension existing in much form in twenty years time so if you want to die in poverty then spent your cash now and don’t save for a pension.

    I have sympathy with those who say pensions so far have not paid out too well (e.g. me – saved for 16 years and I’m forecast £3k per year to live off) and those who say living costs e.g. rents and house prices leave nothing left to save) but really, we have no option IMO but to make our own provision.

    A lot of people are expecting to use their houses as the pensions. But if they all do it around the same time then you’ll not see prices hold as a big chunk of supply hits the market, so they may be shocked at how successful this policy is at providing a lump sum.

    Me, I’m going to carry on saving as best I can and then emigrate to a warmer country with cheaper cost of living in the hope of stretching my savings out till I pop my clogs

    firestarter
    Free Member

    I think the only people that will be comfortable in retirement in 20 years time will be the rich, the politicians and the long term unemployed

    thegreatape
    Free Member

    I’m in the same boat, broadly speaking, as firestarter, but even so it would be daft not to carry on with it.

    footflaps
    Full Member

    These schemes are defined contribution schemes so the money is yours and the only restriction is that you have to wait until retirement age to get your hands on it.

    Although the final rate of tax you’ll pay is completely in the hands of future Governments, so it’s not totally risk free. Eg they’ve just dropped the total lifetime amount for pensions and introduced a higher tax rate for anyone over that, and I’d expect these to both get worse over time as governments look to find more ways of increasing tax take (i.e. lower limit and higher tax rate).

    In the case of the OP, if your employer is matching your contributions you’d be a fool not to pay into the scheme.

    davidtaylforth
    Free Member

    thanks for the advice all; sounds like I may aswell take it on.

    Rubber_Buccaneer
    Full Member

    I always join Company pension schemes and pay at least enough to get the maximum employer contribution. Anything above that I would think hard about investing elsewhere. If an employer is offering money I would hate to turn it down.

    gonefishin
    Free Member

    Although the final rate of tax you’ll pay is completely in the hands of future Governments, so it’s not totally risk free.

    Well nothing is totally risk free and the same can be said for any savings or investment.

    Eg they’ve just dropped the total lifetime amount for pensions and introduced a higher tax rate for anyone over that, and I’d expect these to both get worse over time as governments look to find more ways of increasing tax take (i.e. lower limit and higher tax rate).

    Yeah but the current limit isn’t likely to affect that many people as it’s now £1million rather than £1.5million. Ironically the people it will affect most is anyone on a generous final salary pension!

    Anything above that I would think hard about investing elsewhere.

    Tax relief can make the difference, especially if you are a higher rate payer, but yeah it’s something to think carefully about.

    brooess
    Free Member

    1 in 6 over 50s can’t afford to retire

    Interesting article in The Economist this morning about self-employment, and in particular the growth amongst people above retirement age. The 1 in 6 stat is a bit scary and suggests massive underprovision in pensions.

    The proportion of over-65s who are self-employed has sharply risen too. This may be down to worries about financial security in retirement, says Laura Gardiner of the Resolution Foundation, a think-tank. In recent years British pension funds have seen measly investment returns, thanks in part to rock-bottom interest rates. Britain has one of the lowest “replacement rates” in the OECD, a club of mostly rich countries; on average its pensions replace only 40% of pre-retirement earnings. In a survey by Saga, which sells services to the elderly, one in six over-50s said they had been forced to put off retirement indefinitely.

    suburbanreuben
    Free Member

    1 in 6 over 50s can’t afford to retire

    Interesting article in The Economist this morning about self-employment, and in particular the growth amongst people above retirement age. The 1 in 6 stat is a bit scary and suggests massive underprovision in pensions.

    Or,
    5 out of 6 over 50s can afford to retire.

    Not nearly so scary. In fact, a surprisingly high proportion!

    ahwiles
    Free Member

    David, you’re 30, you’ll be working till you die. Or at least into your 70’s, which will probably kill you.

    the money you pay into a pension now isn’t really ring-fenced for you, it just falls into the black hole of debt that’s paying for people already in retirement, or about to.

    You do have to pay in to play the game, but you/we are relying on little more than luck and goodwill that future governments/employers will actually pay our pensions on the terms that we signed up to.

    Every year, i get a pension statement that reminds me that neither the government, nor my employer have no intention of acting in ‘goodwill’.

    Really, we don’t have much choice. But we can expect to get dry-bummed, again and again over the next few decades. Finally being forced to our knees, *****-****** to death, and pushed into a mass grave.

    that’ll be £200/month please.

    convert
    Full Member

    They are the bog basic minimums, don’t make the mistake of assuming that they’re enough to give you a decent amount of money at the end.

    This is key.

    For reference I pay over 20% of my salary into my pension with an excellent employer contribution and still don’t forecast living a particularly affluent old age. It means my toy money is severely curtailed in comparison to my more live-for-today friends but I think it’s important. It doesn’t have to be a pension of course, there are other ways of saving for your retirement (property and buy to lets, shares, isas etc etc) but to do nothing is foolhardy unless you plan an early death.

    br
    Free Member

    Currently you need a £30k pension pot to generate £1k of pension (give or take)…

    1 in 6 over 50s can’t afford to retire

    I’ll bet it’s higher than that as most folk don’t actually understand how either private or the state pensions (and NI) work, and probably nearer 1 in 2 for the under 40’s.

    djambo
    Free Member

    You do have to pay in to play the game, but you/we are relying on little more than luck and goodwill that future governments/employers will actually pay our pensions on the terms that we signed up to.

    Why not take control of the situ. Get a SIPP and manage your own pension! Reduce the fees you pay and if it all goes tits up you’ll only have yourself to blame!

    footflaps
    Full Member

    This year and last I’ve paid 50% into my pension mainly as I’m concerned about the upcoming pension review, to be announced in Nov, which rumour has it may remove tax relief completely. Hence, I’ve been making the most of the tax relief whilst we still have it!

    Get a SIPP and manage your own pension! Reduce the fees you pay and if it all goes tits up you’ll only have yourself to blame!

    Very little in it fee wise, a Stake Holder pension has to be below 1% and most are less than 0.75%. A SIPP will cost you more once you factor in fees for the funds you buy as well as fees for the SIPP.

    suburbanreuben
    Free Member

    Very little in it fee wise, a Stake Holder pension has to be below 1% and most are less than 0.75%. A SIPP will cost you more once you factor in fees for the funds you buy as well as fees for the SIPP.

    But do you get to choose the funds or other investments in the Stakeholder scheme?

    edhornby
    Full Member

    put in the maximum you can, or at least the amount that triggers the employers largest contribution

    tragically1969
    Free Member

    I can opt out if I want though.

    And you will be opted back in in 3 years as i understand it…………

    surfer
    Free Member

    Depends I guess I’ve paid in 400 a month for 18 years and the government have just torn the entire agreement up. I now have to pay more for 8 years extra to get less. If if I were starting out I wouldn’t join its safer but worth less under your pillow

    Then I suspect you are/have been in a very generous scheme. Would you like to share the details?

    the-muffin-man
    Full Member

    Are company schemes safe though? Are they ring-fenced now, so another Maxwell can’t dib into them?

    surfer
    Free Member

    They are regulated tightly but thats not to say the investments perform that well. Give the tax free nature of your contributions plus any employer contributions they would have to perform spectacularly badly for it be a bad investment. Most actually preform quite well.
    For a higher rate tax payer you should at least invest enough to maximise your employers contributions. Maybe think about ISA’s after that to reduce any possible tax post retirement.

    madhouse
    Full Member

    As I understand it, company schemes will be run by a 3rd party provider as they are now. What the government has done is make sure all companies offer a pension so that more people can save for their retirement (because they know the state pension is barely enough to live on).

    That’s more important now as it is highly likely that todays youth will not be able to rely on increasing property value to fund their retirement. There is a vast amount of people who down-sized their home to free up capital for their retirement due to the massive increases in house prices over the last 40 years and that won’t happen again.

    My advice is to get a pension early, I know it’s more fun to buy beer and bike bits in your 20s but that is the time that pensions need to be started in order to maximise their benefits.

    The state pension doesn’t buy much now and won’t get any more generous as time goes on, so I would advise anyone to plan for their retirement using whatever method they want, the important thing it to make sure you have a plan.

    Bazz
    Full Member

    Depends I guess I’ve paid in 400 a month for 18 years and the government have just torn the entire agreement up. I now have to pay more for 8 years extra to get less. If if I were starting out I wouldn’t join its safer but worth less under your pillow

    Then I suspect you are/have been in a very generous scheme. Would you like to share the details?

    Firefighters pension scheme, used to require 30years service at 11% contributions for a pension based on final salary, which would have been sufficient to get by on (I know my dad has been retired a few years now, he’s not living in luxury but the basics are taken care of.)

    Will now require 40 years of 11.7%(currently, likely to rise) contributions for a pension based on career average rather than final salary that will still pay out considerably less than the old scheme.

    In London (the brigade I serve in) people are leaving the pension in their droves, if I didn’t already have 20 years worth of contributions invested then I would leave as well, because it’s not an invested scheme this is likely to cost then taxpayer more than the old scheme, i.e. lots of retired people claiming but no bugger paying in.

    br
    Free Member

    In London (the brigade I serve in) people are leaving the pension in their droves, if I didn’t already have 20 years worth of contributions invested then I would leave as well, because it’s not an invested scheme this is likely to cost then taxpayer more than the old scheme, i.e. lots of retired people claiming but no bugger paying in.

    But the 20 years you’ve already got can stay there, with the accrued benefits. From now you need to work out is it better to stay in or leave, and I’m pretty sure you’ll stay unless the Brigade will pay the employer contributions into a private scheme – either way, it’s a simple calculation.

    freeagent
    Free Member

    Given the tax free nature of your contributions plus any employer contributions they would have to perform spectacularly badly for it be a bad investment. Most actually preform quite well.

    This is exactly my opinion – I put in 5% which is matched by my employer.
    I know it isn’t enough (I’m 42 – and have only been doing it 9 years) but to be honest, I’d rather spend my money giving the kids everything I need for the next few years.

    Both my Grandads were dead before 70 due to heart problems, so I don’t think i’m going to need enough for 30+ years of retirement!

    At a recent school reunion, I was amazed how many of my old class mates had no pension provision at all.

    surfer
    Free Member

    Firefighters pension scheme,

    I expect you pay circa 10+% personal contribution depending on salary.
    What % does your employer pay in ?

    people are leaving the pension in their droves

    Why?

Viewing 40 posts - 1 through 40 (of 85 total)

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