Have heard a lot of negative press re pensions (private, employer/group, etc) so much so that I opted out of my previous employer's scheme because it was generally sh1t.
Friends in the business got rid of theirs years ago too.
Have a new job in the offing where they pay in 1.5x, hence wondering what the consensus is these days?
Ta
Pensions can be one of the most cost effective ways of saving given that you pay into them before tax and if your employer is also contributing you would have to save a significant amount of your net income to match it.
Yes they get a bad press but mine would have to under-perform in such a staggering way (which it is not) to make it anything other than a no brainer.
It can be more complex if your pension is large and there are tax implications when you start to take it and of course people have different circumstances but for me it forms a big part of my retirement plans as well as other investments.
Have a new job in the offing where they pay in 1.5x, hence wondering what the consensus is these days?
Turning down free money is a silly idea?
The main reason pensions have gotten a bad press is due to annuity rates rather than fund growth and as you are currently paying into a fund this is a better thing for you to look at. In terms of investment they aren't really much different to other stocks and shares type investments. The main upside being you get to invest gross amounts rather than net and the main downside being it's money that's locked away that you can't touch until you retire.
The consensus on pensions is, basically, you need to be saving more into one than you currently are.
The rule of thumb is to halve you're age and that gives the percentage of your gross income that you should be saving for your retirement.
The rule of thumb is to halve you're age and that gives the percentage of your gross income that you should be saving for your retirement.
Uh Oh. 😯
Exactly...
The rule of thumb is to halve you're age and that gives the percentage of your gross income that you should be saving for your retirement.
I've heard similar, but surely factors like equity (£75k house in Northumberland vs £450k pad darn sarf) are going to impact this?
and what % of people actually do this?
And also factor in (if you are 'fortunate' enough to be able to expect to be in receipt of inheritances) that you may also receive other money to see you through retirement.
as someone who is using his pension I cant recommend it highly enough, its a whole new life
I've always paid into my own personal pension and not company schemes. Would they pay into a private one or does it have to be a company scheme.
I've heard of far too many small company schemes failing/companies going bust/directors using the funds to risk using them.
FWIW I've always found the NFU good for this sort of thing.
The rule of thumb is to halve you're age and that gives the percentage of your gross income that you should be saving for your retirement.
Surely that's complete nonsense though?
If I want to retire at 50, I only need to put in 25% of my gross income, yet if I want to retire at 65 I have to put in 32.5%?
The sooner you want to retire the more you need to put in to cover both a shorter saving period and a longer income period.
@muffin-man: They're a global player and not likely to disappear IMO. Can't say for sure that the return is guaranteed to be a good one though.
My pension cut in just recently and I'll say this, however much you save, it won't be enough. I retired for a couple of weeks then changed my mind and got back into the harness..
The sum I have now compared to when I set out to save is beyond my then wildest dreams, yet it barely copes with my living demands, council tax, utilities, vehicles costs, and other living stuff and I was lucky enough to secure a 10% guaranteed annuity. Then the big shock, is the amount of tax I have to pay on it, I'm perhaps a tad naive in these matters but for some reason I but paying tax on something you've waited years to draw down was heartbreaking..
Anyway the moral of the tale, however much you think is a lot now, won't be when you get there and when you do, the Government will pinch a big chunk of it back..
They're a global player and not likely to disappear IMO.
...can I mention Robert Maxwell! 😀
Surely that's complete nonsense though?
Based on the old model of work till 65, live 20 years then die, it's not too bad.
IMHO it is horrifying to contrast the fortunes of my pension to that of my ISA, given that the former enjoys gross contributions from income tax relief. The charges on pension funds are criminal.
Add to this the fact that even if your pension does well and assuming you can get a decent annuity rate, the government still sees fit to tax you on draw-down and the whole thing starts to look like a bit of a (neccessary) ramp.
Now, following the whole stakeholder fiasco, the UK govt are about to embark on yet another ill-conceived overhaul of the system. Watch this space...
only in income taxes though surely? Which is why its good as the savings are done gross so theres more accuring interest, then its withdrawn net at a time when your outgoings are lower (no mortgage or kids). So for the most part my pension comes out of my earnings in the 40% bracket, but my retirement income will likely be in the 20% bracket.when you do, the Government will pinch a big chunk of it back..
I think it means half your current age, I.e at 30 you should save 15% and ramp that up as you get older untill you hit a point where the anuity you can buy equals your outgoings (and hope thats as soon as possible).Surely that's complete nonsense though?If I want to retire at 50, I only need to put in 25% of my gross income, yet if I want to retire at 65 I have to put in 32.5%?
I put in x out of my salary and 3x goes ito my pension fund. I'm about 40 years from retirement so have it all invested in high risk shares, There'll be ups and downs but over that timescale it should generally point upwards..
I am assuming this is a Money-Purchase (AKA: Defined Contribution) scheme, where your contribution go into your own ‘piggy bank’ of investments and your pot on retirement is based on what is paid in plus any increase due to investment performance then Yes, pensions are an extremely tax-efficient way of saving, but yes, your funds are ‘locked’ away until retirement (unless you leave your employer before reaching 2 years of service and then you may be eligible to opt to have a refund of your (employee) contributions (less tax and NI)).
If the employer is also paying in 1.5 times your pensionable salary (usually your basic salary, but may exclude things like performance bonuses / commission-based payments etc), then yes, it’s free money so does seem good.
What you get when you retire (using your pot of cash to buy an annuity) will depend on the annuity rates available at the time. The rules have recently changed though and think you can opt to take the whole lot as a lump-sum cash payment (75% of which will be taxed) now (whereas the old rules were you could only opt for a max of 25% as a tax-free lump sum, leaving the rest for purchasing an annuity)? Not completely sure of this though, so don’t take my word for it.
Different strokes for different folks though. If you can afford to save 7% (or whatever) of your salary each month into a pension and the employer then pays in an additional 1.5% of your salary / 1.5 times your contribution (not clear on your scheme rules), then will probably be the most efficient long-term savings plan you can get.
If you are a high earner and have a significant pension pot, then the performance of the investments on offer in this scheme may be an issue for you. I would suggest some independent financial advice if this is your situation.
Maybe you have other plans for retirement and invest in other ways to finance later-life, in which case, maybe your current plans out-perform the scheme being offered. If this is the case – let us know your secret!
Schemes offered by ‘Global Players’ are very safe from unscrupulous dealings nowadays.
Again, still assuming it is a Money-Purchase scheme, your employer will not be able to get their hands on your individual ‘pot’ as the industry is highly regulated, the Scheme produces its own set of report and accounts for the Schemes independent Trustees and members of the Scheme (and any other interested party) which will be independently audited on an annual basis.
Our employer matches you up to 7%, so if I put in 7%, I get 7% free (from work), plus the tax back on my 7% - so a very good deal!
I'm so very, very screwed.
Give it another quarter century, and I'll be looking for a bridge to jump off.
If you really want to feel bad, check out some on-line calculators to see what you need to be saving if you want more then 50p a month pension!
Here's an example of one:
https://www.moneyadviceservice.org.uk/en/tools/pension-calculator
Just face the facts. If you're under 50 now, you're never ever going to retire. Unless you fancy living in abject poverty.
By the time I hit that age, the whole idea of some cosy retirement, with foreign holidays, playing golf, nice weekends away in the lake district will be nowt but a quaint and distant memory. Something a single gilded generation got to enjoy
If worried about charges look into SIPPs, Interactive Investor are my current guys for that as have fixed charges rather than %ages which I prefer.
Oh, if you didn't contract out of SERPS, recent pension changes mean you've lost out to those that did.
Oh, if you didn't contract out of SERPS, recent pension changes mean you've lost out to those that did.
Any details on this?
I contracted out ages ago, but haven't looked into it in years...
The key thing to think about is, once you're too old/infirm to work, how're you going to pay for food, heating etc? You need an income from somewhere. Given the UK has massive national debt, I wouldn't expect too much from your state pension.
I'm shocked that for quite some time now, a lot of people seem to have seen a pension has an option rather than necessity...
Some people think they can sell their house and live off the proceeds. But if a whole chunk of the population all try and sell their houses at the same time, prices will just drop as supply outstrips demand...
As mentioned above - the tax relief you get on your pension contributions far outstrips any other kind of investment, or even house price growth, so there's no better place to put it
Any details on this?I contracted out ages ago, but haven't looked into it in years
Hmm, looks like opinion on this has changed since I last looked - all very complicated and seems no clear info on this, e.g.:
Anyone else 40 with no house and no pension? I think I will be using that bridge mentioned earlier...
If I want to retire at 50, I only need to put in 25% of my gross income, yet if I want to retire at 65 I have to put in 32.5%?
I think it means half your current age, I.e at 30 you should save 15% and ramp that up as you get older untill you hit a point where the anuity you can buy equals your outgoings (and hope thats as soon as possible).
Yes, the latter.
Our employer matches you up to 7%, so if I put in 7%, I get 7% free (from work), plus the tax back on my 7% - so a very good deal!
You don't get the tax back on your 7%, your 7% is taken out of your gross salary, i.e. before you've paid the tax. So, in total, you're getting 14% of your gross salary. Referring to my previous point, it's a great deal if you're 28...
The key thing to think about is, once you're too old/infirm to work, how're you going to pay for food, heating etc? You need an income from somewhere. Given the UK has massive national debt, I wouldn't expect too much from your state pension.I'm shocked that for quite some time now, a lot of people seem to have seen a pension has an option rather than necessity...
Some people think they can sell their house and live off the proceeds. But if a whole chunk of the population all try and sell their houses at the same time, prices will just drop as supply outstrips demand...
As mentioned above - the tax relief you get on your pension contributions far outstrips any other kind of investment, or even house price growth, so there's no better place to put it
This
I pay into a 'defined contributions' company scheme.
At the moment, I pay in 5% and the company match it, however if I go up another pay band they put in 7%.
I've only had it 7 years (I'm 41) and have no idea if it is the best thing I could be doing, but the way I see it, is that when I retire, 50% of the fund will have been paid by my employer, and that feels OK.
However, quite a few of my old school mates either have no pension (or very basic provision) and don't own property, o I guess I'm going to be better off than some?
Referring to my previous point, it's a great deal if you're 28...
My point was after 7% there's no benefit in using the company scheme over any other scheme eg SIPP etc.
My point was after 7% there's no benefit in using the company scheme over any other scheme eg SIPP etc
True (apart from possibly cheaper scheme fees)
I pay into a 'defined contributions' company scheme.
At the moment, I pay in 5% and the company match it, however if I go up another pay band they put in 7%.
I've only had it 7 years (I'm 41) and have no idea if it is the best thing I could be doing
So the total contribution is 10%, which is about half what you could really do with putting in at your age.
the way I see it, is that when I retire, 50% of the fund will have been paid by my employer, and that feels OK
That's good in tha it's 'free' money to you, but it'll be 50% of a fund that's probably too small...
However, quite a few of my old school mates either have no pension (or very basic provision) and don't own property, o I guess I'm going to be better off than some?
Relatively speaking, yes, but it'll be realative degrees of skintness...
I know I seem relentlessly cynical, but this area is basically a massive dereliction of personal responsibility by the majority of the working population. [b]You[/b] need to save for [b]your[/b] retirement; the state should provide a safety net, sure, but that's all it will be. And you need to be sure that your'e saving enough, and taking advice and guidance as needs be.
Too many people are burying their heads in the sand, and are going to end up royally f*^%ed.
I'm 43 and had a decent pot for my age. Approach I took was to ignore pension until a high earner and just pay off my mortgage with any spare cash. Once mortgage looking good and a high earner then contribute a lot to pension pot using the 40% tax band for max benefit.
Only have a SIPP now as a contractor but I did have a company pension scheme that was very good for fees.
IHN speaks wisdom, IMO.
Best action seems to be to save, early, and more than you think. All complicated by your tax band, but only in that high earners may need to do it a bit differently to make the most of their money.
Nice 1/35th Final Salary waiting for me in a few years
IHN is a wholly owned subsidiary of the AIG group
Remeber your investments can go down as well as up, full terms and conditions availalbe online
F*ck it, let's get pissed!
[i]F*ck it, let's get pissed!
[/i]
Enjoy it while you can...
In seriousness am just about to stop messing about with this and start chucking some serious (by my standards) money at it. It is a bit of a dilemma though - overpay on mortgage or put money in pension - can do a bit of both but not to the extent I want to.
Nail on head.binners - Member
...By the time I hit that age, the whole idea of some cosy retirement, with foreign holidays, playing golf, nice weekends away in the lake district will be nowt but a quaint and distant memory. [b]Something a single gilded generation got to enjoy[/b]
We are looking at a very limited snapshot in time, in a very small number of priviledged western economies.
overpay on mortgage or put money in pension
Depends on mortgage rate and tax band as to what's best. It's nice to pay debts off though.
We are looking at a very limited snapshot in time, in a very small number of priviledged western economies.
Annoyingly many of those now in retirement don't realise just how lucky they are and still moan about the young. They benefited greatly from the house price boom too.
We are looking at a very limited snapshot in time, in a very small number of priviledged western economies.
I dunno, I've always been quite pragmatic about this kind of thing (same with university fees). Some people will always have gotten a better deal than me, others will have been screwed. On the one hand I'll have paid uni fees and likely retire later, on the other I won't die from a whole list of diseases which weren't cureable 50 years ago.
I still intend to retire 'on time', just accepting I'm going to have to pay a bit more for it (just checked, currenlty 15% from me, 9% from work at 28, got a deposit but no house yet).
as I mentioned earlier I made the leap to retirement. I also down sized my house etc to minimize my out goings on council tax, heating etc etc
It makes your pension go a lot further. Seems like obvious advice but includes some tough decisions about down sizing or in my view sensible changes as you embark on your new life
I did buy a new mountain bike though 🙂
Well, I pay in 5% and the company pays in 10%, which I thought was pretty decent until I recently looked at the numbers. I won't be very well off in my retirement!
I should really up my monthly contributions, but even increaseing it to 8% doesn't seem to make a huge amount of difference to the outcome.
And....(stamps foot and sticks bottom lip out) it just seems a bit rubbish to have to take out quite a wedge of money from your salary into a fund that you won't see for years and years. And the goalposts will keep moving and, and and......
it just seems a bit rubbish to have to take out quite a wedge of money from your salary into a fund that you won't see for years and years
or, in other words, 'saving for the future'. PTFU 🙂
