40 y/o no pension, work place 1% pension, or ISA, or?

[toprock]

Some advice guys, I have 10 days to opt in/out of the new workplace pension scheme, 1% from me and employer contributes 1%. The pension company they have chose gets a bad rep on google/MSE etc

Screenshot shows how much a year this would equate to, and the state pension certainly won't be enough.

What are my options, i've heard of people using ISA for a better return on money?

 

[LOAM]

How much are you paying in at 1%?

Does you employer match your contribution if you raise it or are the simply making a 1% contribution?

 

[Sui]

Is a change of company a possibility? Only matching 1% is pathetic.

 

[Jokester]

It's the bare minimum I think of the new workplace pension laws. Personally I would take it, it is still after all "free" money if you can personally take the other 1% hit to your income if it's a matching deal.

What pension company is it?

 

[Scam]

Does it really matter what everyone thinks of the pension company? That's an honest question.

Pension is always recommended as it's pre tax and you're getting that free 1% from your employer. But I'd wonder why you don't have an ISA as well...

Doesn't everyone have a pension and ISA? I thought that was "savings 101"

 

[Irish_Tom]

Is a change of company a possibility? Only matching 1% is pathetic.

I believe this is the statutory minimum as part of the government's auto-enrolment plan. I think it's meant to increase with 'length of service' but it's capped at 3% or 4%, can't remember.

OP, I've just gone through a similar thing at work and decided to opt out of the workplace scheme and use salary sacrifice to pay into a SIPP.

Lower fees and better returns than 'The People's Pension' which is the workplace scheme I've just opted out of. I also had a workplace pension through my previous employer with NEST. I've transferred that out and put it into my SIPP.

 

[LOAM]

I've never bothered with isa's the interest is too rubbish, I'd rather dump surplus into my pension.

 

[FishFluff]

Doesn't everyone have a pension and ISA? I thought that was "savings 101"

Not everyone is in a position to be able to save, unfortunately. I'm 37 now and am only just in a position where I can start saving after paying off all my debts from years of stupid financial mismanagement. At least I was paying into a really good work pension for that time though.

 

[Jokester]

Does it really matter what everyone thinks of the pension company? That's an honest question.

Pension is always recommended as it's pre tax and you're getting that free 1% from your employer. But I'd wonder why you don't have an ISA as well...

Doesn't everyone have a pension and ISA? I thought that was "savings 101"

I guess the assumption is he doesn't have any significant savings at all.

Irish_Tom makes a good point about fees on the pension fund. What are they?

 

[toprock]

How much are you paying in at 1%?

Does you employer match your contribution if you raise it or are the simply making a 1% contribution?

I'd be contributing £25 with £4.17 tax relief so £20.83 and employer £20.83, £41.66 p/month.

If I decide to pay more, employer still only pays 1%.

 

[toprock]

Is a change of company a possibility? Only matching 1% is pathetic.

It's the bare minimum I think of the new workplace pension laws. Personally I would take it, it is still after all "free" money if you can personally take the other 1% hit to your income if it's a matching deal.

What pension company is it?

NowPensions

Its part of the new auto enrollment minimum.

 

[toprock]

I guess the assumption is he doesn't have any significant savings at all.

Irish_Tom makes a good point about fees on the pension fund. What are they?

No savings, but 13 years left on mortgage with nearly 50% equity.

 

[LOAM]

I'd be contributing £25 with £4.17 tax relief so £20.83 and employer £20.83, £41.66 p/month.

If I decide to pay more, employer still only pays 1%.

At your age your contribution is significantly too low. Is the £22 PW pension along with state pension going to be enough?

 

[toprock]

Does it really matter what everyone thinks of the pension company? That's an honest question.

Pension is always recommended as it's pre tax and you're getting that free 1% from your employer. But I'd wonder why you don't have an ISA as well...

Doesn't everyone have a pension and ISA? I thought that was "savings 101"

Its not what people think, its more the hundreds of posts of payments missing, wrong amounts, and some incredibly harsh reviews saying avoid at all costs.

Any savings I had went into the house + mortgage over the last 10 years

 

[toprock]

At your age your contribution is significantly too low. Is the £22 PW pension along with state pension going to be enough?

I'd have no mortgage to pay by then, which would free up a good amount of money, but no it wouldn't be enough.

 

[Skiddley]

1% match is beyond dire, but surely investing in that is a no-brainer as you're doubling your money from the outset.

 

[LOAM]

I'd have no mortgage to pay by then, which would free up a good amount of money, but no it wouldn't be enough.

Remember it would become your sole income so the mortgage freeing up money may not be applicable.

I sort of started from a point of what will I need vs what do I want vs what can I afford, and worked backwards.

The problem with the workplace pension imho is that it's just a token gesture and the minimum contribution simply won't really work for anyone. I don't really know how they are performing but many private pension in the early to mid term can achieve 10% growth (they can go up and down) but it's common to put them in lower growth and safer portfolios as you reach pensionable age.

For an example though I've had my pension for going on 20 years now and I've never paid less than £200 a month into it and currently £350 pcm.

I would consider speaking to an IFA just to see whats out there.

 

[Irish_Tom]

1% match is beyond dire, but surely investing in that is a no-brainer as you're doubling your money from the outset.

If the cost of the fund is high and the performance is poor, you could see better returns in the long term by putting your own money elsewhere, even without the employer contribution.

The biggest issue for the OP is that at 40 and with no current pension, he needs to be putting away more like 15–20% of his pre-tax salary to actually make his retirement pot worth much when he reaches retirement age.

 

[KingOfTheDaves]

I don't want to single you out toprock because a huge number of people make the same mistake, but whacking every spare penny you have into paying off your mortgage at the expense of retirement provision is one of the worst financial mistakes you can make. The possible exception to that is if your mortgage rate is 4 or 5% or something I could maybe understand it.

Compounding makes a massive difference to the amount of pension you end up with, so small pension payments in your 20s and 30s snowball up.

With regards to auto enrollment, whilst the contributions are 1% employee and 1% employer this will be increasing from next year.

6 April 2018 - 2% employee, 3% employer
6 April 2019 - 3% employee, 5% employer

So it start to improve. I would still have other savings on top of that though.

 

[toprock]

1% match is beyond dire, but surely investing in that is a no-brainer as you're doubling your money from the outset.

I'm thinking this, and also it goes up as per below

As your contribution is a percentage of your pay, the amounts will automatically go up or down if your earnings do. Also, your employer may need to increase the percentage being paid into your pension over the next few years in line with the government's minimum standards. From 6 April 2018 you will pay 3% of your earnings each pay period and your employer will pay 2%. Then from 6 April 2019, you will pay 5% and your employer will pay 3%. The dates of these increases may change in line with changes in legislation.

Just this I need to see past!

https://uk.trustpilot.com/review/nowpensions.co.uk