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

[cookiem0nster]

Take the 1% from your employer and pay the 0.8%. Setup a SIPP elsewhere for anything extra you wish to contribute personally. If you leave your current role you should be able to transfer your pot to your SIPP.

 

[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?

Not sure on fees, in relation to cancelling, or taking out 25% at retirement age etc?

 

[toprock]

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.

Thanks, do you get the £350 matched by employer too?

 

[Randomface74]

Those reviews are awful.
Considering the amounts involved, I'd probably not bother.

You do need to do something about your retirement finances though.

 

[toprock]

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.

Until I made this post today I wasn't aware of the increase, so even though they get a bad rep, its still looking a no brainer with those increased contributions.

 

[toprock]

Those reviews are awful.
Considering the amounts involved, I'd probably not bother.

You do need to do something about your retirement finances though.

This is the vicious circle I get stuck in, when I look at the reviews, it puts me right off lol, you'd think Financial Services Authority would have some sort of cover should money go missing etc though?

 

[Randomface74]

I have no idea if/how the FSA helps, but I wouldn't deal with an obviously bad company and rely on it.

Can you switch jobs? You could really do with more income, and a different pension arrangement.

 

[muon]

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%.

Why does it matter how much the employer pays?

I'd put 1% into this pension and also save up elsewhere.

Unfortunately just miss out on a Lifetime ISA.

https://www.gov.uk/lifetime-isa

So need some kind of salary sacrifice scheme.

Can you switch jobs? You could really do with more income, and a different pension arrangement.

Yeh abould just become the PM. Good salary and pension.

 

[Puzzled]

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.

Wonder if we'll see more people opting out as the minimum contribution goes up due to it taking a bigger cut of their usable income, I'd imagine some employers will try and get people to opt out as well when it hits 5%.

Not good but loads of people are in toprock's position and worse, can't afford to live today let alone worry about a retirement that may never come.

 

[Randomface74]

Yes there's a proposed arrangement where:
- your contribution goes into a lifetime ISA
- employer's contribution goes into a pension

don't know if that'll happen.

 

[toprock]

Would this be the best ISA, to consider alongside auto enrol pension then? (i'm actually 39 so still have time before bday)

https://www.moneysavingexpert.com/savings/lifetime-ISAs#goldenrules

LISA

Can pay in upto £4k a year, and get 25% back up to age 50?

 

[muon]

Wonder if we'll see more people opting out as the minimum contribution goes up due to it taking a bigger cut of their usable income, I'd imagine some employers will try and get people to opt out as well when it hits 5%.

Not good but loads of people are in toprock's position and worse, can't afford to live today let alone worry about a retirement that may never come.

I think it is silly. Employers think of staff costs at an overall level. So they would hold back salary considering the 5%. Then the employee loses out on the 5% if they opt out.

For low salary jobs this is just a waste of time. I wonder how many people will keep on top of their pots as they move around as well.

 

[toprock]

Yes there's a proposed arrangement where:
- your contribution goes into a lifetime ISA
- employer's contribution goes into a pension

don't know if that'll happen.

The LISA sounds a bit too good to be true, reading into it now

 

[Irish_Tom]

Not sure on fees, in relation to cancelling, or taking out 25% at retirement age etc?

Just looked on the NowPension site:

£18/year in 'Monthly Admin Charges' + 0.3% annual fee.

£5,000 pot would be paying £33 or 0.66% fees
£10,000 pot would be paying £48 or 0.48% fees
£25,000 pot would be paying £93 or 0.372% fees
£50,000 pot would be paying £168 or 0.336% fees
£100,000 pot would be paying £318 or 0.318 fees.

That's not actually too bad compared to other workplace pension schemes — The People's Pension is 0.5% and NEST is 0.49%.

However, their website is dire and I can't find any fund data sheets or return results.

The above fee information is a bit moot because without the fund performance data you can't really tell whether that's good value or not.

The People's pension was not only more expensive than NEST, it's highest-risk fund was underperforming significantly against the equivalent NEST fund, which itself was more expensive and performing worse than the fund I've gone for with my SIPP.

 

[muon]

Would this be the best ISA, to consider alongside auto enrol pension then? (i'm actually 39 so still have time before bday)

https://www.moneysavingexpert.com/savings/lifetime-ISAs#goldenrules

LISA

Can pay in upto £4k a year, and get 25% back up to age 50?

Yes. Ideal and you manage your own money. Anything else is only better if you are a higher rate taxpayer.

 

[toprock]

Wonder if we'll see more people opting out as the minimum contribution goes up due to it taking a bigger cut of their usable income, I'd imagine some employers will try and get people to opt out as well when it hits 5%.

Not good but loads of people are in toprock's position and worse, can't afford to live today let alone worry about a retirement that may never come.

Once it hits 5% i'd definitely notice that on my take home pay, but i'd expect that to give a bigger payment than the forcast £22 in OP then

 

[toprock]

Just looked on the NowPension site:

£18/year in 'Monthly Admin Charges' + 0.3% annual fee.

£5,000 pot would be paying £33 or 0.66% fees
£10,000 pot would be paying £48 or 0.48% fees
£25,000 pot would be paying £93 or 0.372% fees
£50,000 pot would be paying £168 or 0.336% fees
£100,000 pot would be paying £318 or 0.318 fees.

That's not actually too bad compared to other workplace pension schemes — The People's Pension is 0.5% and NEST is 0.49%.

However, their website is dire and I can't find any fund data sheets or return results.

The above fee information is a bit moot because without the fund performance data you can't really tell whether that's good value or not.

The People's pension was not only more expensive than NEST, it's highest-risk fund was underperforming significantly against the equivalent NEST fund, which itself was more expensive and performing worse than the fund I've gone for with my SIPP.

Thanks incredibly useful, i'm currently swinging towards the opt in button!

 

[Puzzled]

I think it is silly. Employers think of staff costs at an overall level. So they would hold back salary considering the 5%. Then the employee loses out on the 5% if they opt out.

For low salary jobs this is just a waste of time. I wonder how many people will keep on top of their pots as they move around as well.

Apparently they are working on a website that finds all of your pensions so you can track them due to that exact problem. I've got a few small pension pots myself that I don't really pay attention to as it was short term employment, should probably look at putting them in to one pot.

 

[toprock]

Wonder if we'll see more people opting out as the minimum contribution goes up due to it taking a bigger cut of their usable income, I'd imagine some employers will try and get people to opt out as well when it hits 5%.

Not good but loads of people are in toprock's position and worse, can't afford to live today let alone worry about a retirement that may never come.

Majority of my close friends, across a swathe of different lifestyles, jobs etc, have all got into too much debt in younger years, not saved enough, and not put enough into pensions, only right now am I starting to understand the minefield of options a bit more lol

 

[muon]

Incredibly stupid pension question if I could hijack very slightly,

http://www.civilservicepensionscheme.org.uk/employers/employer-contribution-rates/

Does that mean that the employer contribution for eg. someone earning £45k is 20.9% on the Alpha scheme? Plus the employee contribution?

Isn't that a final salary scheme anyway? Who cares what the contributions are.