Pension/future

Soldato
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What are you folks doing with regards to saving money for the future?

I'm 23 and will be looking to buying a house soon so all my money is going to be poured into the deposit, but once I'm up and running on that I'll need to start saving for the future.

By future I mean money for retirement, rather than saving up for a bigger house or savings for kids, that will be done separately.

I have no idea at all about pensions and the like, all I know is I don't pay into one through my company so will have to sort one myself. Do most of you have some sort of pensions scheme? If so how does it work, and if not, what are you doing in preparing for the future?
 
I won't ever get a pension. I do not expect to make it to pension age so seems like a cracking waste of money. I don't buy into inheritance either.
 
I have a scheme through work. They match 2x the amount I pay in each month.

Many people would tell you not to bother with Pension schemes though, as they do have a risk factor. Rather, open your own high-interest savings account and set up standing orders for yourself every month to pay into it.
 
I started my pension when I was 35.

I wanted the option to retire at 57, and get a pension 'wage' paid of £16000 inflation linked (which I thought was quite reasonable).

My IFA said to get this I needed to put £2000 PER MONTH into my pension for the whole of the rest of my career..

Start those pensions early kids, or it'll come back to haunt you ..
 
I won't ever get a pension. I do not expect to make it to pension age so seems like a cracking waste of money. I don't buy into inheritance either.

Pretty self centered don't you think? If you don't plan on being alive that long, some schemes will offer a death in service payout of x times salary with the money you contributed to a pension fund will go to a chosen beneficiary (next of kin etc).

OP:
I contribute to a pension on a salary exchange basis. It is percentage based pre-tax deduction, matched + 2% by the company into a fund chosen by me based on the risk I want to take. I don't know much about any schemes that aren't operated in conjunction with an employer though, so can't help there!
 
In all honesty if you have a house put your savings in an isa or something similar.

Pensions are only good inso far that your employer may contribute. Mine sticks something like 8% of salary per month and I put nothing in so in effect it's free money.

The problem with pensions is annuities and not knowing when your going to die!

Assuming you had a pension pot of 100k at retirement [65] (which is not a lot) you could take £25k tax free cash. Sounds nice I agree. Currently with the other 75k you will have to buy an annuity or if your pot is large enough take drawdown. Assuming you buy an annuity as most people would this would give you income of about 4.5k per annum. Note you get taxed on this as well so take 20% off would leave you with £3.6k. So to make it worth your while you would have to live up till about 85 before you actually got as much money out as you put in. If you die one, two, three etc years after your retirment you are usually stuffed and the money would go to the annuity provider instead. Not that it matters as you would be dead, but the point is you would have saved most of the 75k and got nothing back.

Personally I have the company pension as its free, an isa and a high interest savings account. Seems the best way imo.
 
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Many people would tell you not to bother with Pension schemes though, as they do have a risk factor. Rather, open your own high-interest savings account and set up standing orders for yourself every month to pay into it.

For tax reasons you would be very VERY silly to do this. An approved pension scheme would come in under HMRC rules and regs which gives you a limit on the amount you are able to put into your scheme before paying tax on the interest - clicky

Anything earned below that would be tax free.

Speak to an independant financial advisor (or three!) and see what the best option for you is. Probably now is as good a time as any to look into it.

Please do your research into it though and ask for some information on the performance of any products over the past 5 years to give you some idea of how they have dealt with the ups and downs of the stock market.

Oh, and probably stocks are a better long-term bet than cash, but again speak to an IFA.

Edited to add - good point raised by Dazzerd on losing your pension when you die. There are products/structures out there that work a bit like a trust, whereby the pension is in the name of the trust, of which you are a beneficiary, and you can list those you wish to be beneficiaries when you die - the pot doesn't go when you die but allocated to your wife/partner/children etc. Not sure what options like this you have in the UK but definitely something to ask about.
 
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I started my pension when I was 35.

I wanted the option to retire at 57, and get a pension 'wage' paid of £16000 inflation linked (which I thought was quite reasonable).

My IFA said to get this I needed to put £2000 PER MONTH into my pension for the whole of the rest of my career..

Start those pensions early kids, or it'll come back to haunt you ..

Calculations like this make me wonder why anybody bothers over simply using the money to buy a second property. In your instance over a standard 25 year term it would be yours by the time you were 60, and would likely offer you a similar income, but for a much smaller outlay.

There must be an answer, but i am damned if i can work it out. I am sticking to property myself.
 
Calculations like this make me wonder why anybody bothers over simply using the money to buy a second property. In your instance over a standard 25 year term it would be yours by the time you were 60, and would likely offer you a similar income, but for a much smaller outlay.

There must be an answer, but i am damned if i can work it out. I am sticking to property myself.

That's the point really, nobody knows. Just have to take a punt sometimes!

I was going to invest in a Southampton town house a few years back and convert it into student accomodation - really regret not doing so as the return on that now would be great.
 
Thanks for all the replies. I need to a lot more research as some of the terms used have gone straight over my head :o, and of course before I do anything I will speak to a financial advisor, just wanted to get a rough feel of things first.

Jez; the property idea does seem like a reasonable one. That's what my parents have done. They paid off the mortgage on the house a few years back and have bought a couple of smaller places which they rent out which is essentially theire pension fund. They then plan to sell the current house and downsize into one of those properties when all of us kids have moved out which should put them in a pretty good position.
 
I started my pension when I was 18.
There was a short period when I was contracting and nothing went in.
I'm paying approx. £210 in a month and my company matches that.

Hoping to retire as early as possible.
 
Many people would tell you not to bother with Pension schemes though, as they do have a risk factor. Rather, open your own high-interest savings account and set up standing orders for yourself every month to pay into it.

This is what I am doing at the moment. Although, pensions are very different here in SA. I actually opened an account with the bank yesterday where I will be putting X amount in every month and they will add a % on top of that.

The term is only for 12 months with an option to go another 12 months after that. By repeating the cycle and reinvesting the amount saved up from the previous year, the capital can only grow and grow! :cool:
 
I started my pension when I was 18.
There was a short period when I was contracting and nothing went in.
I'm paying approx. £210 in a month and my company matches that.

Hoping to retire as early as possible.

Up your payments.

If you retire at 58, your pension fund is going to be approx. £200,000. This will give you (inflation linked) about £7000 a year before tax in 'todays money'.

Thats £583 per month, BEFORE tax, to live off. Total. For everything. Add the joke of a state pension, when you get to aged 67 this will shift up to about £630 a month todays money.
 
I put an amount away monthly - started when I was about 22-23 ish. It is much easier to save a little bit a month as early as possible, than leaving it until later and have to put away several times more.
 
Here we go again - loads of misguide fools diving into a thread about pensions saying

Pension are crap/Don't do it/to much risk etc etc etc

So much negativity about pensions - which is usually driven from total and utter ignorance about the subject matter.

For a start every contribution you make to a pension you get 20% tax relief on. So for all the people out there sticking £100 a month into savings account = £1200 a year.

Put £100 a month into a pension you get £25 a month tax relief (can claim an additional 20% if higher rate tax payer) so at the end of the year I have £1500 in your pension plan.

If your looking for a basic pension plan - look for a stakeholder pension from the likes of L&G/ Aviva/Scottish Widows/Standard Life etc as they start from £20 a month and have a low charging structure of approx 1% max
 

but you must admit an inflation linked annuity, especially if you want to look after your missus if you cop it, is going to return you about 3.2%

So for *any* kind of life, that means in todays money you need to be working towards a £500,000 pension pot.

So £80 a month (or whatever), matched by your employer, with the tax benefit, is in no way EVER going to cut the mustard. People need to know that now! Not 2 months after their retirement party when they find they can't afford the 'leccy bill :(
 
Like with so mnay things its realtive. My employer matches my contributions up to 10% of my salary. So if I put £20K a year in the employer does too for a total of £40K a year so you double your money for free. The other advantage is that you get tax relief on the proportion of your gross income that you contribute (effectively I pay no income tax on the £10K from my salary and only pay income tax on the reduced total).

It gets a little better than that too, because you receive the National Insurance component back too and this gets added to the total going into the pension.

It is worth considering a pesnion even if your employer doesn't double-up if you can obatin the tax relief in so doing - over time that adds up to quite a lot.

Even private pensions allow a form of tax relief and an independent IFA can advise you on how that works.

Everyone should have an ISA as its tax free income throughout the year every year and you have access to it if you do need cash for somehting (although that's not really the point of them). Stocks and shares ISAs are great to use as a tax-advantageous "wrapper" as they effectively allow you to trade stocks without paying the stamp duty or CGT on gains made (provided they're properly structured).

Other investments are also a good idea, to ensure diversification and access to different markets. This could be forestry holdings, direct holdings in shares (keep eyes open for attractive IPOs) or any of a range of other possibilities.

The key point is to save always and start as young as possible. If you can, try to save 20% of everything you earn in one way or another and this will leave you comfortable in retirement.
 
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