Pensions/ISA help please...

[tsped83]

Now I know this isn’t probably the best place to seek financial advice, but nevertheless, I am seeking.

Can anyone out there offer me some no nonsense advice on Pensions/ISAs? When I say no nonsense, I mean use small and simple words. Imagine you’re talking to a 30yr old child, which in fact you are.

I got married last year and I promised the wife that after the wedding I’d look at getting a pension. Since I left Uni in ’06, I’ve worked full time continuously but have never contributed to a pension or long term savings. Now is perhaps the time to grow up (well, maybe) and make plans for the future.

So, what are the benefits of ISAs over Pensions and vice versa? I’ve done a lot of reading on the net about both and the different tax benefits, but would very much appreciate anyone’s own similar experience or expertise!

If it helps, the Pension scheme offered by work would be 3% ish, and the contributions from me and my employer would be equal.

Thanks in advance good people

 

[Rooter]

Richart is your man, but in my simpleton logic, if your employer are offering you into a scheme where they match what you put in, take that. Also why not look at doing both? step it up to say 5%, 3% to your work pension and 2% income to your personal ISA.

I could be completely wrong, so go get some advice from a professional, but the above is what i would do.

 

[ger147]

Now I know this isn’t probably the best place to seek financial advice, but nevertheless, I am seeking.

Can anyone out there offer me some no nonsense advice on Pensions/ISAs? When I say no nonsense, I mean use small and simple words. Imagine you’re talking to a 30yr old child, which in fact you are.

I got married last year and I promised the wife that after the wedding I’d look at getting a pension. Since I left Uni in ’06, I’ve worked full time continuously but have never contributed to a pension or long term savings. Now is perhaps the time to grow up (well, maybe) and make plans for the future.

So, what are the benefits of ISAs over Pensions and vice versa? I’ve done a lot of reading on the net about both and the different tax benefits, but would very much appreciate anyone’s own similar experience or expertise!

If it helps, the Pension scheme offered by work would be 3% ish, and the contributions from me and my employer would be equal.

Thanks in advance good people

Deffo join your Works pension scheme as you're getting 3% of your wages put in to it for nothing.

On the pensions vs ISA question, by far the biggest advantage of a pension is you can't withdraw your savings and spend it on a holiday to Las Vegas, a Porsche 911 etc. Once it's in your pension it's gone, which will be a good thing when you retire!!

 

[CMAC]

cant offer any pension advice- just an opinion based on...

Invest in property and/or Gold, ideally property. In the last 7 years I dont think anyones pension pot has remained the same, most were vastly reduced, some decimated.

If I had my time again it would be property as a pension

 

[Laka]

An easy way is to go for indexfonds,,,,when trend is downwards then go for intrestfond,park the saving and when trend is upwards go for indexfond..........then you dont need to put in so much effort

 

[Rooter]

cant offer any pension advice- just an opinion based on...

Invest in property and/or Gold, ideally property. In the last 7 years I dont think anyones pension pot has remained the same, most were vastly reduced, some decimated.

If I had my time again it would be property as a pension

Now i would have agreed with you, however i have 2 employer pensions both from previous roles that i have not paid a penny into for over 4 years, both have grown considerably over this time! so much so, i would like the cash in both now as in my opinion it would be better used paying off some of my mortgage now. retirement is still a long way away for me unfortunately!

Again, thats probably a terrible idea (i cant anyway) but i have stated, get proper financial advice before doing anything!!

 

[richart]

Now I know this isn’t probably the best place to seek financial advice, but nevertheless, I am seeking.

Can anyone out there offer me some no nonsense advice on Pensions/ISAs? When I say no nonsense, I mean use small and simple words. Imagine you’re talking to a 30yr old child, which in fact you are.

I got married last year and I promised the wife that after the wedding I’d look at getting a pension. Since I left Uni in ’06, I’ve worked full time continuously but have never contributed to a pension or long term savings. Now is perhaps the time to grow up (well, maybe) and make plans for the future.

So, what are the benefits of ISAs over Pensions and vice versa? I’ve done a lot of reading on the net about both and the different tax benefits, but would very much appreciate anyone’s own similar experience or expertise!

If it helps, the Pension scheme offered by work would be 3% ish, and the contributions from me and my employer would be equal.

Thanks in advance good people

Assuming you are not just about to leave your Company, join their Scheme. I assume it will be a Money Purchase one. Contribute at least 3% of salary to match employers contribution. You will get tax relief on your contribution, and have no tax liability on theirs. Check to see if your employer will contribute more than 3% if you contribute more personally. For someone aged 30, with a retirement age of say 60, I would invest into a good percentage into equities both in the UK and Overseas. You should be able to do this through the Money Purchase Scheme, as it will have a wide range of funds. This will be a long term investment, so don't fall into the trap of investing into short term low risk funds. You can look at those funds nearer to retirement.

Personally I don't think 6% of salary for a 30 year old is sufficient, and would look to either contribute more myself, or alternatively look at investing through an ISA. Pension is better from a tax point of view, relief on your contributions, and you will get 25% of your fund back at retirement as tax free cash (Under current legislation) Downside is you will have to purchase a pension annuity, and rates currently are at a historic low, and as people live longer, unlikely to improve over the longer term.

You do not get tax relief on an ISA investment, but your investment is much more flexible, as you are not tied in for a specific period. If you choose funds such as cash, bonds, gilts etc, which pay interest, you will not pay any tax on the interest. If you invest into equities, which may give you a better longer term performance, these pay dividends, and you would only get a tax advantage as a higher rate tax payer. Remember that whilst an ISA is more flexible, this can be a disadvantage. If you suddenly are a bit short you may start dipping into the pot, which you can not do with a pension.

This is just very basic information on the two types of investments. In my opinion you should get Independent advice if you have any doubts, as a pension could be one of the biggest investments you will ever make. You can also be advised on appropriate funds to invest into. Get this wrong and your ultimate pension income may be a lot less than you expect.

Hope this helps.

 

[richart]

cant offer any pension advice- just an opinion based on...

Invest in property and/or Gold, ideally property. In the last 7 years I dont think anyones pension pot has remained the same, most were vastly reduced, some decimated.

Not sure where you get that from. All the Money Purchase Schemes I look after for clients, which invest into equity funds in the UK and Overseas are at record highs. Perhaps I am just lucky with my choice of funds.

Are you talking about Property Funds or SIPPS in which you can an invest individual property ? Most Property funds, invest into commercial property which from my experience have not performed well in the last few years. Property funds can also be a difficult to get out off, and some Companies have imposed penalties, or even stopped withdrawals completely.

Gold generally performs well when equity markets are poor. Long term it has not performed as well as good equity based funds, say in the UK and Overseas. To me it is a short term bolt hole, but each to his own.

 

[tsped83]

Assuming you are not just about to leave your Company, join their Scheme. I assume it will be a Money Purchase one. Contribute at least 3% of salary to match employers contribution. You will get tax relief on your contribution, and have no tax liability on theirs. Check to see if your employer will contribute more than 3% if you contribute more personally. For someone aged 30, with a retirement age of say 60, I would invest into a good percentage into equities both in the UK and Overseas. You should be able to do this through the Money Purchase Scheme, as it will have a wide range of funds. This will be a long term investment, so don't fall into the trap of investing into short term low risk funds. You can look at those funds nearer to retirement.

Personally I don't think 6% of salary for a 30 year old is sufficient, and would look to either contribute more myself, or alternatively look at investing through an ISA. Pension is better from a tax point of view, relief on your contributions, and you will get 25% of your fund back at retirement as tax free cash (Under current legislation) Downside is you will have to purchase a pension annuity, and rates currently are at a historic low, and as people live longer, unlikely to improve over the longer term.

You do not get tax relief on an ISA investment, but your investment is much more flexible, as you are not tied in for a specific period. If you choose funds such as cash, bonds, gilts etc, which pay interest, you will not pay any tax on the interest. If you invest into equities, which may give you a better longer term performance, these pay dividends, and you would only get a tax advantage as a higher rate tax payer. Remember that whilst an ISA is more flexible, this can be a disadvantage. If you suddenly are a bit short you may start dipping into the pot, which you can not do with a pension.

This is just very basic information on the two types of investments. In my opinion you should get Independent advice if you have any doubts, as a pension could be one of the biggest investments you will ever make. You can also be advised on appropriate funds to invest into. Get this wrong and your ultimate pension income may be a lot less than you expect.

Hope this helps.

Top man! Thank you very much for this info, greatly appreciated. I'm speaking to a pensions adviser on Friday and this is a good heads up for me ahead of then. Thanks again.

 

[richart]

Top man! Thank you very much for this info, greatly appreciated. I'm speaking to a pensions adviser on Friday and this is a good heads up for me ahead of then. Thanks again.

If you have any queries after your meeting, you can always drop me a pm.

 

[JCW]

If you got a works pension where the company pays in then you can lose really , Look at AVC too , isa is short term and pensions are long term , I retired at 54 from the railways after 35 years , I paid into the pension fund and also an AVC , I paid what I could afford and increased it year by year , get advice from more then one advisor and don't listen to those that say what you doing that for , for private pensions you need to check the charges you have to pay , good luck with it and get it sorted as soon as you can .

 

[JCW]

SIPPS are for property pensions , have a business , its good for that , again watch the charges and be aware of all the facts as there are lots out there that promise everything but returns are not what is promised , by far your works pension is the best option , if the have an AVC then invest in that too

 

[Tashyboy]

Had two letters today re the two pensions I have paid into in 34 years in the mining industry and updating my address etc.

it gave me my figures and the one thing which I noticed was that I have paid no AVC's I wish I could turn back the clock.

re company pensions, yeah pay into them, but company's can and do go bust, and all assets etc end up in the PPF pension protection fund. It costs you 10% of what you have accrued. However it's not all bad news. As with most pensions you can cash in a certain percentage of your final valuation for a lump sum. tax free. With the pit pensions cashing in £1 makes you £9. £1,000 = £9,000 etc up to 25% of your value. However with the PPF £1 = £32 so £1,000 = £32,000. This figure does go up and down.

Do not underestimate how massive this decision is re your pension.

One other thing that has not been mentioned is what will your pension pay you if you were to finish due to ill health. I am now 50 and the amount of men who's health I have seen deteriorate when reaching this age is unbelievable,

 

[JCW]

Had two letters today re the two pensions I have paid into in 34 years in the mining industry and updating my address etc.

it gave me my figures and the one thing which I noticed was that I have paid no AVC's I wish I could turn back the clock.

re company pensions, yeah pay into them, but company's can and do go bust, and all assets etc end up in the PPF pension protection fund. It costs you 10% of what you have accrued. However it's not all bad news. As with most pensions you can cash in a certain percentage of your final valuation for a lump sum. tax free. With the pit pensions cashing in £1 makes you £9. £1,000 = £9,000 etc up to 25% of your value. However with the PPF £1 = £32 so £1,000 = £32,000. This figure does go up and down.

Do not underestimate how massive this decision is re your pension.

One other thing that has not been mentioned is what will your pension pay you if you were to finish due to ill health. I am now 50 and the amount of men who's health I have seen deteriorate when reaching this age is unbelievable,

Well said , I took out my AVC all them years ago , others said you are a young man , don't bother with that yet , Well an old Steam Driver said to me , don't pay no mind to them son , you do it , we never had the chance years ago and we will retire with a small pension , glad I did as my pension today is much bigger then it would have been ..................so you sort out your future now not later

 

[CMAC]

Not sure where you get that from. All the Money Purchase Schemes I look after for clients, which invest into equity funds in the UK and Overseas are at record highs. Perhaps I am just lucky with my choice of funds.

Are you talking about Property Funds or SIPPS in which you can an invest individual property ? Most Property funds, invest into commercial property which from my experience have not performed well in the last few years. Property funds can also be a difficult to get out off, and some Companies have imposed penalties, or even stopped withdrawals completely.

Gold generally performs well when equity markets are poor. Long term it has not performed as well as good equity based funds, say in the UK and Overseas. To me it is a short term bolt hole, but each to his own.

my own independent guy, my own and partners pension halving in value, my relatives and older friends pretty much having their pension wiped out, and researched reports stating 14 out of the top 20 companies performed badly over the 10 year period up till the end of 2012.

I'll grant you there are excellent performing funds but any that had a large percentage of assets in shares havent fared well.

If I had just stuck my pension money in a shoe box since starting I would have more than the current value That's the main reason I would go into property, but I'm just a simple worker that was 'guided' by experts and really dont understand it all. I only fully understand the bottom line value as thats the only part that really affects me.

 

[richart]

my own independent guy, my own and partners pension halving in value, my relatives and older friends pretty much having their pension wiped out, and researched reports stating 14 out of the top 20 companies performed badly over the 10 year period up till the end of 2012.

I'll grant you there are excellent performing funds but any that had a large percentage of assets in shares havent fared well.

If I had just stuck my pension money in a shoe box since starting I would have more than the current value That's the main reason I would go into property, but I'm just a simple worker that was 'guided' by experts and really dont understand it all. I only fully understand the bottom line value as thats the only part that really affects me.

Your figures are very interesting.:mmm:

The average UK equity pension fund (i.e ones that invest fully into shares, not gilts bonds etc) over the last year has produced 14.6% growth, 3 years 30.9%, 5 years 106.7% and 10 years 119.6%.

In the same period UK Direct Property has produced 8.1 % over 1 year, 13.2 % over 3 years, 27.9 % over 5 Years and 37.4 % over 10 years.

These are the figures taken from Friends Life fact sheet for their UK Equity and Property funds, but can be obtained from any investment house. The figures are for the average UK Equity fund, and you would hope that if you picked a decent financial adviser they may have found a fund that would have out performed the average.

I would love to know how the pension funds you quote were invested. I know that I have not had one client that has even come close to losing money in their pension plan over the medium to longer term. Yes there have been some poor funds, but the last ten years have been a great time to be investing into equities and bonds. Past performance is of course not necessarily a guide to the future, but I will happily argue with any adviser that is trying to say that pensions have fallen in value because of equity performance in the last ten years. Some pension plans have just been very poorly managed, poor funds chosen, switches made at the wrong times. Hence the need for independent advice.

Sorry to bore with figures, but investors should not be put of looking at investments until they have seen all the facts.

 

[CMAC]

Your figures are very interesting.:mmm:

The average UK equity pension fund (i.e ones that invest fully into shares, not gilts bonds etc) over the last year has produced 14.6% growth, 3 years 30.9%, 5 years 106.7% and 10 years 119.6%.

In the same period UK Direct Property has produced 8.1 % over 1 year, 13.2 % over 3 years, 27.9 % over 5 Years and 37.4 % over 10 years.

These are the figures taken from Friends Life fact sheet for their UK Equity and Property funds, but can be obtained from any investment house. The figures are for the average UK Equity fund, and you would hope that if you picked a decent financial adviser they may have found a fund that would have out performed the average.

I would love to know how the pension funds you quote were invested. I know that I have not had one client that has even come close to losing money in their pension plan over the medium to longer term. Yes there have been some poor funds, but the last ten years have been a great time to be investing into equities and bonds. Past performance is of course not necessarily a guide to the future, but I will happily argue with any adviser that is trying to say that pensions have fallen in value because of equity performance in the last ten years. Some pension plans have just been very poorly managed, poor funds chosen, switches made at the wrong times. Hence the need for independent advice.

Sorry to bore with figures, but investors should not be put of looking at investments until they have seen all the facts.

wish I'd used you oo:

Dont know, understand fully or have an interest in Financial services as there are so many ways of disguising and manipulating the figures.
A property would have given me more flexibility and options and maybe I like it because its more tangible, but whatever way any of us choose to save for our crumbly years its key to seek advice, and lots of it.