Starting a pension

[Banana Bar]

My 6 figure pension returned 9.1% last year. I had seriously considered putting it into something tangible last year but very pleased I didn’t. Question as always is should I do it now, FTSE cannot keep going up. I did opt for 50% medium risk and 50% high risk investments. Just a thought, hope there was no investment in Carrillion [emoji15]

 

[Turra farmer]

My 6 figure pension returned 9.1% last year. I had seriously considered putting it into something tangible last year but very pleased I didn’t. Question as always is should I do it now, FTSE cannot keep going up. I did opt for 50% medium risk and 50% high risk investments. Just a thought, hope there was no investment in Carrillion [emoji15]

There is a fair chance there was a few pension funds invested in carrillion or some of the other companies thst will fold because of them

 

[4course]

the state pension in this new era of all staff having to be enroled in a scheme and in a couple of years paying with contributions of 8-10 %between employee and employer tells me that the state pension that we have all paid into will not be worth a lot and then you need to look at health care whilst we may be living longer an awful lot of folk need a placement in a care home with charges of anywhere north of 5 grand a month( family member currently on this), so to be safe I reckon my wife and I to cover all eventualities without spending the capital in and around the business will need a pension of atleast£120,000 / annum plus spending money and household costs which to generate that sort of income would be impossible unless I was a retired ex carrilon executive! however if I spend the lot on wild living before im too old to enjoy it I will be kept by the state or alternatively have to die in harness.

 

[Robw54]

Fair point, on fees,
But where would one start, with no idea of the money investment sector,
Advise of any form is going to cost you,
Now at 60, one new 5 yr investment using what was our mortgage money.
Existing Private pension. And Two Rental properties. Plus state pension should see me okay at 65yrs.

I back tested SJP against Vanguard passive target funds and SJP beat over 5yr despite fees being 4x higher on a similar risk profile.

Cheap isn't always best - but Buffet does say just buy a S&P 500 tracker and forget as he proved over 10yr you can't beat the market.

 

[Frank-the-Wool]

I see a few people mentioning that they are putting money into ISA's.

These are not a good way of saving, most cash ISAs have very low interest rates at the moment. Stocks and Shares Isa's are better but investing money into pensions is a far better option with the top up from the government.

 

[Robw54]

It's a 100% loss to me if it goes in tax so it's worth a punt in a pension. My old man only just made 68 and his dad late 50s.

 

[Woolly]

Stocks and Shares Isa's are better but investing money into pensions is a far better option with the top up from the government.

Up to what age is investing in a pension, with the government top up, a better option that say a S&S ISA?

Is there an upper age limit on investing in a government-funded pension? Presumably one has to be paying NI contributions, which is not worth doing unless one has to?

Will the government will contribute to a SIPP?

 

[The Agrarian]

Can contribute up to age 75, though as NIC stop at 65, you won't save that 9 or 12% tax, though you will obviously still save income tax. So that's where I'd start to consider looking at the cutoff, if I'm still working at that stage. If you think about, a 60 year-old can throw every penny at his contribution for five years, and at 65 pull it straight back out tax free in the 25% tax free lump sum.

 

[PostHarvest]

Take a look at Nutmeg Savings and Investment. www.nutmeg.com Its an investment fund run by a pretty small operation in London. They operate Savings, Pension funds and ISA's.and their fees are lower than some other investment companies. Maximum fee is about 1% but the fees are on a sliding scale, the more you invest the lower the fee rate. The company is fully regulated and approved. You can check how your money is doing every day if you want, no waiting for annual statements and the staff are very responsive either by phone, web chat or email. My pension fund with them has yielded 12.88% after fees in the last year, compare that with 0.12% (if you are lucky) with the banks. I don't have any connection with them, but I have had a chunk of my savings and pension with them for a few years. I can't fault them so far.

 

[Woolly]

So one can pump up one's SIPP whilst saving income tax till the age of 75, then in due course draw down, taking 25% tax free?

 

[Robw54]

So one can pump up one's SIPP whilst saving income tax till the age of 75, then in due course draw down, taking 25% tax free?

Yeah but you can't put much in once you start drawing, used to be 10k now 4k to avoid recycling.

I think there is some merit in hammering contributions when you get closer as you know what the tax regime on the way out is (if you can afford it).

I've said it before but watch the personal pension access age. It's currently 55, mine will be 58 (10yr behind state). There is a danger that could become 5 years behind and since now all the higher rates + are hammering contributions you can guess there might be a twist to come in future. I also wouldn't rule out means tested state pension.

There is also the chance income tax will be higher or NI merged in someway which will alter the numbers.

 

[bosses son]

Can contribute up to age 75, though as NIC stop at 65, you won't save that 9 or 12% tax, though you will obviously still save income tax. So that's where I'd start to consider looking at the cutoff, if I'm still working at that stage. If you think about, a 60 year-old can throw every penny at his contribution for five years, and at 65 pull it straight back out tax free in the 25% tax free lump sum.

I think it is only the income tax part that the goverment will put in . Dont think they contribute the NIC into your pension pot. Correct me if am wrong.

 

[The Agrarian]

All good points. I am 99% sure by the time I get there I won't be getting a state pension. It'll be tested in some way or other. Own your own house, and they could very well capitalise it for you i.e. pay you state pension and then insist your house be sold when you die so they can be repaid.

But, governments are there to frig up your carefully laid plans. You don't know how they'll do it, so what can you do but take a broad approach? Fund a pension, fund an ISA, buy a vintage car, rental property, stuff cash under the mattress...

 

[brigadoon]

I see a few people mentioning that they are putting money into ISA's.

These are not a good way of saving, most cash ISAs have very low interest rates at the moment. Stocks and Shares Isa's are better but investing money into pensions is a far better option with the top up from the government.

That is perfectly correct so far as it goes. The counterpoint is that anything with "pension" in the title is easily subject to specific legislation. Not too long ago a SIPP could only be used to purchase an annuity, thankfully that is no longer the case and there is a good deal more flexibility.

However I stopped contributing to a SIPP many years ago and would not touch anything called a pension, far preferring the flexibility available via an ISA.

 

[Robw54]

That is perfectly correct so far as it goes. The counterpoint is that anything with "pension" in the title is easily subject to specific legislation. Not too long ago a SIPP could only be used to purchase an annuity, thankfully that is no longer the case and there is a good deal more flexibility.

However I stopped contributing to a SIPP many years ago and would not touch anything called a pension, far preferring the flexibility available via an ISA.

Everyone's situation if different. If you're a basic rate payer, with say estimated private fund giving estimated 4K yr plus pension you are going to be better off from a tax perspective saving into a LISA or ISA if you add state to your income. Lets face it living on a grand a month won't be much fun.

Hedge your bets, business, property, pension, ISA, VCT and cash.

I know plenty 65+ still working full time probably scratching their heads wondering how to draw pensions without incurring a shed load of tax on income.

I strongly suspect the game will change once the next government is in. The cost of tax relief is spiralling.

 

[texas pete]

Everyone's situation if different. If you're a basic rate payer, with say estimated private fund giving estimated 4K yr plus pension you are going to be better off from a tax perspective saving into a LISA or ISA if you add state to your income. Lets face it living on a grand a month won't be much fun.

Hedge your bets, business, property, pension, ISA, VCT and cash.

I know plenty 65+ still working full time probably scratching their heads wondering how to draw pensions without incurring a shed load of tax on income.

I strongly suspect the game will change once the next government is in. The cost of tax relief is spiralling.

I agree with you there regarding the cost of tax relief and I think the LISA looks like the start of an overhaul of the whole system, as it caps what the government has to contribute.

 

[SRRC]

I see a few people mentioning that they are putting money into ISA's.

These are not a good way of saving, most cash ISAs have very low interest rates at the moment. Stocks and Shares Isa's are better but investing money into pensions is a far better option with the top up from the government.

Best not to be quite so black and white!
You really must sit down and soberly assess what's best for your particular situation. Assuming you are a taxpayer you really should take the free money government gives out. ISAs are just one of several schemes, have a look at:
http://www.learnmoney.co.uk/isa/shares-pros-cons.html
Whatever sort of investments you make there are two basic rules, start early and keep putting in.
I'll repeat, compound interest is your friend. £100 at 4% doubles in 18 years.

 

[Deutzdx3]

I'm 33 years old. I will never have a pension. So many older chaps I've met over the years have said how much they regret paying into a pension. Waste of time and money. Buy a property. Couple of classic cars specific ones not any. Few years of strife but it'll give a better return renting it and when you sell it. Just my view on it. From what I e been told by people who have them and regret having them and what you read in FT.

 

[Pieces_of_Eight]

I'm 33 years old. I will never have a pension. So many older chaps I've met over the years have said how much they regret paying into a pension. Waste of time and money. Buy a property.

Property is all good as long as you have a lump as a deposit and can afford the repayments and the upkeep on the property.

Better surely to spread your eggs into different baskets, Property, cash ISA, Pension, stocks & shares etc etc. so you are protected from volatility.

I started paying into my private pension when I was 25 and just wish I'd started sooner. Every year I'm impressed with how my fund is gradually growing on my annual statement and the and the £s in there can only ever go up (although inflation is working against me).

 

[Deutzdx3]

Property is all good as long as you have a lump as a deposit and can afford the repayments and the upkeep on the property.

Better surely to spread your eggs into different baskets, Property, cash ISA, Pension, stocks & shares etc etc. so you are protected from volatility.

I started paying into my private pension when I was 25 and just wish I'd started sooner. Every year I'm impressed with how my fund is gradually growing on my annual statement and the and the £s in there can only ever go up (although inflation is working against me).

I take your point, but if you died 1 year after you retired and it does happen a lot, the remainder of your pension goes straight to government. If you had it in saving on shore or off shore. And yes you can open an offshore account and it’s not a tax avoidance that’ll go to your family.
to get a buy to let mortgage you don’t need any where near the amount of deposit as a capital repayment. Invest in stock, totally agree, and other areas.