Pensions advice

Remember your pension is taxed,think about buying a couple of vintage cars that will only increase in value etc etc

You sell and dont pay tax !

* rider

normally I'm completely wrong

Who is the pension with? Is it backed by the state?

It's with my company (which is a pretty big company). How do you mean, "Backed by the state"?

I take it, it isn't a final salary scheme and assume it is a money purchase scheme... do you know?

I know very very little about the subject, but if you carry on at the same rate until you're 60 then there'll be £250k in the pot (realistically there'll be much more than that) and I believe you can take 25% of that as a lump sum (although there have been stories in the news recently about people cashing it all in and going bonkers with it?).

My old man retired about two years and he must've had about £160k in the pot because he took £40k as a lump sum, and he gets a paltry pension each month. It wouldn't be enough to live on though and he doesn't qualify for his state pension for a couple more years.

On the bright side, we're roughly the same age and you have £80k more in your pot than I do!

It's definitely not a final salary scheme. And what's a money purchase scheme?

Where you invest to grow a big a fund possible but as no initial guarantee, your objective is just to put as much in as you can. The £250 you talk about, is that before or after tax relief?

scuse the typo's, it's been a long day today :)

I think it's after tax relief, but again I'm not 100% sure! These are all questions I need to ask.

your fund is your total fund combined - not sure what you originally paid but if it's always been the same then no the figures suck to be fair

I pay in £162, plus £81 in additional voluntary contributions.

Sorry - I've just discovered that the total amount that goes into my pension each month is just over £550. I pay in around £240 and they pay in around £320.

those appear to be your gross contributions, although with AVC's it does appear like it is a final salary scheme for the main pension. You won't be taxed on these contributions so in effect you are not actually paying these figures yourself. You are paying 20%-40% less depending on your current rate of income tax. I'm a bit rusty on the old rules but still remember the majority of them but have kept up to date with the new rule changes. Unfortunately, on present terms, you will not be able to draw these before age 57 (it is currently 55 but goes up to 57 in 2028).

On your last post that sounds more like it - check where your AVCs funds are invested, they could be high risk and volatile

I've just found this on our website:

Your estimated total personal account value at your assumed retirement date is: £332,020.

If you carry on paying into your personal account at your current level and stay in the Plan until your Assumed Retirement Date, your pension is estimated to be £8,770 a year in today’s money - based on your current contribution levels.

That doesn't sound too healthy! Ho hum.

ok, to buy a pension of £8.770 today would need a fund of around £200,000+ but that is an annuity which I don't think will exist for much longer following the government changes (which are sublime to those who use their head). What is your assumed retirement date?

...or age?

I am 39. The figures in bold in my post at 20:26 assume I would be retiring on my 65th birthday.

Seems ok, but you'll have to wait another few years after that to draw your state pension (if it still exists), which is going to be around £7k (in today's money) giving you around £15k a year however, unless there is a major downswing (and this could happen) and you get advice on where your money is going you could possibly get this nearer the £20k mark (combined). Trouble is, nobody can see the future.

I get my pension pot in 2 years and only last week did I reinvest in a (very) cautious fund for the remainder of term. I'll be 55 then.

Thanks - much appreciated. There's a long way to go, but as I currently live in a one-bed house there's not much scope to downsize!

You will appreciate anything you have when you retire. Mine is worth around £15k (after lump sum) at 55 which, added to my income, will be quite tidy if health allows me to keep on working for a while longer. Very few people have what you are on target to get so don't lose sight of it. Best of luck.

At 65 your an old fart ,tighter than two coats of paint and living on borrowed time. ,3 score and ten and you cant take it with you

..

http://www.thepensionsregulator.gov.uk/doc-library/pension-guides.aspx

pensions, imo, is much of a guess, and you can pay for great advice that turns out to be rubbish

would you be better off paying less pension and more mortgage ?, who knows !

salting spare cash into an isa is a good idea i reckon as income will be tax free, but
its a punt too, inflation if it returns can hammer investments

as for company pensions, maxwell managed to shaft his lot, ....just saying

regulations make that less likely these days


i guess when you reach 55 you may want to take some cash out of your pension, its
always worth asking what the penalties are for this. and at 39 today you can probably
reckon on living to 85-90, ....

ffs buy a vintage car only gonna go up in value

liable for CGT...

I'd say it depends upon the kind of salary you have been used to living on.
By a final salary model, a pension might pay 2/3 of your final salary.
So, if you were earning 42K at retirement, 28K would be your pension, index linked. (Grows with CPI or RPI if you are lucky!)

That 330K should give a figure of nearer 12-15K I would think based on annuity rates I have read about recently. Remember, you have 7.5K state pension to
add on top, assuming you have 30 years NI contributions.
Using the 42k model above, you'd want around 20.5K per year from your company pension to match the kind of figure that final salaries were modelled upon. (+7.5K state = 28K)

Since you'd have to be a bit mad to take an annuity out for all your retirement fund (If annuity rates stay on the floor), I'd presume you would go for income drawdown with the bulk of your fund. So you'd carry on investing and withdraw ca. 4-5% from your fund each year to live on. Take a close look at charges with these schemes, there are normally lots of them! In my experience, companies are poor in keeping people informed about pensions.

One good thing about investing in large company pensions, is that the charges on the funds that your money is invested in are much lower than you could match in your own private pension. (If you are lucky, you may be paying ca 0.2% per year, rather than ca. 1% per year in your own private pension. These differences are very significant over the long term.

If I were you, I'd chuck in more now, since there's plenty of years for growth from this point, rather than put it off.

From a recent story in the Times :-

The annual charges you pay on your investment and pension funds may seem like a tiny fraction of the overall total. However, they matter because they will eat heavily into your investment returns.
The Department for Work and Pensions (DWP) calculates that people who save throughout their working life into a pension would lose 24 per cent of their accumulated pot if the annual charge was set at 1 per cent.
If the charge was raised to 1.5 per cent, the chunk of pension pot that would be lost becomes an eye-watering 34 per cent.
However, the DWP’s calculations do not cover the full cost of the fund charges that investors bear. The typical headline charge figure quoted by most investment and pension funds takes no account of other “hidden” charges, such as dealing costs, which are borne by the investor but do not feature in the stated charges.

Makes me glad I stopped my pension 18 months after I started,  My pension pot stands at about £2000

If you postulate that you'll retire at 65, and think you're going to live to a grand old age so you're going to take an annuity, then let's assume annuity rates are like they currently are, say 5.5% of the pot.

Well you can kind do the maths yourself that e.g. say you've 200k pensiion pot at retirement, you'll get £11k a year to live on, + the state contribution. Think about what you want and how you might achieve it.

I'm not sure where the low figures mentioned above (and I've seen elsewhere) for annuity rates come from unless it's factoring in that people will probably live longer in 26 years time, so that annuties will then come down. Annuities are basically calculated on probabilities and life expectancy etc of the total pot - the providers cut.

The new pension changes are fantastic as people were constrained before, if you retired at a time when annuities were sh*t people were forced to buy them, now people have options, as long as you don't give money to nigerian princes cold calling you.

you have 7.5K state pension to add on top, assuming you have 30 years NI contributions

This rises to 35 years from April 2016


Whilst annuity rates will fall with an ageing population it is usually best practise to take anything tax free so, based on your figures JC, most would opt for the £50k up front. £50k is not a terrible nest egg but it still needs to be used carefully and, as usually happens, a lot will dwindle on what could be a new car, repairs or upgrades to the home and (of course) holidays!

Allowing for this the pension would then reduce to £8.25k but I can't see 5.5% annuities (if any) when the OP reaches 65 not forgetting that the state pension age is very likely to be 70 (or more) by then.

In my opinion, considering they don't change things (which we know they will), they will probably stick with drawdown (or similar) because it makes the government a lot of quick cash for those that do not take advice and (as an above poster rightly said) consequently loses it all.

I think the best advice that anyone can give to anyone with years ahead of them is to get as much in as you can, take full advantage of the current tax opportunities and take independent advice where the funds should be allocated based on an agreed risk profile.

...or putting it another way

If I were you, I'd chuck in more now, since there's plenty of years for growth from this point, rather than put it off

ISAs can be viewed as taxed now, no tax later, pensions as less tax now, then maybe some tax later. People may knock pensions but you can get the employer to put a lot in or get a good tax break.

Looking at at the OP again that looks a decent amount.

I personally think with a good pot I'd take part in annuity and then withdraw/draw down the rest, maybe put 50k of it on the opposite of whatever Moneytree is backing that day. You don't know if you're going to live 110 so I'd always want a guaranteed baseline though.

It's not necessarily just the company putting much in that counts, it's also whether they return the company NI on contributions. Some companies pocket it!

If your company refunds company NI (11% I think) and matches or adds to contributions, you'll find it hard to match that kind of return in an ISA imo.

For example, I put in a multiple of £3, my company tops that up with 5% of salary & they also refund company NI and that results in a multiple of £5.50 reaching my pension.

I think the company NI is 13.8%

Use your money to buy to let housing stock in london . The rental return is better than any pension pot and there is no CGT to pay if you die and it is left to your kids......pensions are a massive rip off as they are paying for so many other peoples wages . Don't take my word for it , make calculations over the last ten , twenty , thirty years......no brainer

BTL when tax changes are being made to make it far less attractive, in a housing bubble?

t