Bit of Pension Fund advice

[PJ S]

Partner has received info and application form to avail of the company's pension plan.
The long and the short of it is for 6% she puts in, they'll contribute 10%, and there's proviso to split the pot 3-ways:
Global Equity Fixed Weights (60:40) Index Fund
Over 5 Year Index-Linked Gifts Index Fund
Cash Fund


So, I presume 6%:10% is the norm for employer based contributions?
Is there a preferred percentage to assign to each of the 3 options?

She has no previous/current pension fund in place, so what's her best option(s).


Cheers

[Mattt]

How old/close to retirement?

Mine is matched contribs to 10%.

Can she take part in Salary sacrifice?

[PJ S]

40, don't think salary sacrifice (not sure what that means tbh) is on offer.
Just reading the info leaflet - it's an invite to join the Defined Contribution Section of the Penson Scheme, operated by Associated British Foods.
She's limited to 25% on the Cash Fund option, and it seems Legal & General are behind it.
Mention of the three options being 'Passive' investment, and additional tracker funds available with details from the HR Dept.

So, is she best to stick with the passives, and if so what split?
Or do the trackers offer better dividends if past records are an indication.

Thanks Matt for any advice you can offer.

[Mattt]

If it were me, I'd get all the information she can about the options available.

What's her attitude towards risk?

[Mattt]

As for salary sacrifice, it involves taking a reduction in gross pay equivalent to the contribution - which then saves on NI for the employee & employer.

[JohnP68]

"passive" is the same as "tracker", they are funds that aim to perform broadly in line with the market index that they are designed to track

[sidicks]

With say 20 years to retirement then I'd maximise the exposure to equities.

sidicks

[PJ S]

Cheers MCM - think you've answered all we needed to know, but it's nice to know you're there if something else springs to mind.

Have a nice weekend.

[robsti]

musclecarmad said:

can't reply to emails at the moment

well she needs to check her state pension age - for me its age 68 which is far too old to retire imho so i'm excluding the state pension from my analysis.

you can include it or exclude it depending on your views

normally i'd say just see the state pension as a bonus and not include it in your planning

she needs to think when she would like to realistically retire and it doesn't just have to be the default 65 that everyone says
think about how much income she would like when she retires
the pension companies will give you illustrations showing what she is likely to get back at her retirement date assuming certain growth rates and various assumptions
if your partners thinks thats enough then fine
if she would like more money then you need to contribute more

most people 'say' they'd be happy with a grand a month but in reality when you get to retirement you are likely to want to treat grand kids, help kids on the property ladder, have a camper van, have world cruises and not hold back. living your last days on a grand a month isn't the best way to end your days on earth.

i'm a highly qualified pensions adviser by profession so any more questions do feel free to ask

Hi MCM,would I be right in thinking that you would need about 200k in your fund to get 1k a month?

How much would you have to contrbute a month for 25 years to get to 200k?

[robsti]

Cheers MCM.

[Ponk]

The norm for a "lifestyled fund" whereby the fund is managed for you is equities whilst young, then 10-15 years from retirement shift to bonds first, then cash nearest to retirement. That's probably a good starting point.

Perhaps a stupid question but isn't income drawdown a feature of SIPPS rather than occupational schemes? The occupational schemes i've come across so far haven't had that option. Not exactly sure as I don't deal with that aspect of Pensions day to day.

Edited by Ponk on Tuesday 18th May 19:56

[Ponk]

musclecarmad said:

Ponk said:

The norm for a "lifestyled fund" whereby the fund is managed for you is equities whilst young, then 10-15 years from retirement shift to bonds first, then cash nearest to retirement. That's probably a good starting point.

Perhaps a stupid question but isn't income drawdown a feature of SIPPS rather than occupational schemes? The occupational schemes i've come across so far haven't had that option. Not exactly sure as I don't deal with that aspect of Pensions day to day.

Edited by Ponk on Tuesday 18th May 19:56

first off:
lifestyled funds are as described ponk however I despise them. The reasons I despise them is that they take absolutely no account of market conditions and they automatically move your money. Imagine when the ftse was 3700 not so long back, some people had their money moved out of equities into cash/bonds automatically. Imagine the horror when people realise. Therefore, it makes better sense to try to take account of the market when moving your money and so it makes sense to review your financial situation every 12 months with your financial adviser. Oh, and also, if you are going into drawdown you prob don't even want to move into safer areas as even if you are 60 you still won't be touching your fund for a long time!

To answer your second question this is where people get confused. There are very few 'occupational schemes' nowadays. An occupational scheme is normally regarded as a final salary pension or a occupational defined contribution scheme. Companies don't like these any more as there is a lot of regulation and admin costs - for example you need pension trustees. Therefore a lot of companies now use Group personal pensions which are provided by an insurance company (Aviva, axa, skandia and so on). These are now often referred to as occupational schemes but in the strict sense they aren't.
Yes, drawdown is a feature of SIPP's and most schemes don't offer drawdown etc which is why most people don't use it as they don't understand pensions. Some people take a scheme pension which is often not the right thing to do. You can however transfer your money to a SIPP at any time you wish - certainly this is something those with big pots should at least be considering.

People really REALLY don't understand pensions. Even the majority of financal advisers I deal with are thick and unqualified and uneducated. I think i'm the only one with a financial mathematics degree and advanced qualifications - most just have a multiple choice exam under their belt!

Sorry I only deal with large occupational schemes so I hadn't thought of those that are "occupational" but provided by Standard Life etc.

I wasn't suggesting using the lifestyle fund, just that it gives a good template to follow if you have no idea. E.g. equities whilst young.

I speak to quite a few IFAs in my day to day work, the majority as you say are clueless!

Edited by Ponk on Wednesday 19th May 16:55

[dom180]

musclecarmad said:

Ponk said:

The norm for a "lifestyled fund" whereby the fund is managed for you is equities whilst young, then 10-15 years from retirement shift to bonds first, then cash nearest to retirement. That's probably a good starting point.

Perhaps a stupid question but isn't income drawdown a feature of SIPPS rather than occupational schemes? The occupational schemes i've come across so far haven't had that option. Not exactly sure as I don't deal with that aspect of Pensions day to day.

Edited by Ponk on Tuesday 18th May 19:56

first off:
lifestyled funds are as described ponk however I despise them. The reasons I despise them is that they take absolutely no account of market conditions and they automatically move your money. Imagine when the ftse was 3700 not so long back, some people had their money moved out of equities into cash/bonds automatically. Imagine the horror when people realise. Therefore, it makes better sense to try to take account of the market when moving your money and so it makes sense to review your financial situation every 12 months with your financial adviser. Oh, and also, if you are going into drawdown you prob don't even want to move into safer areas as even if you are 60 you still won't be touching your fund for a long time!

To answer your second question this is where people get confused. There are very few 'occupational schemes' nowadays. An occupational scheme is normally regarded as a final salary pension or a occupational defined contribution scheme. Companies don't like these any more as there is a lot of regulation and admin costs - for example you need pension trustees. Therefore a lot of companies now use Group personal pensions which are provided by an insurance company (Aviva, axa, skandia and so on). These are now often referred to as occupational schemes but in the strict sense they aren't.
Yes, drawdown is a feature of SIPP's and most schemes don't offer drawdown etc which is why most people don't use it as they don't understand pensions. Some people take a scheme pension which is often not the right thing to do. You can however transfer your money to a SIPP at any time you wish - certainly this is something those with big pots should at least be considering.

People really REALLY don't understand pensions. Even the majority of financal advisers I deal with are thick and unqualified and uneducated. I think i'm the only one with a financial mathematics degree and advanced qualifications - most just have a multiple choice exam under their belt!

Some good advice.

Out of interest, do you know if I can transfer money from my current company scheme (unit linked) where employee/employer make contribution, while still paying into the scheme and keeping it active - ideally I'd like to continue to contribute and also receive company contributions but once the money is in the pot, transfer the money into my SIPP to get access to funds not available by the scheme choosen by my company and have more flexibility on changing investments.

[dom180]

musclecarmad said:

dom180 said:

musclecarmad said:

Ponk said:

The norm for a "lifestyled fund" whereby the fund is managed for you is equities whilst young, then 10-15 years from retirement shift to bonds first, then cash nearest to retirement. That's probably a good starting point.

Perhaps a stupid question but isn't income drawdown a feature of SIPPS rather than occupational schemes? The occupational schemes i've come across so far haven't had that option. Not exactly sure as I don't deal with that aspect of Pensions day to day.

Edited by Ponk on Tuesday 18th May 19:56

first off:
lifestyled funds are as described ponk however I despise them. The reasons I despise them is that they take absolutely no account of market conditions and they automatically move your money. Imagine when the ftse was 3700 not so long back, some people had their money moved out of equities into cash/bonds automatically. Imagine the horror when people realise. Therefore, it makes better sense to try to take account of the market when moving your money and so it makes sense to review your financial situation every 12 months with your financial adviser. Oh, and also, if you are going into drawdown you prob don't even want to move into safer areas as even if you are 60 you still won't be touching your fund for a long time!

To answer your second question this is where people get confused. There are very few 'occupational schemes' nowadays. An occupational scheme is normally regarded as a final salary pension or a occupational defined contribution scheme. Companies don't like these any more as there is a lot of regulation and admin costs - for example you need pension trustees. Therefore a lot of companies now use Group personal pensions which are provided by an insurance company (Aviva, axa, skandia and so on). These are now often referred to as occupational schemes but in the strict sense they aren't.
Yes, drawdown is a feature of SIPP's and most schemes don't offer drawdown etc which is why most people don't use it as they don't understand pensions. Some people take a scheme pension which is often not the right thing to do. You can however transfer your money to a SIPP at any time you wish - certainly this is something those with big pots should at least be considering.

People really REALLY don't understand pensions. Even the majority of financal advisers I deal with are thick and unqualified and uneducated. I think i'm the only one with a financial mathematics degree and advanced qualifications - most just have a multiple choice exam under their belt!

Some good advice.

Out of interest, do you know if I can transfer money from my current company scheme (unit linked) where employee/employer make contribution, while still paying into the scheme and keeping it active - ideally I'd like to continue to contribute and also receive company contributions but once the money is in the pot, transfer the money into my SIPP to get access to funds not available by the scheme choosen by my company and have more flexibility on changing investments.

generally speaking yes, I presume you have a Group personal pension not a more traditional form of occupational scheme. Speak to your administrator about it, but that's what I used to do.

Some aren't keen on it but I transfer to a sipp whenever i can do.

Yes it's a group one. Thanks I'll check it out.