Pensions

[edition]

Hi,

I have another thread about wether to go with a Buy to Let or just sort a pension out.

Now if I were to go with a pension how would I go about doing this (there are no work schemes).

I'm 26 and a homeowner, Just after some advice on what to pay in and into what.

I know people are going to say pay in what you can but what sort of average do most people put in?


Thanks in advance

[Mx_Stu]

edition said:

Hi,

I have another thread about wether to go with a Buy to Let or just sort a pension out.

Now if I were to go with a pension how would I go about doing this (there are no work schemes).

I'm 26 and a homeowner, Just after some advice on what to pay in and into what.

I know people are going to say pay in what you can but what sort of average do most people put in?


Thanks in advance

I'm sure someone more qualified will be along in a bit.

Your first step is probably to sit down with an IFA (and basically get the lecture that at 26 you are already 10 years of pension contributions and growth on those contributions behind some people, which is the lecture I got off my chap (He's a good guy though, just a realist))

As for contrbutions it does vary and really boils down to how much can you afford and how much you will need in retirement. My old employer used to pay 4% (of my gross salary) if I paid 4% however my current employer pays 13% and I don't need to pay anything (although I do).

The big upside to a pension is that you receive tax relief on contributions which means £100 into your pension actually costs you £80/ £60 depending on whether you are a basic rate or higher rate taxpayer.

[edition]

Hi,

Cheers for the replys, very useful!

My company is less that 5 people i,m afraid so I guess i will have to find my own!

If I were to start at say 8% could I then up it at anytime? Or if I start at 13% can I back it off if I find it too close to the bone? If i can how offen can you do this? Does this depend on the actual pension?

Tax wise if I were to pay £100 (i'm not in high earner tax) only £80 would come out of my pay per month?

SOrry for all the stupid questions I just want to get a good idea of what to do for the best!


Thanks so far!

[Mx_Stu]

edition said:

If I were to start at say 8% could I then up it at anytime? Or if I start at 13% can I back it off if I find it too close to the bone? If i can how offen can you do this? Does this depend on the actual pension?

I would think it would depend on the provider as to how flexible they are with changes in contributions. I would be tempted to start at 13% (assuming you can afford it) and try your hardest not to to drop your contributions. It might be tough for a while but soon after you'll forget you ever had that money in the first place.

edition said:

Tax wise if I were to pay £100 (i'm not in high earner tax) only £80 would come out of my pay per month?

Yep, you would pay the net amount so £80 would come out of your pocket and then the provider would claim the tax back from HMRC.

[LordGrover]

When you say half-age% is that of gross or net salary?

[edition]

I'm hoping Gross!!!!

[Mx_Stu]

Gross!

[LordGrover]

... so our 26 year old on £40k should be paying £433 per month into his pension?
Little wonder few do so - that's a big chunk when you're at the house-buying stage.

[edition]

Hehehe yeah thats what I'm thinking nightmare!!!! I guess a nightmare we should face now rather than later!! I guess putting £50 in now is better than nothing!!


So say if I go to the Skipton B.S. (that's who our mortgage is with) the should be able to sort me one out pretty trouble free?

[Mx_Stu]

LordGrover said:

... so our 26 year old on £40k should be paying £433 per month into his pension?
Little wonder few do so - that's a big chunk when you're at the house-buying stage.

£350 net per month or £300 if he can get his employer to make it on his behalf and he reimburses through salary sacrifice (but thats a whole different story).

As you say, its a big chunk but even £100 a month is a starting point. Whilst its tricky when you are at house buying age and trying to get a deposit, on the whole my generation (I'm 28) don't think about things like pensions (It's something they will sort when they are older) and instead spend all their wages on 'stuff'.

[Mx_Stu]

edition said:

So say if I go to the Skipton B.S. (that's who our mortgage is with) the should be able to sort me one out pretty trouble free?

Looking at the Skipton website I couldn't see anything on there about pensions. I use Aviva, but as I said earlier it would probably make more sense in the first instance to chat with an IFA. I found the chap I use via http://www.unbiased.co.uk

[MrCippo]

i'm in a similar situation and my plan is to buy shares every 2-3 months from my pension contribution, build a shares portofolio / budget, reinvest in shares. yes, it could go wrong, it might just work out nicely. i'll give it 3-4 years, see how it goes.

[Mx_Stu]

Thats a very useful answer - thanks.

For the borrowing element, is this something that the 'managers' of the SIPP would typically arrange or something that the individual would have to arrange.