to give up paying into my pension

[laurageordie]

It seems like the rates on return have really gone down. Just had a statement through and it says if I carry on paying into it till I'm 65 and it does averagely well then I will get 3000 a year. Ffs it is impossible to live off that today let alone in 30 odd years time. I earn about the average and put away 5% a month

Does anyone have a pension they can actively manage online?

Such as:
Change monthly investment amount
change how the fund is invested, percentage in which funds.

Anyone able to suggest a provider who lets you change things whenever you like?

But will the state pension even exist in 30 years time? Its looking doubtful as the current system is unaffordable and even with the pension changes will get even more unaffordable

I pay anything I can save into an ISA. That I can access again on a rainy day - jobs are not secure these days.

Is it better to use ISA first or do something like 50/50 split between ISA and pension?

It's amazing how many people are clueless when it comes to pensions.

The government have recently announced radical changes to the pensions market making them a hugely attractive savings vehicle.

From 55 onwards, you will be able to take out what you want, when you want from your pension.

If your company pay in to the plan as well then they are a no brainer. If they don't already then Auto enrolment means they soon will have to. An 8% contribution will effectively be costing you 4%. That is a 50% return on your money on day one? How can't that be good?

You get tax relief on contributions at your highest marginal rate, you can take 25% of the fund tax free at retirement (the rest is taxed at your marginal rate which means that you could in theory take £10k out a year if no other income and this would also be tax free as using your personal allowance)

The state pension is increasing to £140-155 a week in the next few years for many people and although you won't get it until your are older, it isn't going away, it is becoming better!

The illustration to which you are referring is poor because they assume that you are going to buy an annuity with inflation increases. Almost nobody does this and hardly anyone will buy an annuity at all with the new rules.

They should teach financial education at school because people can make really poor choices by not understanding how things work.

Who knows what will happen to the state pension - I was working it out based on now because that's all we know for sure. But the fact it may decrease or be removed is more of a reason to save, not less.

Nannynick, the answer to that is very much "it depends" - there's no single correct answer. When you put money in an ISA, you've paid income tax on it before hand, but there is no tax on the interest earned. When you pay in to a pension, there's no income tax on the money going in so for the same net cost, more is saved. The income is taxed on the way out but you still have a personal allowance so depending on how much your pension income is you might not pay tax on it, or will only pay tax on a proportion. Plus with auto enrolment your employer should be contributing (or will need to soon) which boosts the pension savings a bit more. Lots of people used ISAs because they hated the rigidity of annuities but that's been removed now.

For rainy day savings then an ISA is obviously more useful as it's accessible but for most people for retirement savings the pension will be a better vehicle assuming they have a modern product with reasonable charges.

I think it's still worth paying into, given that 3k a year is better than the alternative of nothing! It'd be £57 a week in old age. The new state pension will be £148. I know I'd rather have £205 a week to live off than £148.

I don't pay into a pension, but I do put money into ISAs.

Once bitten twice shy for me - I was a good girl when I started work, set up a private pension, paid into it regularly...

It was with Equitable Life and is now worth very little.

Nick you need to look at SIPPs there are many different types and you actively control the investment yourself. Mine does have in line access as I don't need it as my biggest asset is commercial property and I am never going to sell that overnight. I choose commercial property as whilst the asset value does not increase massively the yields are very high around 11% per year. I then roll this money into a WRAP product which is very multiple very small funds with individual fund manager spreading it across a wide variety of sectors and these can be bought and sold quite flexibly.

I'll hold my hands up to not being clued up on pensions so I may be talking nonsense but with the minimum income guarantee for pensioners mean that if you have a small private pension you'd only end up getting the same total amount of money as you would if you relied on the state, because if you didn't have that small private pension income you'd have your income topped up by the government anyway?

hi Nick (long time!), up until the radical changes that the government have just introduced it was a fine line between isa and pension. With the isa you at least have access to it tax free when you get money out BUT you don't get the contribution from hmrc into the pot. With a pension you get the hmrc contribution which boosts how much you put in but up until now there were stupid controls in place. With the new rules, I reckon that for the vast majority the pension is probably better.

You can either look at a sipp (self investment pension plan) eg check out Hargreaves landsdowne (as an example not a recommendation! ) or you might want to look at stakeholder pension as charges are cheaper. If you Google stakeholder pension provider there are about 25 providers out there. hth.

to OP, even if you're only getting £3k you still need a plan else you will be really stuffed!

For those who are currently pensioners it is means tested but that's changing shortly so it won't be any more - housing benefit still will be I think, but pension credit will be rolled in to the new single rate approach.

If you absolutely can't afford 5% then you can't pay it. But if it's a case of 'can just about afford it, but have other things I'd rather spend my money on now', then think hard about the implications of stopping.

IME lots of people aren't clued up about pensions, and would be shocked to realise that without some decent provision of their own, they'll be working until probably knocking on 70, and will then have a crap state pension (if it exists at all)

The other thing to consider OP is that even if money is really tight now, make a plan for upping your contributions when your circumstances change. So if you get a promotion and a pay rise, you can pay the difference into a pension.
Or, perhaps you have young children and are paying a load of childcare costs now, but that will reduce and then disappear as they grow up and you'll have more flexibility financially.

I do see where you're coming from (when we had childcare for 3 children we could really have done with the money in our pockets rather than paying into our pensions) but I'm very glad I've always kept paying into mine, and now our children are grown up and retirement seems not a million miles away, I can really see the benefit.

You need to find out what sort of pension scheme you have. Many employers now run Group Personal Pension Schemes, you can usually choose your own investments within the scheme.

If at all possible it is definitely worth staying in a company scheme if it is also contributing. In your case, by sacrificing £80 of your net pay per month you will be gaining an investment of £200 per month.

Obviously these are just general figures, I don't know how much you are paying, but I can almost guarantee that your employer won't give you this money in any other form.

Can you pay into multiple pensions?
It looks like my current personal pension is ok but I am struggling to work out the fees.
My employer will soon be providing a stakeholder pension, probaby via NEST and that will let me pay in more at times I have more. Can't transfer existing pension to NEST though.
So could I pay a little into personal pension and a variable amount into NEST?

You can pay into multiple pensions. You can also transfer from your employers pension into your own pension.

But what you pay in now may be small, but this may increase in the future when your children have grown up and your earnings increase.

I know £3000 doesn't seem a lot, but its £3000 you wont have if you give up now. And its the minimum you will have.

Well the 3k is if it does average, if I'd does bad the projection is 1.5k.

Thanks for all the advice, I'm going to pull out of it on Monday and put the money into an isa, then in times of emergency I can access it.

are you sure that is a good idea? Cash ISA rates are dreadful at the moment and savers are going to continue to receive a kicking for a while yet.

Even if you don't contribute any more, leave it where it is. The stock market can do a lot in 20 years.

With respect, OP, that is a terrible idea. I am broke, utterly broke, but I know that keeping up my pension contributions is better than paying into an ISA.

I'd agree with the others. At most, do it for a short period to get a wee bit of rainy day savings behind you - but in terms of saving for your future the pension is a better option. You don't have to take the annuity at the end but it will be a far bigger sum if your employer and the government are contributing!

I'm 28, dh is 31, and we've never paid into a private pension, and don't intend to.

I have a pension at work that makes an 8% contribution and dh's work pension pays in 4% (at no cost to us), but I have no idea what they're worth, or will be worth...they're free anyway, so I don't really care.

I don't trust pensions, and personally feel they're one of the riskiest things you can do with your money. For those in their 20s/30s now...do you really look at what the Government are deciding for private or state pensions now, and truly believe that it will have any relevance to you? Yes, they may well shake things up, make huge improvements, introduce a new rule to say you can withdraw £x as cash...and in 20 years we may have another, worse, financial disaster, pension pots will go through the floor and the new Government in 2034 will decide some more radical changes that puts pensions in a worse position than they are even now.

DH and I have a small buy-to-let which brings in £400pm rent. We don't make anything atm because the rent only just covers the mortgage on it, but that won't last for ever. Our plan is to overpay our mortgage (on our home) now, to pay it off as soon as possible. Then when it's clear, spend a couple of years saving that mortgage money towards a deposit for another mortgaged buy to let, then another...etc. Then we'll either have assets we can sell off, or a steady rental income.

I agree with having an emergency fund - its a good idea.

But using ISA savings as retirement planning is not a good idea, no one else will be contributing (either employer or the government via tax relief) and ISA savings rates are tiny at the moment. Plus you have the incentive of Tax Free cash once you do take your pension.

Don't do anything rash. It may seem easier now but it will be worth it in the long haul.

So, essentially, you suggest putting all of your savings for the future in property, and are criticising other people for risky investment choices? Erm, yes, ok. You are quite fortunate to have a non contributory scheme, they're pretty unusual nowadays and mean that whether you have chosen to have it or not your investments for the future are diversified somewhat.

Pensions are a long term investment. By the time I retire I'll have been paying in to mine for 45+ years. There will be ups and downs, that's the nature of long term investments. But given that at present a 5% gross contribution is topped up to 18% by my employer investing in my pension is an extremely sensible choice.

Hi,

I too am completely clueless about pensions and looking for advise.At 32 I have never contributed to any kind of pension. My current employment does not at the moment offer anything but I assume this will change with the new rules? Anyway I was wondering if it is worth while to open a private pension. The main issue is that I am currently on a low income (below the tax threshold) . I have some savings and could make a small contribution to a pension every month, but would there be any point? Alternatively I could wait until my work one starts, would it be worthwhile to contribute to this as the amount would be very low I would imagine?

Thanks