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

If OP can't afford to pay into a pension theres no way in hell they'll be able to "invest" in property.

The fact is nowadays that if you don't own and can't afford your own property you will find it very difficult to get a BTL mortgage. You need a larger deposit for starters and that's not even the half of it.

I think you're mad for taking your money out and putting it into an ISA.

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

I assume you mean property is 'more' risky? Horses for courses I suppose. IMO property is one of the most stable and risk-averse investments you can make.

No, I'm saying that putting all your savings in property is risky. Which it is. You've commented strongly on hoe risky you feel pensions are, yet effectively recommended your choice which is something as, if not more, risky yourself. Putting all of your retirement savings in to a single category is risky and not what any decent adviser would normally recommend either. Now that's not actually the case for you because of your workplace pensions, but it's certainly not good advice.

And as the previous poster points out, if posters are struggling to afford e.g. a 5% deduction for pension contributions then a BTL mortgage is not really an achievable goal anytime soon. It's increasingly hard to get one without owning your own property anyway, and requires a decent deposit.

You also need to either have enough income or savings to be able to cover significant repairs should they crop up, or lengthy void periods which are always a risk. Or the cost of evicting bad tenants who don't pay but stay for as long as possible...and then repairing the inevitable damage. You could argue that it's a low-ish risk investment in terms of capital appreciation in the long term but in terms of the continual risk to your family budget then it's not risk-averse and certainly not for a poster like the OP who is finding her pension payments a stretch.

YWBU not to sign up and continue your company pension as your employer contributes to it so its free money you would lose out on. I only signed up for 5% and my employer pays the same. Luckily for me the contribution is before tax so it lowers my salary back into the 20% tax band so bonus for me.

I then put 10% of my monthly salary as an overpayment to my mortgage because by paying it off super early I save on interest rates and its my aim to at least be mortgage free by 45 so I can choose whether I want to work full time or not.

Having just been looking at SIPPs due to a change in my circumstances, they are not worth doing with any amount under £50,000

which makes them irrelevant for 80% of the workforce.

Normal DC pensions - like the one OP has have generated negative returns over the last 15 years

sadly, cash ISA are even worse returns

OP
Do not pull your money out of your pension.
Leave it there for later use
but if needs be opt out for a few years and then restart when your finances change

Do you have the source for that 15 year figure please TalkinPeace, I'd be interested in having a look at it. Thanks

Statistically
Here you go
www.betterfinance.eu/fileadmin/user_upload/documents/Research_Reports/en/Pensions_Report_2014_FINAL_-_EN_FOR_WEB.pdf
Covered in the Economist, the FT and the BBC

OP - don't pull out of it on Monday. Consider pulling out of it after you have looked at all the advice here first.

Not by any means an expert but my words are:

I thought that pensions wouldn't exist when I got older - but they still do.I thought that we would all die in some superpower mass nuclear holocaust but we haven't.

You will still get your state pension, they should still exist (see above), as well as your private pension.

You don't currently pay income tax on the earnings that you put into your pension.

Your 5% contribution is doubled to 10% by your employers contributions.

The new 'pension rules' makes it easier to take out 25% of your pension 'pot' at 55+, so if an employer has paid in the same as you, for every base £1,000 (not including interest) that you paid in, you get £2,000 (plus interest).

I would not stop your pension if I were you. Your return may not sound like much at the moment but in time you may be able to contribute if you get a pay rise etc.

Do you really want to risk relying on the state pension? At least if you have a small private pension you may get some holidays or be able to choose which nursing home etc.

Thanks TalkinPeace, knew I'd seen it somewhere but couldn't remember what it was called. I'm unconvinced by some of their methods I have to admit - and assessing returns over the period of a massive recession doesn't help!

But as you say, the alternatives are generally worse - including cash under a mattress before anyone suggests it. A fair bit of the poor return is essentially due to fund choice- a lot of people are incredibly risk averse (fair enough) but are therefore putting all their pension savings in to products which aren't going to really produce positive real returns especially when you try to account for tax etc in the way they've done. I suspect that if they tried to do an equivalent type of analyses for BTL property, taking account of mortgage interest, stamp duty, capital gains tax, income tax, etc etc they might even end up with negative returns for that.

Statistically
assessing returns over the period of a massive recession doesn't help!
true, but there is absolutely bugger all evidence that returns will ever, ever return to the heady days of the 80's and early 90's

I'm also a pension scheme employer and we are working on the basis that this is the new normal.
Rates and returns will be low for the next 15 years, so the last 15 is a good guide.

There are one or two sound posts in this thread but there is an awful lot of poor posts too. If you want advice talk to an expert because some of the advice on here is just incorrect.

Oh agreed TalkinPeace. But especially if you consider it from the view of the effective net contribution of the individual (i.e. once you bear in mind that someone like the OP is getting 10% in for what effectively costs 4% in her pocket) then I'm not sure that over the same period there are many options which would be better for the individual. IYSWIM?

If your employer pays into your pension also, you should absolutely keep paying in.

It's just a projection, based on assumptions for growth and inflation.

Presumably your income will increase over years, and what you pay in.

talkingpeace There analysis is based on average returns - since 2000 nominal returns average 2.5% a year. Since 2002, average returns are over 5% a year as they have been if you start in 1990.
There analysis has deliberately picked the top of the dot com bubble as a start point.
After nominal returns, they deduct charges, inflation and tax. Any other investment would also have similar deductions.
If the point is that pensions charge too high fees, they should just say so.I am not sure the point they are making.
In the OP case she can:

put £100 into pension scheme, employer will add £100, so £200 invested.

Take the taxed salary of £88 and put into another investment vehicle

Doing this annually for 40 years, the alternate investment would need to return about 3 times the pension scheme to get the same lump sum at the end.

Caroldecker
Have you read the actual report? Did you read the coverage of it in the financial press when it came out?

The whole point is that the nominal returns that the stock markets have experienced is not what the net returns in funds have been.
Because of poor management and high fees, many people are a lot less well off than they realise.

AND
future returns are not looking good

Pension returns are very variable - mine has done very well over the last 10 years without contributions, because it has been invested in the right things. That is good fortune. It may well plummet again (it will have done over the last two weeks) - but pensions are to be considered over decades.

they are tax efficient like nothing else. Like everyone else on here, I can't give financial advice; but please think very hard before taking money out of it before retirement. And if your employer pays in - take it, free money.

be aware that even those who earn nothing can put up to £2880 in a pension each year, which will be topped up to £3600 by the government. Free money.

More and more of the population in future decades will be in retirement, and most of us will easily live twenty years after retiring, and the younger among us could routinely be making it into our nineties and beyond. There is no way that the public purse will be able to provide more than the basics. We will each need a big pot of money to keep us comfortable in old age. Pensions are one way to accumulate that pot with some tax advantages.

talkingpeace I fully understand and agree, my point is there are fees for all investment products. Some (most?) pensions do have high charges and these should be challenged, but the way to do this is to challenge the fees. The tax relief on contributions and the additional pay from employers make pensions the best investment for most people, especially with the new rules avoiding an annuity.
Using scare tactics to encourage people into other schemes / no savings is not helpful, just say "be mindful of the fees charged can reduce the value of savings so bear that in mind when choosing a pension suppplier"

be aware that even those who earn nothing can put up to £2880 in a pension each year, which will be topped up to £3600 by the government. Free money.

Sorry but what scheme is this?

I'm just going to stop contributing to my pension, not with draw it and diversify my portfolio.

I'm planning to get a buy to let. My friend bought a studio flat in Croydon for 150k and she makes 120 a month while paying of the mortgage and once this is clear will be 470 a month. So I need a deposit of 40k, thankfully my DM will match my amount from her inheritance.

That's just a normal personal pension that's being referred to Laurageordie.

That's the state pension then?

No, it's a personal pension purchased through a pension provider. There is tax relief on pension contributions. If you contribute through an employer then this happens by virtue of the money being deducted from your salary before tax - so putting £100 in to a month through an employer scheme doesn't cost you £100 in your pocket as that money would have been taxed and would have become £80 by the time you get it.

If you have a personal scheme where you are paying the cash in from your own bank account then the income has already been taxed. So the government tops up the contributions. They "gross up" the contributions - so if you put £80 in to a personal pension the provider will claim the tax relief for you and that £80 will become £100 (assuming basic rate tax)

Ah I see, so your not getting free money. Just saving the 20% tax at the risk of having to lock away money for several decades?

No idea what tax will be like in 40 years, so could turn out to be a bad move right?