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So I had a statement the other day from one of my pensions. At 65 - not when I retire, obviously - it'll be worth £1k per Annum in today's money. That's over 20 years from now.
So I'm thinking, is it better of part spent against doing up my (London) house which we are in for long term, and any left pays off some of the mortgage? On know bricks and mortar don't make massive pensions any more but still, seems it could make/save me more than it's worth no?
Ps it's not my only one, I have 3 one other is a biggish company pension.
How are you going to get the pension fund cashed before you retire?
Erm... Que?
Not that easy to just spend it usually the money is tied up until retirement age.
I might be wrong but I think you have to be 55 before you can get at any pension funds and even then only a one off withdrawal (that you have to pay tax on) of a maximum of 25% of the total value.
Oh well that's that dream of decorating the hallway over with then.
Next.
I was in a DC scheme for a couple of years before qualifying for a DB scheme. I cashed the DC in when I left it to pay off some debts. More use to me then than in 40/50/60 years time.
I doubt spending £1k on your London house will add value to it - I'd be tempted to spunk it on a holiday or something frivolous.
No it £1k per Annum as a pension. It's value is circa £20k today.
aaaahhhhhhh, sorry.
What's a pension.... 😥
And what's a DC scheme and DB scheme?
DC - defined contribution (you and hopefully your employer pay in regular percentage of your salary)
DB - defined benefit (final or average salary related normally)
Mines private so DC I guess.
Interesting post. I have a few schemes and have often thought that a cash in option would be handy
Money Saving Expert had a good article about this (and specifically saying to avoid 'selling' them - you get a tiny fraction of the value)
You'll never get the money out of the pension to spend it......
Ooooh loooook at you with your big s****y house in that London!
Oh good grief.
I've about 10 pensions, all predicted to generate varying amounts, but when you add them all up they come to a decent amount.
Leave it, especially as you'll probably not actually be allowed to get it out.
Ha ha ha ha! 😀
But that pot of money isn't yours! I know you've paid into it and everything, just like a good saver and citizen does, but you can't now go around thinking that it's your money anymore. No no no, that just won't do.that spoil everything.
Look, all you have to do is just pay me at least 15% of your net salary each month for as many years as you can! but for it to really be good for you! let's just say that if you didn't start when you were 16, you certainly won't have enough, so let's make it 20% each month. I'll then look after it for you and at some point when you have stopped working because you're too old and unproductive, I'll be able to pay you a small amount each month out of the money you have given me to look after.
Although, please be aware that sometimes, the money you give me to look after, doesn't like being looked after that much and it might not all be there. It'll be somewhere else, but I'm sure that won't be a problem.
Biggest ****ing scam of the modern era. It's a con and we all fell for it. Mugs.
I cashed in a UK pension. There was a list of conditions that allowed me to do it one of which was resigning. I wouldn't have cashed it in to wallpaper a house but reckoned I could do better with the money than a pension fund, I have.
I know that saving is not very popular in the UK but a bit of cash in the bank is choice. For you to decide who can best manage your money. Pension funds are often so badly managed that even with the tax advantages they are a poor investment.
from someone who has retired early and spent yesterday in the sun at bike park Wales. Dont fool yourselves about pensions they do work and are very much well worth having to save for. Anyone telling you not to has never retired. A £1000 per year for the rest of your life is a very good start build on it.
Anyone telling you not to has never retired.
I beg to differ.
[url= http://www.everyinvestor.co.uk/news/2013/10/21/worst-performing-pension-funds-revealed-6412/ ]There are some lousy pension funds[/url]
I'm sure you can do better than those by investing in a few consistently performing diversified funds in different geographic zones to spread risk.
Kryton - if you have a couple of old DC schemes you can amalgamate them into a single SIPP. Email me if you want.
In general you can't get at your pension till you are 55, at which point you can take (a maximum) of 25% of the total amount tax free.
(Google on drawdown and annuity for the rest of the pot)
Re pension statement, I would review (*annually):
- what are the charges and commision
- what % did it earn
- what did the 'overall market' do
note that if it earns less than charges + commission it won't be much of a pension at retirement.
Note that moving money may involve commission and is worth learning about. However note the impact of compound interest and the difference between a good performing fund and a poor one will be massive over 20 years.
I'm putting the pension fund from the company I've just left into my Hargreaves Lansdown SIPP so it's all in one place. Happy with the returns I get as I pick quality unit trusts; those who are anti pensions should check out SIPPs.
🙂
Gotama/Mudshark
Some investigation reveals my work pension is a Hargreaves Lansdown SIPP. Does this means I'd be better off add my other 3 pensions (standard non serps) into it?
I'm wary of putting all my eggs in one basket, but I could choose to "manage" though amounts with HL in a more risky manner?
I transferred all my old group pensions into my HL SIPP.
Pensions are just a tax efficient wrapper around an investment that you can't access till 55 (a good thing). What you choose to invest in makes the difference to the returns.
Extremely good value for higher rate taxpayers.
To me, I think reinvesting your money is best. £1k per year is nothing now, let alone in 20years times. At least if you do up your house, you can rent it per room/ whole and that can be your retirement money.
Kryton57 - well it's easy to manage if all with HL so that's what I'd do - there's no risk so don't think of it as putting all your eggs in one basket. Picking the investments is the trick but HL have quite a bit of info such as their Wealth 150. You've got your login info for your HL a/c?
I have yes.
Obviously I need to work out how to do it and the best fund to use etc. quite obviously I've never bothered with any if that. My contributory work pension is in a reducing risk portfolio, I think I'd like to put this little lot into something higher risk / hopefully higher returns.
[i]I'm wary of putting all my eggs in one basket[/i]
This.
I've left all mine with the companies/private ones they started with. At least that way if one/two go pop I've not lost the lot.
[i]To me, I think reinvesting your money is best. £1k per year is nothing now, let alone in 20years times.[/i]
With most pensions the £1k is a prediction, so whatever £1k buys now should be about what the pension will/may buy at retirement. And if you could generate £1k for every year of work you could be retiring as a higher-rate tax payer.
If ever you are going to need a lot of money it will be before 55 rather than after it. Financing your kids' education, starting a business (perhaps with a kid), a big move, baling out of a sinking country, taking advantage of a property market crash... . Having access to one's own money is more important than a tax advantage to me.
That's a good point Edukator. I wouldn't put more money in I was just looking to ensure Mrs K and I can have a decent standard of living after we stop work.
I'm a pension specialist. Firstly, you can access a pension before age 55 in the following circumstances :
A you are deemed to be in severe ill health (life expectancy of less than 12 months )
B you have paid into a company pension scheme for less than 2 years, in this case you get a refund of the contributions that you have made, but not any that your employer has made.
After 55 you have the following options:
1. Tax 25% of the fund value as a tax free cash sum and use the rest to buy an income ( either via an annuity, which is buying an income for the rest of your life, generally you can't change your mind on this at a later date OR by using a thing called income drawdown, where your money remains invested and you draw an income from this within set limits; tends to be higher risk as funds need to match your attitude to risk, capacity for loss and maintain your income levels). With income drawdown it's possible to take the tax free lump sum and defer income but if you die there will be a 55% tax charge on the remaining fund
2. Leave it where it is until a later date but you should access it no later than age 75 to avoid penal tax charges on death.
Currently if under 55 and none of the above apply to you:
1. Leave it where it is
2. Transfer it to another scheme, either an existing company scheme or a completely new scheme. Again like income drawdown you will need to select funds that match your objectives and attitude to risk. It's not all about performance.
If you're not familiar with terms such as alpha, beta, standard deviation, etc, I would not recommend managing your own portfolio. Unskilled investors tend to make basic mistakes like investing when stocks/funds have already had most of their growth and dis-investing at the bottom of the market when the best thing to do would be to ride it out and wait for gains.
Get independent advice from a qualified financial adviser. Rules changed last year so that all charges are very transparent and upfront and you can negotiate on costs.
julzm - what's best to look / ask for in an independant financial adviser e.g. qualifications, membership of professional body etc. Seen a few advisors over the years and always got the impression they are steering you towards what might get them the most commission, maybe that's to be expected.
I've got 24 years on a private pension and 12 on a work one (with their contributions), the annual statements look okay to me and what I kind of expect but still wouldn't mind getting an objective view and whther might be better having all in one pot.
Is it true that pension funds are often invested/redirected into "unethical" companies, are there good ways to avoid this?
Interesting topic. I have a small pension (£8k) from a place I only worked at for 6 months which is lying dormant. Think I'll transfer it to a SIPP tomorrow and see what happens.
Avontyrell - rules changed from jan 2013 and commission is now banned, so it's all transparent pricing now that you agree with your adviser what they will be paid. This is usually split between a fee for the initial advice and an OPTIONAL ongoing adviser fee (usually a small annual percentage of the fund value expect around 0.5%).
Qualifications wise - all advisers had to sit exams to get them to a minimum of Diploma in financial services (actually quite onerous for many). However next step up is Chartered Financial planners. You'll pay more for their advice perhaps but feel free to negotiate with them. You can check a website called unbiased for local advisers around you.
Iffoverload - the trustees of the pension scheme have a legal duty to invest the funds for the benefit of the members/beneficiaries. There are different ways of looking at ethical investment - green funds tend to be higher risk due to the narrow nature of the underlying assets. However you can choose to go with funds which operate negative screening, e.g. They wouldn't invest in arms companies for example. A good way to do this is normally to ask your adviser about multi asset funds as these are well diversified across different asset classes ( different asset classes are affected by different factors so don't all go down or up at the same time; an asset class is things like shares, gilts, government bonds, property, etc). These types of funds often operate negative screening and will provide lots of info about what they do invest in.
Think I'll transfer it to a SIPP tomorrow and see what happens.
Is that easy to do?
Excellent, thanks.
I didn't know you could till I read this thread then co-incidentally looked through a huge pile of unopened Hargreaves Lansdown mailshots.
I just received a letter today from the pension scheme of the company I've just left saying they're going to increase my charges by 0.2% unless I continue to make contributions - a good reason to move my money!
Ethical pensions ! FFS. Its money we are talking about.
When you have been sat in your soiled nappy for most of the day in a badly run old peoples home wating for some foreign underpaid nurse to sort you out - your earlier decision to choose a pension because it was "nice" may then seem to be stupid.
I want my pension to make the most possible money it can. Drugs, guns and prostitues - I will be way too old and skint to care.
I want to have posh nappies while I dribble away the rest of my years in an old peoples home.
Ethical pensions ! FFS. Its money we are talking about.
Pensions are looked after by the evil bankers dontcha know.
Pensions are looked after by the evil bankers dontcha know.
Depends, if you go for SIPP (Self Invested Pension Plan) you can choose who to invest in.
Someone may have said this already, but may be worth combining the smaller pensions to spread fees
I had a poxy little one which would have been eroded to naff all by fees as there was a fixed element to the fees
Well I just got a letter back from Scottish Widows telling me my pension has been transferred into a Hargreaves Lansdown SIPP.
Pretty quick considering I only sent the form off last Friday..