New Pension - advice

[Jonathan---]

Hi,
I am 29 years old and work in a small family business. They say if i sort a pension they will contribute �1000 a year towards it to start with. (With the expectation of this figure rising.) I don't really have any spare money to put in myself.
Where do I start?! I have used Independant advisors in the past on shares and isa's but would they take a regular commission?

[Hymie]

To get a half decent pension when you retire, you should be looking to be putting at least 10% of your salary into a pension. The later you start, the greater that percentage figure needs to be.

Assuming you will work until you are 70, you will only have saved a total of �41,000 � at today�s value (assuming your employer increases the payments with inflation). Hopefully, with investment the value would have grown. But I reckon you would be doing well to end up with a pension pot valued at �100,000 (at today�s value). This will buy you a fixed pension of around �7,000 per year.

On top of this figure, you should receive a basic state pension � currently around �5,000.

You will then be living on around �12,000 per year (equivalent value today).

Should all this come to pass � the biggest winner will be the State � who will not have to pay you means tested benefits. However, given that the pension payments are gratis, I would take up the offer from your employer � having a look at what is on offer here.
http://www.fsa.gov.uk/tables

The best hope I can offer you is that on retirement you can take 25% of your pension pot tax free, so you could be looking at �25,000, plus a small pension.

Personally, I would not add any of my own money to such a scheme � which I think would benefit the State more than me.

[Jonathan---]

I agree - I have my own money in other investments and i'm not worried about my income in later life because I will probably be fairly confortable money wise by then.
But i do need to sort something out - every month i don't do anything i'm losing out on this pension contribution. I'd rather have this small amount than nothing obviously.
Any recommendations?

[Hymie]

If the deal on offer from your employer is that you can choose who you pay the pension contributions to; take a close look at the eye-watering sums charged (from the fsa tables) � and take your pick. Note that the values shown are based on your investment growing at 7% per annum.

Most have high early charges, paying commission to whoever. Once you have selected a likely candidate plan, you might like to ask them what would happen, should you stop paying into the pension? This could well happen, should you change jobs and your new employer has alternative arrangements, which do not allow you to continue payment into the plan (without giving up what your new employer is offering).

You could take (pay for) financial advice with regards to this; some advisors will take their payment from commission paid by whoever�s pension product you eventually take � rather than an upfront fee. But I reckon you could do just as well with the fsa tables, a blindfold and a pin.

[alifbae]

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http://insurance-plan-guide.blogspot.com