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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: Martz256 on August 06, 2012, 06:44:19 AM

Title: Pension or Self invest?
Post by: Martz256 on August 06, 2012, 06:44:19 AM

Hi All,

I'm at a point where i need to decide on whether a pension is the right way forwards.

So far in life i haven't had a pension, i've grown up in the mindset that they are a poor investment of my money. I'm not sure exactly where I've got this idea but i remember a lot about endowment pensions falling short and Robert Maxwell probably didn't help.

Anyway 2 years ago i joined a firm with a good pension scheme that matched 6% of my salary. It seemed a no-brainer at the time and I signed up.

Now, 2 years later, i have left the company. The pension scheme has become a personal scheme and i can continue to pay in, but my new company do not contribute.

My question now is, is a pension scheme the best way to save towards old age if you are not getting any employer contributions?

The benefits of a pension, that i can see, is that once you reach retirement age and purchase your pot, the payments then last for as long as you live. So, assuming the pot is large enough, it will deliver enough to live on as long as you need it.

but... surely this is the MMM aim, with the added possibility of attaining this before state retirement age.

So would i be best keeping the money in my own coffers, learning and working it myself. Again, this sounds like a no brainer after reading this site! It just feels a little less.... safe i guess.

So time for question #2.

I am currently using my Cash ISA as much as possible, but have the option of a Stocks / Shares ISA that would easily accept my planned pension payments. Given that this is tax free would this be the better option for my long term saving than the Vanguard options that regularly get mentioned on MMM?

I realise that there are different options for a shares ISA and this is something that I will need to look into.

Thanks for any insights!

Martyn

(p.s. i also assume there's no way of getting my 2 years of payments OUT of the pension?)

Title: Pension or Self invest? A UK question, I think.
Post by: Sacadoh on August 06, 2012, 07:30:15 AM

I have company pension with a 6% base & further 6% match. I also top up my H&L SIPP (invested mostly in a low cost Vanguard tracker) to the maximum I can to benefit from 40% tax relief.

If I was a basic rate tax payers now I would only invest with a company pension to max out the matching element and then put the remainder into a low cost equity ISA. Nothing to stop you investing in a Vanguard tracker within your ISA. Happy to outline my reasons about not filling up a pension pot if you are a 20% taxpayer if you like, although they have been well argued elsewhere.

I see little point, save for emergency funds, in saving in a cash ISA that may be unable to achieve even a modest real rate of return.

Title: Re: Pension or Self invest?
Post by: Martz256 on August 06, 2012, 08:49:47 AM

thanks for the input Sacadoh,

I hadn't actually questioned my cash isa, but it's a fair point now you mention it. I have it in a 3% deal but i guess this could be working harder.

Just dipping my toe into the world of investments at the mo before i take any plunges :-)