Work place pensions

Soldato
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Ok no one wants to talk about this but it's something that is going to effect a lot of people .

I have lots of facts and figures and I think the auto enrolment will start at the end of next year at my company but a few questions I need to ponder before I do ?

All of my spare cash is currently invested in 2 rental properties I have so I might opt out so I can invest this cash into them anyhow .

1. Who decides where the monies get paid into and what type of investment fund will it be ?

2. Are there are fees to be paid ? If there are its a no brainer opt out for me .

3. Can I designate a date for maturity or is that done by the government ?

4. Is this going to be an annuity based fund at the end of the term , a draw down or will I have access to all my cash on maturity date ?
 
Soldato
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Fife
Ok no one wants to talk about this but it's something that is going to effect a lot of people .

I have lots of facts and figures and I think the auto enrolment will start at the end of next year at my company but a few questions I need to ponder before I do ?

All of my spare cash is currently invested in 2 rental properties I have so I might opt out so I can invest this cash into them anyhow .

1. Who decides where the monies get paid into and what type of investment fund will it be ?

2. Are there are fees to be paid ? If there are its a no brainer opt out for me .

3. Can I designate a date for maturity or is that done by the government ?

4. Is this going to be an annuity based fund at the end of the term , a draw down or will I have access to all my cash on maturity date ?

1. It depends who administers the scheme - a previous employer of mine used AXA PPP, and it was invested in one of their funds. I have a SIPP with my current employer where I choose what to invest in.

2. Depends on the scheme - generally yes, if it is invested in a fund of some sort.

3. You can, but there are minimum dates - afaik you can designate a date after your 55th birthday.

4. Depends on the scheme. Normally you'll have the option - drawdown is generally more sensible if you have a reasonable amount in the pot.

Be aware that you probably can't "opt out" - your employer will offer this on a take it or leave it basis. You can transfer-out from most schemes though (i.e. when you leave employment), although to reinvest the cash into property you'd have to transfer out to a SIPP provider (and this will come with its own costs).
 
Soldato
OP
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1. It depends who administers the scheme - a previous employer of mine used AXA PPP, and it was invested in one of their funds. I have a SIPP with my current employer where I choose what to invest in.

2. Depends on the scheme - generally yes, if it is invested in a fund of some sort.

3. You can, but there are minimum dates - afaik you can designate a date after your 55th birthday.

4. Depends on the scheme. Normally you'll have the option - drawdown is generally more sensible if you have a reasonable amount in the pot.

Be aware that you probably can't "opt out" - your employer will offer this on a take it or leave it basis. You can transfer-out from most schemes though (i.e. when you leave employment), although to reinvest the cash into property you'd have to transfer out to a SIPP provider (and this will come with its own costs).


Thanks Jamef , I thought I could opt out if I wanted to ? What I ment was the monies paid into this could be used to overpay mortgages I have on BTL , I would like to buy a third property in the next ten years and would have to use equity in the two I already have .

This thing is going to be a whole lot of trouble coming for millions by the looks of it and going by the interest and replies to this thread one that lots don't want to talk about either.
 
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You can opt out if you choose

Money paid into pensions is great, expecially if your a higher rate tax payer as pension contributions are tax free (you get 20% paid back directly into the scheme by the tax man, and you reclaim the other 20% either in arrears or by an adjustment to your tax code). Some very very highly paid people will find pensions are slightly less tax efficient but generally they are incredibly safe.

You will also get an employer contribution again bumping up the amount thats paid into your fund.

Barring your employer choosing a silly scheme drawdown etc should be available, and worst case you move it in later years to one that allows it.

I believe the fees will be very low, mine is 0.4% I think thats fairly common now. The days of 2% etc are pretty much gone unless you want some superstar fund manager, who if he is a superstar will make the 2% back your paying extra.
 
Associate
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My employer has been doing this for as long as i have worked there (at least 7yrs). They will match what i pay up to 7% - I can contribute as much as i want but they will only match 7%.
There are several investment types, basically low, medium and high risk investment. Its not bad i guess but i lost my final salary pension when i transferred across to them tho'
 
Soldato
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Thanks Jamef , I thought I could opt out if I wanted to ? What I ment was the monies paid into this could be used to overpay mortgages I have on BTL , I would like to buy a third property in the next ten years and would have to use equity in the two I already have .

This thing is going to be a whole lot of trouble coming for millions by the looks of it and going by the interest and replies to this thread one that lots don't want to talk about either.

You can opt out, it's only mandatory for companies to offer it, not for employees to subscribe to it.

The money paid HAS to go into a pension fund, you can't just get tax free money to put where you want, that's not the point of pension contributions being tax free.

There's little interest because I suspect that many people here are already in such a scheme. I have been so for the past 15 years. It's a no-brainer, I put in 2.5% of my salary, tax free, my employer puts in 5%. Some schemes allow you to swap your funds from high risk -> low risk as you approach retirement age. At the moment I'm in a reasonably high-risk 1% management fee fund split across UK and overseas investments (50/50), and it's up 10% over the last 12 months.

People don't talk about it on here much probably because people are either too young, or people have got over the 5 seconds it takes to decide to enrol in a company pension when you work out how many benefits it has.
 
Associate
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You can opt out, it's only mandatory for companies to offer it, not for employees to subscribe to it.

The money paid HAS to go into a pension fund, you can't just get tax free money to put where you want, that's not the point of pension contributions being tax free.

There's little interest because I suspect that many people here are already in such a scheme. I have been so for the past 15 years. It's a no-brainer, I put in 2.5% of my salary, tax free, my employer puts in 5%. Some schemes allow you to swap your funds from high risk -> low risk as you approach retirement age. At the moment I'm in a reasonably high-risk 1% management fee fund split across UK and overseas investments (50/50), and it's up 10% over the last 12 months.

People don't talk about it on here much probably because people are either too young, or people have got over the 5 seconds it takes to decide to enrol in a company pension when you work out how many benefits it has.


2.5% seems like next to nothing, I am having to put 7.5% in and that's a NHS pension :confused:
 
Permabanned
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its just a ploy to steal your money, how much are the rate of return how much of the fees will be deducted etc...
You are much better at finding an asset that grows with time rather than an asset the shrinks with time.
 
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Soldato
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2.5% seems like next to nothing, I am having to put 7.5% in and that's a NHS pension :confused:

It increases with time, in 2 years I can put in 5% (company 10%, total 15%), and after another few years 7% and 14% (21%).

Of course it depends what salary you are on as to whether or not 2.5% is next to nothing.

Of course, if you think it's a ploy to steal your money, you might as well opt out and try and invest on your own. Without the company contributing, and without the tax breaks. To put it into perspective, it costs me just over £x a month to contribute over £x * 6 a month, with an average growth of 6% over the last 4 years. So it's hardly shrinking...and even if it was, it would have to shrink by about 10% per year to mean that I end up with less than I put in (inflation adjusted of course). And I am free to change which funds (out of 100s available) that I invest my money into. From cautious fixed-income type products all the way through to aggressive far-east emerging market funds.

Of course it could all go titsup.com, but the same is true of anything you invest in for that sort of rate of return.
 
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I hope people who don't have pensions and are 30/40's plus, realize that starting a small pension could well be a complete waist of time. If I started it I may as well throw my money down the drain :(

Just read the BBC piece and i have to ask given the rise in NMW and then the need to pay towards pensions I take it the government knows that the smaller business' will be forced to work around such a scheme ie only employ people under 22, or split shifts to prevent anyone from earning more than £5,564. Many are finding it so difficult at the moment I honestly think it will see some lose their jobs.

And lets be honest its simply the government try to save money from the state pension.
 
Associate
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Same oul' town
I hope people who don't have pensions and are 30/40's plus, realize that starting a small pension could well be a complete waist of time.

That's pretty much why I don't bother with one. Back when I started my job last year they gave us all work pension forms to fill out but as I was temp at the time I didn't bother. Employed there full time now but don't have much interest in participating in one. I know there's the free money and tax break but I just feel because of my age it wouldn't be worth it. In saying that a guy who was 55 started paying £60pm into it, I don't know what he expects when he retires, hope he doesn't have big plans anyway.
 
Soldato
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I hope people who don't have pensions and are 30/40's plus, realize that starting a small pension could well be a complete waste of time.
This is true, especially if you earn less than the average wage.... unless your company scheme is particularly generous. Mine's lousy (absolute minimum contributions) so I always preferred to keep control of my money and put it into an ISA.

My only concern is that later on the government may try to punish those who opted out or have savings. For instance by cutting the state second pension hard.

We're entering an increasingly messy time for pensions though. The only thing I'm taking for granted is that we'll all be disappointed, and I work on the principle that I can earn more in a day's part time work than I can with a pretty substantial pension pot.
 
Soldato
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Is the money guaranteed by the Govt? Wouldn't like to pay in for 40 odd years then the company go belly up and I then get no pension.

Or would we bail out the company, ie. as a tax payer anyway (although I'm not at the moment) I'd be paying to bail out my own pension lolz
 
Don
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I would have thought that paying into a pension later in life is better for you because you're up straight away due to the tax relief on it. Could take a good few years otherwise to make that back up through other means, particularly if you're paying 40% income tax.
 
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This is true, especially if you earn less than the average wage.... unless your company scheme is particularly generous. Mine's lousy (absolute minimum contributions) so I always preferred to keep control of my money and put it into an ISA.

My only concern is that later on the government may try to punish those who opted out or have savings. For instance by cutting the state second pension hard.

We're entering an increasingly messy time for pensions though. The only thing I'm taking for granted is that we'll all be disappointed, and I work on the principle that I can earn more in a day's part time work than I can with a pretty substantial pension pot.

I am 99% sure the state second pension IS being scrapped. A higher single pensions payment is being proposed. I believe this is to scrap the earnings test for pensioners so the basic state pension would got to approx £150 with no tops ups at all.

I think the basic pension would then be about £9k pa. I know for sure I wouldn't be aiming to have a life in retirement living on that!

The problem with doing it yourself is if something goes wrong. Yes for sure with buy to let etc if it all goes well for you after 15 years or so you are pretty made. BUT if it goes wrong you could end up with stuff all. A pension is ring fenced, it wont be taken into account if something goes wrong and you end up on benefits.
 
Soldato
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As others have said, the no 1 benefit of a pension as a savings method is the tax benefits. For every £100 you put in, as a basic rate taxpayer, it only costs you £80. Show me any other investment that gives you an instant 20% return, followed by decent growth (if you've selected the right funds, as with any investment).
 
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