So with my new job I put in 6% and the employer contributes 12%, which they top up to a total of 19%. This will accumulate a sizeable pension pot over the next 40 years, given my income starts at about 62k and will go up approximately 1k/year, keeping track of inflation.
But given a decent pension pot gets you sod-all in terms of annuities today, is there any benefit to not joining the company pension scheme and investing, say, 10% in something else entirely?
Will there even be pensions in 40 years time? Is it possible that I'd just be throwing away 6% of my income for 40 years? (This assumes a retirement of 65; fortunately I suspect the public will not take kindly to a 68-year-old pilot)
[Elderly on this forum should feel entirely free to gloat at this point but some sensible advice and predictions would be appreciated]
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If you get an income of 1/3 your final wage and a lump sum of about 1.5 times (tax-free) you'll be doing well - assuming you'll be around 65 in 40 years.
Remember life expectancy in 40 years could be mid-high 80s so don't expect annuities to get any better.
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MY usual thought would be stay with the employer scheme unless you can find a very good reason not to - they may have negotiated lower charges than you would be paying privately - 40 years of 1% of your fund every year = a lot of money for the fundholders.
If you wish to tuck away more than your 6%, I'd think about ISA over additional pension plans initially - no tax relief on what you save, but there is no tax on the income/returns you make (unlike annuity income), and you have total flexibility in what you do with the pot over the next 40 years unlike pensions.
Additionally ISAs are far more comeptetive as a rule with regard to charges, since unhappy punters can very easily take their money elsewhere (as many do each year).
If you take money out of a pension scheme early the taxman usually wants a fat chunk.
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Your employer is going to add 12% on top of what you put in - you are going to need some pretty stellar performance elsewhere to beat that / you'd be daft to let them off the hook! The rules on annuities have been relaxed of late, so you might not even need to buy one now. Of course, past performance is no guarantee to the future, and your guess is as good as mine as to what the rules will be when you retire....
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>>and your guess is as good as mine as to what the rules will be when you retire....
I think it was Zero who said before "the only thing you can be sure is the rules will be different to now" or something like that ;-)
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>> >>and your guess is as good as mine as to what the rules will be
>> when you retire....
>>
>> I think it was Zero who said before "the only thing you can be sure
>> is the rules will be different to now" or something like that ;-)
Yeah, the pension i got was not what I signed up for all those years ago. The only rule you can count on is the one that says "it not going to better than now"
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Join the pension scheme your employer is paying in double to you it's a no brainer.
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I thought the employer contributions could be taken into a separate private pension usually.
Or is it discretionary?
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>> I thought the employer contributions could be taken into a separate private pension usually.
Not usually, where the employer contribution is linked to what the employee puts in. But why would you want to? It's just a pot of money at the end of the day, and when you do retire you can use any annuity provider.
Short answer is stick with the company scheme and get their money. If you want to put an extra 4% in yourself, either put that in the company scheme or into a SIPP with a fund supermarket like Hargreaves Lansdown www.hl.co.uk/ (there are other providers, but their site is quite good at explaining things too).
Assuming it's a defined contribution, "money pot" scheme, the only reasons you want to do that would be to use different investments to the ones that the company scheme offers. But if it's a decent scheme (which judging by the contribution level, it is, comparatively) then they will offer suitable investment choices and probably lower charges than you could get on your own.
Losing the company contribution would be folly.
Do have a look at your investment choices though. Typically you will be offered Equity trackers (UK/Global index) at the risky end of the scale, and cash/gilt funds at the other. There will be some bumf about your attitude to risk in choosing funds. A mistake often made by younger people is to decide they want to be 'sensible' and they go for the lower risk options - what people in the industry sometimes call "reckless conservatism", because they have no chance of getting the fund growth they need.
If you want to read some stuff on investing, get a book called Smarter Investing' by Tim Hale www.amazon.co.uk/dp/0273722077
Last edited by: Manatee on Sun 11 Mar 12 at 08:06
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There's more than one question here; you need to compartmentalise. I assume you are being offered a defined contribution scheme, albeit a very generous one.
The regulatory situation and annuity returns, if such things exist in 40 yrs time, are 'known unknowns'. So is the Employer's commitment to keep on topping up at the rates you mention and indeed the assumption that you will 'Fly to Serve' to 65.
OTOH you are offered chance to salt away nigh on 20% of the salary you mention. Even for ten years then unless investment is incompetent or Marx was right about capitalism you'll do well.
And TBH at £60k plus then unless you plan to keep a housewife or two at home you should still be able to generate some savings.
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>>unless you plan to keep a housewife or two at home you should still be able to generate some savings.
I thought FF was of the female persuasion.
Not that I'm homerphobic or nuffink.
Or maybe it's a chap - I don't pay a lot of attention these days )
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>> >>unless you plan to keep a housewife or two at home you should still be
>> able to generate some savings.
>>
>> I thought FF was of the female persuasion.
>>
>> Not that I'm homerphobic or nuffink.
>>
>> Or maybe it's a chap - I don't pay a lot of attention these days
>> )
>>
Nope, male last time I checked. What gave you that idea?!
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>>Nope, male last time I checked. What gave you that idea?!
Looked back at a few of your posts and definitely 'blokey' so apologies for that (realy, what woman would ever remark about a daily paper being avaialable to read in a BMW dealership!)
I think I was maybe crossing the 'FF' monicker with a wimmin's tag from old HJ.
Move along... nothing to see here :-)
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Blimey, how many years at medical school did you do?
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10 - I was so good I got to do each year twice ;-)
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>> I think I was maybe crossing the 'FF' monicker with a wimmin's tag from old
>> HJ.
>>
>> Move along... nothing to see here :-)
>>
Other FF was FranFran a lady posting from Oz. Flounced a couple of weeks ago taking rather more offence than was needed at one of Zero's 'bon mots'
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, given my income starts at about 62k and will go
>> up approximately 1k/year, keeping track of inflation.
thats not keeping up with inflation,
>>
>> But given a decent pension pot gets you sod-all in terms of annuities today, is
>> there any benefit to not joining the company pension scheme and investing, say, 10% in
>> something else entirely?
the best you can count on is getting the same out of it as you (and possibly) the company put in, nothing more. Trouble is that nothing else has as many tax incentives as pension funding, so you can't count on earning anything better.
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Well, I'm shocked o)
If my maths are correct that makes you 25 yrs old.
You are far too young to be flying an areoplane and I think you should stop now. When I look at a pilot I want to see those years of experience etched on his face to give me confidence.
You need to do a few more years yet learning the ropes and I'm sure Aylesbury have a very good parachute club where you could do circuits and bumps all day long.
Young 'uns these days never want to start at the bottom and work their way up.
....and don't you dare to refer to me as 'Elderly', young man;)
Pat
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don't tell me, coppers are looking younger too.
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...and patients are getting younger and younger.
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Is that because you keep killing the old ones off because they're not cost effective?;)
Pat
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You might like to think that, but I couldn't possibly comment.
/sir humphrey
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>> You might like to think that, but I couldn't possibly comment.
>>
www.telegraph.co.uk/news/matt/
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>> Well, I'm shocked o)
>>
>> If my maths are correct that makes you 25 yrs old.
>>
>> You are far too young to be flying an areoplane and I think you should
>> stop now. When I look at a pilot I want to see those years of....
Don't worry Pat, the only reason Captains have grey hair is as a consequence of flying with whipper-snappers like me.
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>>
>>
>> Young 'uns these days never want to start at the bottom and work their way
>> up.
>>
I think that's what most pilots do.
Submariners of course do it the other way round.
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>> So with my new job I put in 6% and the employer contributes 12%, which
>> they top up to a total of 19%. This will accumulate a sizeable pension pot
>> over the next 40 years, given my income starts at about 62k and will go
>> up approximately 1k/year, keeping track of inflation.
That's a superb contribution from your employer. My employer contributed only enough to ensure that predicted pension commitments could be met. Most years they didn't contribute anything. We need to know how your scheme would calculate your pension before we can comment.
>> Will there even be pensions in 40 years time?
Assuming you work for a reputable company and the pension scheme is well administered there's no reason to believe that the scheme won't be still going in 40 years time.
>> Elderly on this forum should feel entirely free to gloat .........
I doubt very much whether many (if any) will be in a position to gloat. I'd rather you hadn't told us your salary arrangements. It smacks of bragging and is not at all relevant to the topic.
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>> I doubt very much whether many (if any) will be in a position to gloat. I'd rather you hadn't told us your salary arrangements. It smacks of bragging and is not at all relevant to the topic.
Perhaps, but it does tell us that FF is a 40% taxpayer, which can make a lot of difference when deciding to make extra pension provision or not.
As regards 'elderly' gloating - I think everyone will agree that the current pensioners are in receipt of far more compared to their contributions than the next few generations shall be.
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I'm not gloating about my pension.Started work at the age of sixteen.
Have some savings in the bank and no interest return and inflation high.He is a lucky lad to be earning over 60 grand not many people do.
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...He is a lucky lad to be earning over 60 grand not many people do...
Agreed, although presumably he was a good boy and got his head down to get his pilot's licence.
What he earns is crucial to his question, which I imagine is why he posted it.
Looks like he's not taken on too big a mortgage for his income, so I reckon Fursty's about as well set as a young man could be.
Time to put all this boring stuff to one side and concentrate on those stewardesses.
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>> .......... I think everyone will agree that the current pensioners are
>> in receipt of far more compared to their contributions than the next few generations shall
>> be.
I have no reason to think that my employer's scheme isn't still available to new starters, and will pay out on the same basis as it did when I retired.
Last edited by: L'escargot on Sun 11 Mar 12 at 09:12
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>> I have no reason to think that my employer's scheme isn't still available to new
>> starters, and will pay out on the same basis as it did when I retired.
I have every reason to think, nay swear on a tack of bibles, that your defined benefits scheme is NOT available to new starters.
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I suspect that L'es was in a defined benefit (DB)scheme, a different animal altogether. It was common for firms to take pension holidays when the scheme was in surplus, as they often were before Gordon started taxing dividends on scheme investments. It was irrelevant to the members, whose benefits were calculated from service and salary, not purchased from a money pot, provided there wasn't a subsequent deficit when the sponsor went bust, though the Pension Protection Fund now provides underpin for 90% of the value of pensions.
FF is almost certainly in a defined contribution (DC)scheme (he should ignore my earlier comments and what follows if that isn't the case). There is no "calculation" of benefits. FF in effect will have his own pension pot which can be used to buy an annuity when he retires (there are other options currently, but pointless to discuss as he won't have to decide for decades when the rules will be different).
He shouldn't be dependent on the scheme 'keeping going' providing the scheme is run in accordance with regulations - there is an actual invested fund with his share in it. There can be no 'deficit' as with a DB scheme.
FF, if you are concerned about the way your scheme works, the scheme booklet should tell you enough to understand the basics. There's nothing to stop you asking for a copy of the trust deed and rules if you want them.
Last edited by: Manatee on Sun 11 Mar 12 at 09:14
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>> FF is almost certainly in a defined contribution (DC)scheme ..........
We don't know that, because he didn't say. Part of my reply to him was that we couldn't comment on his case until he told us the basis on which his pension would be calculated.
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>> >> FF is almost certainly in a defined contribution (DC)scheme ..........
>>
>> We don't know that, because he didn't say. Part of my reply to him was
>> that we couldn't comment on his case until he told us the basis on which
>> his pension would be calculated.
Well he did actually, taking this at face value...
"But given a decent pension pot gets you sod-all in terms of annuities today..."
I qualified my answer to ensure I didn't mislead accidentally.
Last edited by: Manatee on Sun 11 Mar 12 at 09:45
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>> >> FF is almost certainly in a defined contribution (DC)scheme ..........
>>
>> We don't know that, because he didn't say. Part of my reply to him was
>> that we couldn't comment on his case until he told us the basis on which
>> his pension would be calculated.
We do know that because he is talking in percentages paid in by his employer. With a defined benefits scheme there is no defined % paid in by the employer, merely sufficient money to cover the liabilities. (or a holiday if there is enough in the fund, or not enough paid in and there is a shortfall)
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The destruction of UK pensions started before Gordon - Nigella's Dad (Lawson) had his knife out in 1988
www.opalliance.org.uk/decline.htm
There are continuing rumblings about taking away the high rate tax advantage - budget soon - but perhaps they are just trying the water (again) to see how loud the screams are.
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The most important point, as already alluded to by Iffy above, to ensure a comfortable old age, and to have plenty of readies while you are working is.....
NEVER BUY A HOUSE THAT IS BIGGER OR MORE EXPENSIVE THAN YOU NEED
;-)
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>> The destruction of UK pensions started before Gordon - Nigella's Dad (Lawson) had his knife
>> out in 1988
>> www.opalliance.org.uk/decline.htm
>>
>> There are continuing rumblings about taking away the high rate tax advantage - budget soon
>> - but perhaps they are just trying the water (again) to see how loud the
>> screams are.
>>
>>
>>
Impression I have is not so much screams as marching on Downing Street with flaming pitchforks.
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>> Impression I have is not so much screams as marching on Downing Street with flaming
>> pitchforks.
>>
Ringing endorsement then, according to the Ministry of Spin..
;-)
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we need someone's head on a Pike Staff
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Shrewd move becoming a commercial, rather than a military pilot, FF, as I doubt at your age you would have had the time to reach a rank that would command anything like your current salary.
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And what's more, while not an impossible scenario, the likelyhood of someone shooting at him is far less ! Got to be a bonus in its own right that really...
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Got to be a bonus in its own right that really...
>>
Doesn't get to drive the sporty models though, plus can't be doing wheelies or donuts with a load on.
On the other hand, stewardesses...;)
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Aye true GB.
We're not jealous you know FF. Not jealous at all. Never think that.
I mean, who would want to be a single, 25 year old, airline pilot with a BMW?
Edit- with a good pension...
:-)
Last edited by: Humph D'Bout on Sun 11 Mar 12 at 14:31
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It's a hard life but someone has to do it.
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Have you got anywhere near the opinions you wanted, FF?
Re-reading the OP, perhaps you were thinking more about investments other than a pension o f any kind?
You could do ISAs to about £11,000 a year on the current allowance. Note that the investments could be similar, it's just a different wrapper.
The main differences are
ISA - no tax relief on investing, to get £10k in your ISA costs you £10k; but no tax to pay when you cash it in. PENSION - £10k currently costs you £6k to put in (for now). You'll get taxed when you draw it out, but your tax rate might be lower then. Under current rules you can also take 25% of your fund back tax free as well when you retire, but in 40 years, who knows?
ISA - designed for saving up. You can get at the money anytime, and you don't have to buy a pension with it. PENSION - your money is out of reach, essentially until you retire. The idea is that you will use it to buy an annuity. Under current rules, once you have a minimum guaranteed income of £20k a year (pensions, essentially) you can however choose to use "drawdown" directly from the fund, though drawings are taxable. The govt's idea is to review the £20k from time to time and increase it with inflation, but that won't affect anybody once they've started on drawdown - and the 'Minimum Income Requirement" amount if met doesn't have to be index linked. Again, the rules are likely (certain) to change in the next 40 years.
You could do property - some people swear by buy to let as a long term retirement fund builder.
In your situation you might want to save in ISAs (for long term savings, a stocks and shares ISA - cash will limit the growth, as with pensions) or property, but your company contribution still means the pension is too good to give up so most people would say do that anyway.
Using your company pension arrangements as a base and then doing say ISAs on top is really a flexible and prudent approach. On any foreseeable scenarios, you'll either have money you can get at anytime, and/or the option of retiring earlier.
I'm not "advising" you BTW!
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Fursty Ferret,
You need advice from somewhere like this. tinyurl.com/7unsy5k
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>> You need advice from somewhere like this. tinyurl.com/7unsy5k
He's 40 years away from buying an annuity!
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>> >> You need advice from somewhere like this. tinyurl.com/7unsy5k
>>
>> He's 40 years away from buying an annuity!
>>
I was suggesting the type of place to get advice, not somewhere from which to buy an annuity. He's asking for advice and that's the type of knowledgeable place that offers advice.
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>> [Elderly on this forum should feel entirely free to gloat at this point but some
>> sensible advice and predictions would be appreciated]
>>
Gloat!
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>> >> [Elderly on this forum should feel entirely free to gloat at this point but
>> some
>> >> sensible advice and predictions would be appreciated]
>> >>
>> Gloat!
>>
I didn't understand why the O.P. thought that the elderly on this forum were in a position to gloat. What does he think they've got to gloat about?
Last edited by: L'escargot on Mon 12 Mar 12 at 12:07
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No gloating on my behalf good luck to the O.P.Sensible advice some of the other backroomers have given this.Predictions nobody knows.
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>>Elderly on this forum should feel entirely free to gloat at this point
Gloating by those of us of a certain age could be short-lived, if and when IDS's plan for a flat-rate state pension is introduced.
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Thanks everyone for the pointers / tips / advice etc (esp. Manatee and L'Escargot).
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Pensions in 40 years - Lygonos
