sbk1972

Pensions. :-( Im a 39 year old contractor, and have no pension. Looked into it at 28, and was shocked at charges / costs and never brought one. However, looking back, wish I had as now I would have to throw large amounts of £££ into one, to make it worth anything.

So, Ive now invested in a different form of penison, one called "Children". Im planning on either my son, or daughter to either become a Lawyer / Dentist / Dr and to look after thier good old loving father :-)

I must admit, I am now starting to worry about my £££ future as I realise I cant contract for ever, but when I stop working, what will I live on. Therefore, to all the clever pension guys on here, what sort of pensions can I contractor invest in ??

SBK

EddScott

It depends on a number of factors

Salary and outgoings - this determines how much you can comfortably save and may also dictate what is most suitable.
What are you future plans - when do you want to retire. Any idea as to what income you may want in retirement per annum.

So from this we need to set realistic goals and we develop an idea of what the most suitable investment vehicle might be.

We then need to discuss your "attitude to risk" and you ability to absorb investment losses. Some questions need to be answered and discussed to decide what investment funds may be suitable to you. Remember, the negative psychological difference of losing £10 is much greater than the positive feeling of making £10 so you may not be as risky with your money as you think you are.

Other questions worth asking is how much "hands on" do you want personally and from the adviser. You can have either active managed funds which are more expensive but the expection of performance is higer, or passive funds which by and large are a collection of tracker funds. Cheaper but perhaps not as high performance - this is a big argument for and against and I know advisers completely wedded to each approach who would never consider changing. I suspect the overall outcome isn't too far apart - the higher performance perhaps no more than offsets the higher charges. If you want regular meetings with client/adviser discussions on the investment portfolio, the cost is higher but so is the potential for return. This is largely how the firm I work for operate.

Now we have an idea of what product might be most suitable and we have an idea of your attitude to risk and ability to absorb losses. From this we can build a portfolio of funds where your money will be invested.

Once agreed and in place, the most important thing is when will the investment be reviewed - if you go to an IFA and there is no mention of a review date, walk away.

The review, IMO, is far more important to the client than when the investment began. Its the ongoing monitoring of an investment that will either make or break your portfolio performance. If you only want one meeting a year and not too fussed where your money goes as long as it's within your remit then a cheaper passive approach might be suitable. If you want quarterly updates with quarterly market reviews and any possible fund switch recommendations, then a more expensive actively managed portfolio is more likely to suit you.

If you get a decent, well qualified IFA (and BTW, qualified doesn't always mean good) and build a good relationship then you can work together for your future. Most IFAs do care about their clients and their clients money. IFAs by and large are expected to be solicitor, accountant, financial adviser and quite often agony aunt all rolled into one.

The new rules and regs are pushing out this jack of all trades approach and is likely to only be detremental to the people and force many into the hands of the banks who really don't give a toss.

andys

Well my personal pension grew 20% last year and I also have a nice 1/35th final salary to look forward to.

sbk1972

Thanks EddScott for taking the time to write that, I appriecate it. Im a little suspect of IFA, as at the end of the day you cant beat human nature, and the fact that certain products give higher kickbacks to the advisor means what does the `independant` truely mean. Or, this could be me being a distrusting, robbing contractor :-)

The questions you asked were identical to the ones I was originally asked back years ago when I looked into pensions. And if I remember correctly, I was aiming at 60 to retire, stupidly indicating I wanted to be on £100K a year pension, so my pension fund had to be worth around £5M ! :-)

Realistically, being 39/40, retiring at 60 / 65, wanting to be on 40/50K a year pension, what would I need to through away each month to achieve this ?? Go on the figures that most contractors are on £100K a year, 3/4K a month out goings ( food /insurances / kids / houses /etc etc )

SBK

TelBoy

Ed will have better calculations, but on my own back of a matchbox sums, that sort of annuity at 60 would require about 750k in the pot. £750k would therefore require £3,125 per month for 240 months, assuming zero growth, so realistically maybe something like £2,500 per month. Quite scary when you think about it.

madscoob

iTrader: (3)

not bad 24k paid in over 24 years . 1k per year pension got to live 24 years just to get your own money back that can't be right . ive got to live 12.8 years just to get mine back as of now if i retired today , and ive got 22 years more to go lol

sbk1972

Well, that aint gonna happen then :-) Luckily I've paid off my mortgage, so perhap its time to buy another house and start renting it out. I need to look into this and work out a plan.

SBK

Terminator X

iTrader: (7)

Agreed albeit "better" to put the money into property imho eg pay off existing mortgage or buy another house & use the money to pay of that mortgage. Let's face it you have to pay in mega amounts to get anything significant back at retirement + there remains a risk that it could all have been pissed away by the pension company as well ...

TX.

Terminator X

iTrader: (7)

Some posters on here need to make use of the smilie!

TX.

PS

What age are you Andy (?) as to get a FS pension you must be as old as the hills ie most of us "youngsters" were locked out years ago ...

andys

37

EddScott

Doesn't really take into account investment growth. I think I did an illustration in the past looking for a pension pot of £500K and it worked out to about £400 a month for 35 years with an average of 6%. Quite a tall order!

Advisers have traditionally been paid via commission. It's possible to take high commission on investments and some of the more dodgy ones - Caribean holiday homes for "dead pensions" is favorite - can have commission in double figures. Theres a very high profile adviser group where I live doing this and the whole thing stinks - FOS or FSA aren't interested though (says alot about the regulators IMO)

There are new rules coming in that is attempting to abolish commission. However, this is a doubled edged sword. If I say you have to pay me £400 to research your pension arrangement and the bank says its "free" as they will be allowed to do, you'll go to the bank and the level of service will be very poor. The new rules are pushing those with lower amounts of money to the banks which is frankly bad news.

It also won't prevent miss-selling because if you give me £400 and I declare your pension spot on - what have you really gained for £400? So the incentive to fiddle with the pension to justify the £400 is still there?

These "kickbacks" I think have come from the panorama program where the reporter was pushing the pension provider about the "kickbacks"?? The person being interviewed did try to say that because we buy in bulk, we get a discount (clearly fair enough in any other industry) but the reporter made a big show of how the kickbacks were some kind of fidde??

Many IFA practices have ceilings by which they will charge commission. For instance 3% is usual on ISAs etc plus 0.5 every year for the payment of the ongoing review process (personally I prefer 1 plus 1). So, if you only take the same amount irrespective of company, the argument over truly independent advice is sound. Ironically, there was a push to put ceilings on commission but the insurance companies blocked it saying it was anti-competitive? What a load a *****.

Putting a fixed ceiling on fees and commission would take away the need for these rule changes - the cost of which will be in the billions once the government is finished pishing about and trying to slew all the rule changes towards the banks.

TelBoy

Er, yes it does. £2,500 per month for 240 months is £600k, so that's simple compounding of 25% growth to get to £750k, or annualised over 20 years about 6%, as you used. Not wishing to split hairs of course

njkmrs

To Edscott

I am no pension expert and do not want to mislead anyone ,what I understand my figures to mean is that my investment over the last year has increased by 15.23% including my contributions and my employers contribution compared to this time last year .Which I still think is pretty reasonable.If I am reading my online statement correctly .
Apologies if anyone misunderstood .

njkmrs

SBK .Good to see your honesty .Hopefully it will make some reading this think real hard about what they want and need to do for their future .It is never too late to start putting something away and I hope your kids come up with the goods for you .I think mine are banking on putting me in a home as a dribbling wreck and partying long and hard !! They dont know I will have everything timed to a T and zilch in the pot for them !!

EddScott

http://www.savingsinterestcalculator.co.uk/

Was using this for the calculation.

Depends what is being included to give you that figure. I'd want to remove the effect of the contributions over the 12 months to get a better picture of how the actual investment has grown.

hodgy0_2

aside from "defined benefit" schemes, pensions, like any comercial financial product are primarily designed to make a profit to the provider

any benefit it you is incidental

not anti pension -- but just the way it is (as with any financial product)

they make good sense if you have a high income and can get the absolute maximum tax relief (with employer contributions)

Terminator X

iTrader: (7)

HTF have you ended up with a FS pension

TX.

nick172sport

iTrader: (6)

whats the point my dad had 4 pensions goin on was scottish widows non made the figures what where quoted he said its a waste off time and he through most off his money into it ive got 4 froze because my company change contracts to other firms like ***** nilly lol so havnt bothered anymore with one im 45 btw

andys

Well joined 5 years ago its now closed to new jorners. Was one of the last compainies left

cookstar

iTrader: (6)

31 here and have FS pension. Along with a few others.

Terminator X

iTrader: (7)

I don't get it they all shut down late 90's / early 00's didn't they?

TX.

andys

no not all of them just need to be selective who you work for. In fact I actaully have two althought one if from I company I left

Chip

Interesting reading some of the figures on here. I paid in to my FS scheme a hell of a lot less then has been quoted and am getting a hell of a lot more out of my pension than the figures on here state.

And there are still many FS schemes still out there.

Chip

Leslie

Keep wondering why you are using PSL's photo as your avatar.

Les