New Work Pension, Haven't A Clue What To Invest In?

[Cletus Van Damme]

I've recently changed jobs, I'm 51 and would like to retire at 60 if possible. From a previous job that I did for 26 years, I had a final salary pension, which appears to be much better than I thought. There's obviously penalties involved in taking it early. I've got another crappy pension that I was sold that only has about 9K in it. I might also in inherit quite a bit of cash, but I don't want to rely on this as it's not a given. I'm also planning on over-paying the mortgage (not that's it's a massive mortgage), to get shot asap.

This new job it isn't a final salary pension as it's unheard of. It's a defined contribution pension, where I can pay up to 8% of my wages and the company will pay 1.5 x that amount, so it's 20% if I went for the maximum. They've just sent me a booklet that doesn't really explain a lot. I haven't a clue about pensions, the final salary one I can take 25% of it as a lump sum, I don't know if this one is the same.

My only really issue is that it gives you an option on how to invest the funds, with several options that I enter a percentage out of the 100% in each option. If I don't bother they'll just do it for me. The options are:

Equities
Property
Blended Assets
Corporate Bonds
Pre-retirement to annuity
Pre-retirement to cash
Cash
Ethical Growth
Ethical Consolidation

I just wondered if anybody could point in the direction of a website that might explain all this please? The risks, what it actually means as I haven't got a clue. I'm thinking of paying the maximum amount into the scheme. This is purely on the basis that it's pre-tax and the company is paying 1.5 x into it. I understand that these schemes are not that great. I'm not sure if there's anything else I could be doing that is better.

Thanks for any advice. I haven't a clue as you can tell...

 

[vickster]

Doesn’t the pension company offer you a choice based on risk? Mine lets me choose on a scale for low to high, then the pension company invests across a range of things in line with that

 

[Supersuperleeds]

These are the normal options, but your new company should have an advisor within the pension provider who can give you advise.

Your final salary pension will have a date it matures. When it does you will get two options offered to you. 25% lump sum tax free and a fixed monthly amount (may be indexed linked) or no lump sum and a higher fixed monthly amount. You will need to decide which you want to take.

The defined contribution scheme you will not be able to touch until you reach 55, where you can take up to 25% lump sum tax free. You will want to move the funds out of equities and into bonds a few years before you retire to try and protect your pension pot.

As I said at the beginning the company should be able to give you access to an advisor, you really need to use them, a decent one will look at all your pensions and advise you what to do with them, though they likely will only be able to offer you whatever products the pension company they work for sells.

At our place we offer all our staff an annual pension review

 

[Cycleops]

Rather than asking on here I would say you need to talk to a financial advisor. I was recommended one when I had an investment mature with Zurich. So far they've been very good and have a lot of experience investing in markets. You can choose how you would like your money invested from high to low risk or a combination of both. Have been very good so far and keep in touch every week letting me know how things are doing. They are down south, don't know where are but if you like you can PM me and I'll give you their details.

 

[Debade]

You may want to look around for a financial forum. Boggle heads is one in the States that I reference from time to time. You can see if there is one by you and/or post at BH and see if they have some thoughts.

 

[Cletus Van Damme]

This is all really good information thanks. It's a large company and would to think that they offer advice. I've sent the pensions department an email regarding imvestment advice. Thanks @Cycleops I'll be in-touch if I get nothing back, I live up-north by the way in sunny Cumbria.

Pensions are something that I haven't a clue about, have never been interested in, but think now its time that I figured it out. Regarding the final salary pension that is handled by JLT (Mercer), I really don't know if I just let them sort it out or seek advice if it can be better managed, when I decide to pull from it. I haven't a clue about all this kind of thing and would imagine that most people use the default company, due to ignorance, and the thought of getting fleeced by some shyster...

Thanks again

 

[mistyoptic]

Regarding the final salary pension that is handled by JLT (Mercer), I really don't know if I just let them sort it out or seek advice if it can be better managed, when I decide to pull from it. I haven't a clue about all this kind of thing and would imagine that most people use the default company, due to ignorance, and the thought of getting fleeced by some shyster...

Thanks again

When I reached the point where my Final Salary pension was accessible, I talked to a local Independent Financial Adviser who had been recommended to me. The result of his research was that he couldn't do any better than the company scheme and he was honest enough to say so, so I went with the company scheme. His view was that a guaranteed final salary scheme is hard to beat.

If you can find a local IFA, recommended by people you know, then talk to him/her first. Don't rely on us

 

[sheddy]

I think IFA's now are obliged to declare how they are taking their fee.

 

[Cletus Van Damme]

When I reached the point where my Final Salary pension was accessible, I talked to a local Independent Financial Adviser who had been recommended to me. The result of his research was that he couldn't do any better than the company scheme and he was honest enough to say so, so I went with the company scheme. His view was that a guaranteed final salary scheme is hard to beat.

If you can find a local IFA, recommended by people you know, then talk to him/her first. Don't rely on us

Thanks I'll bare that in mind when the time comes

 

[SpokeyDokey]

I took my main company pension at 53 (it's 55 earliest now) and the 'hit' for taking it early was 33% (approx' 2.5% per year) which I didn't think was bad. That was in 2009.

 

[Bonefish Blues]

When I reached the point where my Final Salary pension was accessible, I talked to a local Independent Financial Adviser who had been recommended to me. The result of his research was that he couldn't do any better than the company scheme and he was honest enough to say so, so I went with the company scheme. His view was that a guaranteed final salary scheme is hard to beat.

If you can find a local IFA, recommended by people you know, then talk to him/her first. Don't rely on us

Agree - but always worth asking the provider for a transfer value - sometimes if they are trying to reduce risk by actively incentivising transfers out the numbers can be thought-provoking.

For obvious reasons there are careful controls on transferring out of a DB Plan, btw.

 

[Eric Olthwaite]

I understand that these schemes are not that great.

Nowadays most schemes are pretty good - especially one where the employer pays 1.5x your contribution. So definitely pay the maximum you can, if you are able.

 

[Eric Olthwaite]

The MoneySavingExpert website has a forum with a very good pensions section - you may want to give that a go.

 

[Brads]

Just be aware that MSE forum has loads of IFA's on it. And a load will jump in saying you shouldn't be allowed to transfer out of your DB scheme.

I did, I had a gold plated final salary scheme and I transferred out. It was a great move for me.

 

[SkipdiverJohn]

Most of my pension AVC money is invested in a mix or UK and global equities, which have recently been hammered because of the virus, but I just put in more cash and get more shares at lower prices.
The way I look at it is that cash and cash substitutes like gilts and other low interest bonds are a guaranteed way of losing money relative to inflation, so I tend to avoid them. On the other hand things like equities you may or may not make money on their value, but they will generally give you a better income yield. If you can be flexible about your retirement target date, then you can afford to take more risk with the market being down at the time you planned to take your pension. You can always defer it or even take it early if the market is very strong.
Property I'm a bit wary about, TBH. Its a big field coving a lot of different types of property. Warehouse type property is doing well, commercial retail property like shopping centres is getting hammered by the virus and the trend to go online. If you're going for real estate you need to drill down into the detail and see exactly which sector of property you will be investing in.
Ethical, I couldn't give a monkeys about unless it's offering proven better returns than non-ethical. I'll invest in tobacco, bombs & bullets if it will give me a bigger pension pot.