How important is a company pension?

[wallyward]

Hi

 

I believe that very soon an employer will have to pay into a pension for its employees by law rather than choice. couple of links below:

 

Private pensions to become compulsory for workers | Money | guardian.co.uk

 

Auto-Enrolment - The Pensions Advisory Service (TPAS)

 

Stakeholder pensions are a very good way of saving. for example my company one is through Aviva. I can log on at any time and check the payments are being made in full by my company and the value of my fund. I can use the forecast tools to look at what he pot will be worth (hopefully!) in teh future. I can set my "risk" level that the funds should be invested at. For example while I am young(ish) I can invest part of the fund in riskier things hopeing for a bigger return and then as I get nearer pension age change the investments to teh least risk ones so ring fencing my pot. any money i pay in on top of the money from the company is completely tax free. at retirement you can take 25% tax free and teh rest must be used to buy an annuty. yes if you die the balance does not go to your estate. so if you want to try and get all teh money out quickly and stick it in the bank or under your mattress just get the shortest annuty you can.

 

Any profit from renting out a property is taxable and also any profit from the actual sale of the property is subject to capital gains tax (tapering) unless it is your main residence for a certain length of time before the sale.

[gensetsteve]

You only pay tax if the property has made a profit and you have used your allowances. I think you can allocate alot of things as your pension but then you cant sell and realise the money until you retire. I would rather pay alot of tax on a large profit than avoid tax and see very little back.

[wallyward]

Hi

 

there is an oppurtunity here to have your cake and eat it.

 

let the company you work for pay into a pension fund for you and then rather than top that up with your own payments use that money to buy property.

 

All I would say about letting out property if thats what you want to get into make sure you think it out in advance. Most tenants are very switched on now to making sure the lanlord has the right to rent the place by either having consent to let from the mortgage provider or a buy to let motgage. Keep proper records, make sure you comply with all the legislation especially about gas certification etcetera.

 

I became an accidental landlord some time ago when we wanted to move and not have the hassle of selling the place we lived in. It went ok for a while and we brought some more places to let out (always went for 2 bed places with small gardens as they were always in demand). we never made much money out of the rents but were content with the increase in value we saw on paper.

 

It gets very scarey though when you sit back and realise you owe nearly 20 times your annual wage on mortgages (including the one on our house). even worse when you have 1 house empty for some months and another one where you have to end up taking the tenant to court for not paying to get an eviction notice. When that happens the mortgage's still need paying and its your pocket its coming out off.

 

After about 8 years of having rental properties we have now sold out and yes we made some money but i would think twice before doing it again. Though if the right place came up at the right price I would do it again - but only if I was buying cash this time.

[adrian007]

The state pensions are running out even now. I've been contracted out of the state pension since I was 18, and this year they are putting an end to that...why? I assume because they dont have enough money to pay out the pensions they currently have to pay so need more money in the kitty now

 

Labour stopped this at the same time as they announced that the state second pension would be set at a flat rate, rather than an 'earnings related rate'.

 

It's not a recession related policy, it was a policy they brought in when they had money coming out of their ears (or throught they did, lol)

[adrian007]

Correct as far as it goes. The problems arise when you come to retire and find you can only access part of your pot directly. The majority has to be used to purchase an annuity at currently ruinous rates . when you die the remainder of the annuity is won by the life company.

 

Moral of the story...work hard and do your best the get ###### like all the rest.

 

kwfhomepage

 

You are correct that you can take 25% out of the pot any time after age 55.

 

The rest could be used to take out an annuity but there other choices. It could be left invested, you could draw on that investment if you wish as well and take the annuity when you are older - annuity rates are better when you are older.

 

But also, while annuity rates are poor, and likely to remain so, there is an increasing amount of innovation in this area to combat the problem - enhanced annuities for those in ill health, temporary annuities, investment linked annuities etc.

[easy-lift guy]

I think that ship sailed a long time ago.

 

Company pension schemes are normally a good idea, because you're getting the employer's contribution, plus your contributions are tax free. That's in contrast to a lot of private schemes, some of which have turned out to be poor value. As far as I know, a pension's more tax efficient than just saving off your own bat, even if you've got an ISA.

 

Best thing you can do is get some proper advice from a genuine and independent advisor.

 

edit: re rent from a second property being tax free: it certainly is not. You can offset all the expenses against your income, but you're supposed to pay tax on any profit. The only tax free rent you can get is for renting rooms in youir own home, under rent a room scheme.

 

Same applies here in the states only your expenses against your rental property are a write off, the balance which you should never have is taxable.

At 29 depending on your long term goals and how much $$$ you have to work with and your health and family present and future, I would lean towards property investment:thumbup1:

easy-lift guy

[wallyward]

Hi

 

I think this debate will roll on and on and the only correct answer would be on an individual basis and the only way for someone to work out if its right for them or not would be to take advice, consider the options and make their own judgement.

 

That said, there are many people on here who employ someone. Is everyone aware of the changes to come in this year on employers obligations to provide pensions?

 

http://www.thepensionsregulator.gov.uk/docs/workplace-pensions-law-is-changing.pdf

 

the question of if a pension is a good thing or not for an individual is academic if an employer has to provide one.

[adrian007]

I'm in the 'pay in' camp. You may have gathered.

 

Pensions these days are miles better for the customer than old fashioned ones - the costs with the plans are lower, the investment routes are better as well. There is no risk of Maxwell types, although I do have a strong suspicion that 'the tax free lump sum' will stop being tax free at some point.

 

The pension won't affect your potential for getting a mortgage.

 

Also, a feature nobody has mentioned - you can buy land, woodland and commercial buildings within some pensions. Hmmm, that could be useful for some people hereabouts I'd have thought. :-) That's what I'm doing, it's why I hang about on this forum, learning stuff

 

If you end up working for more than one company, you may well end up with 2,3,or more pension pots, you can amalagamate these into one pot so that life doesn't get too complicated.

 

Underperformance - someone mentioned endowments - endowments were OK while inflation was always 10 - 20% pa. Since it dropped in the late 1980's, endowments proved pretty rubbish and the effects of theridiculously high commissions and charges were clear to be seen.

 

At this time, pensions were reformed, so that the ridiculous commissions and charges disappeared too - that is good for you.

 

So, people with 'old pensions' need to get them looked at, although some of those old pensions also had inbuilt promises that you can't buy today, so it isn't necessarily a good thing to jump out of them. (This was Equitable's Life's problem - it guaranteed annuities at, I think it was 15%, lol)

 

But, in brief, alot of the problems mentioned here are impossible these days, when you get to 55 years old and your joints are aching you won't regret having a decent sized pension pot to include in your plans.

 

It's much better than saying 'oh, in my job you can carry on working forever'

[firewood]

I think property has alot further to fall in value as much as a third. I think in a few years there will be some good rental opportunities houses that cost 140k may drop to 80. Give this some thought as its as important to have somewhere to live as it is to pay some suited fat cat manager his commission. It will be more difficult to get a mortgage if your throwing £200 a month into a black hole. The reason pension schemes are so complicated is so they can rob you blind without you realising until its too late. I am the generation that got ripped off with mortgage endowements and now we are working to prop up the banks again.

 

Did you get caught too steve with endowements?

 

I got rogered to the tune of £40k.

 

I will never ever trust a bank or insurance co again. They are scum.

 

http://www.kinnoirwoodfuel.co.uk

[muldonach]

Just wondering what people's thoughts are on a company pension? I'm 29 now and have started with a company who has a pension, they put twice what I put in. Which seems good. Obviously a lot of people would be happy with a job at the minute never mind a pension, but I'm just interested in wether people think it's something I should be worrying about?

 

It is always worth worrying about how you propose to support yourself and family in later years. From what I read the offer of a company pension is pretty damn rare these days, it is not something I have ever had the offer of although I paid into an industry pension scheme for a period and got severly rooked when I left the industry. A pension plan is good provided it performs well in the long term

 

The questions for me are:-

 

Who is running this scheme and how is it invested / performing?

 

What is the likelyhood of me staying in the scheme long term and what happens if I leave early?

 

Is there an alternative - for example would the company pay their contributions into a SIPP if I had one?

 

Personally I would tend towards managing my own money if at all possible

 

Be very careful of anyone in a suit and if anyone tells you they are offering "free" financial advice ask them straight out what commission they are on and who is paying it - they are obliged by law to tell you