Do you believe in using a pension plan?


(Yen Pham) #1

I’ve been thinking a lot about pensions since I started working here at Monzo a few months ago. I don’t know whether I’ll retire in the UK, and so I wasn’t sure whether saving for that phase in my life using my employer-provided plan (including a small, mandatory contribution) was my best option, if it might be hard to withdraw that money in future.

Knowing very little about pensions, I was surprised to learn in a conversation here that some people don’t believe in saving for retirement using a pension at all – that instead, it’s better to take what you might have contributed and put it into your own investments. Of course, I knew already that a pension plan is a form of investment, but it’s subject to very specific restrictions (if you, like me, are clueless about these things, we actually published a big guide to pensions on the blog this week!).

So I was wondering – do you believe in saving for retirement using a pension plan, or do you think investing independently is the better way to go?

  • I believe in saving for retirement using a pension plan
  • I believe investing is a better way to ensure you have money for the future

0 voters

And just a reminder that this poll is for fun, and not for financial advice! You should speak to a qualified financial advisor before making major financial decisions :relaxed:


(Noel Edmonds Beard Sculptor ) #2

I wish I would have got one when I was younger but now I have the auto enroll ones oh and I have investments etc.


(Is Santa here yet?) #3

Both. Take the pension for the employers contribution and invest as well


#4

This makes a difference.

Aside from that it seems mad not to - as employers match what you put in (up to a certain amount) then you are essentially been given some extra free money, with the compound interest on top of it.

Not for yourself @yen, but for others who are not aware, Monzo also did a blog on pension types and terms that is good enough to post in a way it gets an auto preview:


#5

The Conservative Government have done a lot of positive things with regards to workplace pensions and auto-enrolment. Retirement planning is something that every adult should be doing. I’ve paid into a pension since I was 18. If I could give my own child any advice it would be pay into a pension as soon as financially able and pay extra if an employer will match.


#6

Also, again sorry that it does not directly answer your question, but for new people who’ve never seen it, this is a great flowchart:

Back to answering specifically now :stuck_out_tongue:


(Yen Pham) #7

The argument I heard was basically that one ought to be able to make up the free employer contribution via earnings on independent investment, and that in that case, you’re also more directly in control of your money (because you can access it more freely and move it around at will). I believe that to be possible, but I’m not sure the average person wants to have to think about it! But I’m no expert.


(Yen Pham) #8

I saw this flowchart the other week @rolanddeschain! Good stuff.


#9

:100:

I also have a stocks and shares ISA, so that I have some in a more accessible place, but I put the bulk into my employer pension, as that way I also avoid paying the initial income tax on it as it comes out of my pre-tax salary.


(Andrew Schofield) #10

If you pay into a pension via salary sacrifice you’re already getting additional benefits by not paying NI on the contributions either.
Another thing to consider is that pension pots are somewhat protected in the case of bankruptcy, which investment accounts would not be.

Depending on your pension provider, you should be able to choose a world market tracker, which in the long run is probably what you want to aim for even with your own investments.


#11

I’m similar. Work place throw money into a work place pension and then I have my own savings going towards retirement. 50% of that goes into a SIPP for tax relief going in but will be taxable coming out and 50% goes into a S&S ISA for tax free coming out. I figure it’s the best of both worlds.


(Andrew Schofield) #12

Pensions are also outside your estate for inheritance tax purposes.


(Andrew Schofield) #13

This is true, but it depends how much you draw down per year. You always get 25% of the withdrawal tax free, and then income tax is charged at your marginal rate on anything above the personal allowance, so depending on how much you withdraw, you could pay no tax. i.e the current personal allowance rate of £11850, you could withdraw £15800 and still pay no tax (75% of 15800 is 11580). Supplement that with ISA income, and your entire income could be tax free.


#14

With savings on tax plus companies essentially giving you free money on top of it, unless there’s some very specific and well thought out reason not to, you’d be silly not to.


(Andrew Schofield) #15

It may well be that you could transfer your UK based pension to the country you eventually decide to retire in via QROPS: https://www.gov.uk/transferring-your-pension/transferring-to-an-overseas-pension-scheme


(Andy) #16

Yes totally believe in my pension plan here. I’m pretty boring with my money, a percentage goes in to my pension and whatever’s left at the end of the month goes in to a savings account. I can’t be hassled with the risk of investing. I just don’t know enough to get started


#17

This is a starting point :slight_smile:

For me it is always an extra, after I have put the % of my salary that is ‘that is half my age at the age I was when I started paying into my pension’ into my pension.

UKPersonalFinance mentions the Vanguard ISA a lot, as it is very simple to use, lowest fees available if you are only buying Vanguard funds anyway, and once you’ve met the opening amount you don’t have to keep paying anything in:
https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

For ‘put it away and forget about it’ their Life Strategy series is the easiest (LS100, LS80, LS60 etc). The number is the amount of funds vs bonds you hold, so amount of risk/ anticipated return. You’re not investing in individual shares, so don’t have to monitor it all the time or know the market. It’s recommended you leave anything you put in for a minimum of 5 years, to ride the ups and downs of stocks.

LS80 for example: https://www.vanguardinvestor.co.uk/investments/vanguard-lifestrategy-80-equity-fund-accumulation-shares?intcmpgn=blendedlifestrategy_lifestrategy80equityfund_fund_link


#18

If your having long term savings a S&S ISA is a good way to go as mentioned in the above post. The LS funds are simple and just about picking how much risk you find acceptable then dump some (but not all) money into it for the next 20 years.


#19

I’m half SIPP half ISA. When I move jobs I transfer the old-job pension into the SIPP so I can manage everything all in one place. All my employers have had a 3-5% match so it only made sense to subscribe for the extra money; also currently if you’re paying 40% tax then chucking a bit extra in a pension is worthwhile. But I’m not a fan of having all my savings somewhere I can’t access until I’m 58, especially after I saw a friend burned who was a year off retirement when the government bumped the age limit back from 50 to 55.


#20

How did you choose/ set up your SIPP?