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Author: Subject: Starting a Pension.
cryoman1965

posted on 15/9/14 at 06:16 PM Reply With Quote
Starting a Pension.

My 17 yr old comes home from work and asks about starting a pension. I have a company pension so have very limited knowledge in this. His company don' t offer a company pension or a stakeholder. Any free advise welcome where to look and what 4o look for. I.E Are all stakeholder pensions the same.

Cheers

Nige

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Chris_Xtreme

posted on 15/9/14 at 07:28 PM Reply With Quote
I know you said 17, but the company may have something in the pipe line. If they are really small may be not

https://www.gov.uk/workplace-pensions-employers

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bi22le

posted on 15/9/14 at 08:33 PM Reply With Quote
Any money he puts away (and get used to doing so) is great.

when I turned 30, nearly 2 years ago, I looked into pensions. The market is dead. Low interest rates and debatable returns on investment. The pension market is very stale so I would not put any money into it right now.

first thing to do is get him putting money. Set up a standing order to get a set amount of money out of his account and into a high interest ISA. These wont offer much, something like 1.5% I think.

Then do what I did. After a year (£100 a month =£1200 total) I brough ETF. Read about them. They are automated shares essentially. Aimed to track what ever you want. It allows you to invest in stock exchanges (NASDAQ, FTSE250, etc), industries (IT, new business, chemical etc) or comodities. Essentially what ever you think will be big in 30 years you can get.

ETF are special because they are tax free (ISA compliant) and automated. You basically get a clever computer to broker and manage it, not a fat cat in London taking your wedge.

I have invested over £1500 this year and am currently sitting on approx 8% growth. You cant get that anywhere else.

Im not a sales man, do some googling. You will see that there is a hell of a lot of interest for financial geeks on ETFs. Shop around for the broker (you need someone to actually purchase these. It functions like a Paypal account basically) you want to use.

For you information. I use Morningstar to compare ETF data and IWEB to invest my monies.

If you want any further info then U2U me and I would be happy to assist.





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cliftyhanger

posted on 15/9/14 at 09:17 PM Reply With Quote
Just saving into a high interest regular saver account can be a good way to start. Rates are about the best you can get. Then maybe, if he really wants to, stick into a pension scheme at some point. Danger until that happens is that he may decide to blow it on something more useful to him, eg cars/girls/booze etc

I have an inherent distrust of financial institutions, and I prefer the idea of using a BTL as a self funding pension scheme. Needs cash to get it started though, and not insignificant amounts.

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russbost

posted on 16/9/14 at 07:18 AM Reply With Quote
My pension lost around 1/3 of it's value just b4 I was 50 & able to make any drawings against it (2007 crash) however the funds which (fortunately) I had invested in property for rental continued to provide the same return they always had & in fact grew during this period both in capital value & %age return - the lesson is pretty clear, the more you can do without the intervention of large organisations & financial advisors all creaming their bit off the top the better you will do.
Several of my friends who have retired in recent years have taken their pension lump sum & invested it in property, the rental return is way in excess of any they could possibly hope fro from an annuity & they have a "fund" which continues to grow in both return & capital value - about the only other place you could possibly match the return would be on the stock market & quite frankly unless you have some sort of insider knowledge or are a stockmarket guru you might just as well "invest" it in the local bookies!
Obviously it requires discipline to save sufficient to get a 1st property, but there are plenty of buy to let mortgages around & sensibly done will be the best thing he could ever do, in the meantime stick it in a high return ISA - perhaps "locked in" for 5 years or so to remove temptation of spending it!
Good luck to him - nice to actually hear about a youngster with some plans for his future rather than just today!






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jossey

posted on 16/9/14 at 08:20 AM Reply With Quote
Nothing to do with me but look here

http://www.hl.co.uk/pensions

They have alot of papers about pensions.

Property is potentially a better bet as a long term investment.

Given people generally spend a 3rd of their take home pay it would make sense to have 3 properties paid off by retirement of a similar value to your house you want to live in. This in theory without any yield give you a living income.

My house is 250k rental would be 875 per month I could live on the income of 2 of these if my own house was paid for. Plus I could sell up if needed.

When the housing market collapses the rental market increases which they suggest occurs every 20 years...





Thanks



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cliftyhanger

posted on 16/9/14 at 09:36 AM Reply With Quote
OK, lets face it, BTL property is a no-brainer.

As long as you can get the deposit together....

A property should return 5-7% initially. That should just about cover expenses etc for the first couple of years. After that it will make a small, but increasing profit. If you take nothing out I expect the property will pay for itself (ie no input from you overall) after 15-20 years.
At that point you will have(a) a property which has REAL value that will always increase in value (ok, few ups and downs, but this is a long-term investment) and will produce an income which will also increase, roughly with inflation.

There is no other product available that can touch that. Unless you are crooked or very very lucky.(put it this way, my first property bought 20 years ago, cost 60K, plus 12k to sort it. Initial rent was 10k pa. Today 24k pa, house worth £450k. So I am getting approx 30% return on my initial investment, plus the capital has grown about 9%pa on average.)

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swanny

posted on 16/9/14 at 09:41 AM Reply With Quote
Not all pensions are the same. my advice would be to find a good trusted financial advisor that comes well recommended.

one of ours has been recently moved and is now performing dramatically better than before. important not to leave pensions for ever and assume they will be ok. if you are paying a management fee (and you are) make sure someone is actually managing it for you not just taking the money.

at some point in the future i hope we'll have a mixture of property and other investments, but at present we are seeing similar income to that we could expect to see from a rental income on a buy to let (if mortgage free) every month with no hassle/non payers/repairs etc/insurance and other costs from investments recommended by our financial advisor. at this point in our life, hassle free income is highly attractive :-)

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Irony

posted on 16/9/14 at 10:10 AM Reply With Quote
I don't have a pension and it worries me. I am 34 and I have put all my spare money into property. I hope this is the right decision long term.
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whitestu

posted on 16/9/14 at 10:48 AM Reply With Quote
Most buy to let properties are only viable because of the very low interest rates we have now. That probably will change in the future.
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907

posted on 16/9/14 at 11:17 AM Reply With Quote
quote:
Originally posted by Irony
I don't have a pension and it worries me. I am 34 and I have put all my spare money into property. I hope this is the right decision long term.




IMHO you will never regret this decision.



At one time I had amassed several tens of thousands with Equitable Theft but when it crashed the only one it didn't effect
was the head honchos Mr VT. There was always enough to pay his millions.

My pot was now valued at £5k and the company pension advisor said we should transfer what was left to Theft Equitable.

What I didn't know was that the transfer value of £5000 was £500, and he had a standing charge per transaction of £500.


Pensions are legalised robbery.


Paul G

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russbost

posted on 16/9/14 at 11:59 AM Reply With Quote
quote:
Originally posted by whitestu
Most buy to let properties are only viable because of the very low interest rates we have now. That probably will change in the future.


Yes, but if interest rates go up so will inflation & so will rentals, pensions however may well come down, in a high interest market the stock market (where pretty much all pension money goes) does not perform well - I know where my money is staying!





I no longer run Furore Products or Furore Cars Ltd, but would still highly recommend them for Acewell dashes, projector headlights, dominator headlights, indicators, mirrors etc, best prices in the UK! Take a look at http://www.furoreproducts.co.uk/ or find more parts on Ebay, user names furoreltd & furoreproducts, discounts available for LCB users.
Don't forget Stainless Steel Braided brake hoses, made to your exact requirements in any of around 16 colours. http://shop.ebay.co.uk/furoreproducts/m.html?_dmd=1&_ipg=50&_sop=12&_rdc=1

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keithjardine

posted on 16/9/14 at 12:18 PM Reply With Quote
Well done to the lad being 17 AND having a job/career that has some form of financial planning offered and has clearly got him thinking about the future. I'd echo the above feelings about a pension vs property, his money is locked in for a very long time in a pension and requires some management to avoid feeding the fat cats too much vs a property that can be sold relatively quickly to release funds.

Personally if I had my time again (32 now, mortgaged up with Mrs and two kids and very content) I would have bought a 2/3 bed terrace house at 60-70k (little risk of depreciation and little appreciation so capital tax gains are minimal), lived there whilst doing a basic tidy up then rent out before moving to the next property-of course pre 2008 a mortgage could have been obtained on the high street the same day with few questions-hindsight!!

Nowadays buy to let mortgages are 25% deposit up front plus fees, this is not straightforward for a 17 year old just starting out even on a modest property. He'd potentially be better off saving a deposit for a personal residential mortgage on a 2/3 bed terrace house somewhere local so he knows the area and more importantly can rent a room or two to mates (or room share with randoms). This will enable him to pay the mortgage alone if he is stuck and if room renting he can use that money to offset his spending on the property and essentially live there for free whilst the mortgage is still being paid-he will have to be disciplined to save though!

Room renting has tax advantages so long as he meets the criteria (£4250 tax free annual income from room rental).

This may provide an easier/cheaper/quicker route into BTL as once his foot is in the door the mortgage can be swapped to BTL if he no longer resides there.

Currently I have no pension provision but overpaying the mortgage to reduce the term by 8 years, then I will divert the basic monthly payments @ £950 to a savings account (or perhaps withdraw and stash as cash so I can claim benefits when I retire and live in a care home for free when i'm decrepit).

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snapper

posted on 16/9/14 at 06:14 PM Reply With Quote
Most pensions benefit from employer contribution and interest free on what is put in effectively adding value to the pot
As most youngsters will work till 70 there is a little more time to acrue value
I agree that for some the property market is a good bet but as most will struggle to afford 1 property in their lifetime buy to let may be more difficult than it sounds
My divorce and separation from child plus a break up with a subsiquent partner quashed all hope of property investment however I am lucky enough to have been in a final salary non- contribution scheme for many years, it now requires 8% from me and that hurts but I'm close to the enough years now
Greasing the top step of the staircase of you raging parents house is always an option





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Acc8braman

posted on 18/9/14 at 10:16 AM Reply With Quote
quote:
Originally posted by bi22le
Any money he puts away (and get used to doing so) is great.

when I turned 30, nearly 2 years ago, I looked into pensions. The market is dead. Low interest rates and debatable returns on investment. The pension market is very stale so I would not put any money into it right now.

first thing to do is get him putting money. Set up a standing order to get a set amount of money out of his account and into a high interest ISA. These wont offer much, something like 1.5% I think.

Then do what I did. After a year (£100 a month =£1200 total) I brough ETF. Read about them. They are automated shares essentially. Aimed to track what ever you want. It allows you to invest in stock exchanges (NASDAQ, FTSE250, etc), industries (IT, new business, chemical etc) or comodities. Essentially what ever you think will be big in 30 years you can get.

ETF are special because they are tax free (ISA compliant) and automated. You basically get a clever computer to broker and manage it, not a fat cat in London taking your wedge.

I have invested over £1500 this year and am currently sitting on approx 8% growth. You cant get that anywhere else.

Im not a sales man, do some googling. You will see that there is a hell of a lot of interest for financial geeks on ETFs. Shop around for the broker (you need someone to actually purchase these. It functions like a Paypal account basically) you want to use.

For you information. I use Morningstar to compare ETF data and IWEB to invest my monies.

If you want any further info then U2U me and I would be happy to assist.


Hi,

Could you let me know what App you are using for this?

Cheers

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