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[LC0112G]

Listened to a financial advisor a few weeks ago on the radio, advice was if you have spare cash buy a 2nd property & let it, better option in his opinion much safer than any type of pension his words were there is only one winner that is the insurance/pension companies the  average person has very little hope of getting a fair deal. The wife & I both have NHS & civil service pensions so we will be  fairly comfortable , did think about buying a 2nd house when I received my gratuity last month but decided to spend it on a few decent holidays instead !!

If you ask a finacial advisor you are likely to get duff advice. If you ask a INDEPENDENT finacial advisor, you are much more likely to get good advice.

You obviously don't understand what a modern (non final salary) pension is. They have nothing to do with insurance or pension companies. They are simply a tax free wrapper within which you can hold a virtually unlimited number of different assets.

[tunnie]

Hummm, I started my 'proper' pension in 2010 when I joined Sky full time, looking online my fund is around 20% higher than what's paid in.

So ~5% growth year, which looks average?

If I want a £22k /year pension, I need to put in at least 20% myself + what Sky put in. I currently put in 8%, planning to increase that to 12% this year, giving me 20% over-all. But still need to find another 8%.

Think every pay rise for next few years must go into the pension fund 

Sorry - too many assumptions there to guess at. - Like your current age, your scheme retirement age, what age you want to retire at, how much income you want in retirement etc.

The usual advice on pension forums is to put in whatever is needed to get the maximum employer contribution. What's the max Sky will match? 8%, 10%? I assume there is a max? After that, the advice is often to save a 6 month salary cash like safety fund (typically in a high paying current account or cash ISA) and after that invest in a Stocks and shares ISA. You may also have to save a deposit for a house and pay for a wedding/kids in your later 20's and 30's.

When I started, there used to be a limit on the amount you could save per year. It was something like 17.5% of salary up to age 25, then 20% from 25-35 IIRC. Also, it's unlikely you'll need as much in retirement as you do whilst working - mortgage will be payed off, and sprogs will have effed off :-) Typical final salary schemes only pay out about half of final salary so that's probably a gooid point to aim for.

Rule of thumb is 5% return (after inflation) on a pension pot - so to get 22K p/a you would need to amass a pot of around £440K (in todays money terms) by the time you decide to retire. So you need to invest around £200 per month for 47 years. Have a play with the pension calculator on the HL web site https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

Thanks 

Sky does have pension calculator too, been fiddling with that. Sky match up to 8% the system starts with you putting in 4%, them 8%. (now reduced to 6%, luckily I'm on the old scheme) I doubled mine, however after that, they continue at 8%, so my plan is to put in 12% myself + 8 from Sky. I also pay in the additional thing government put in last year? I did not opt out...

I also save via Sharesave scheme, currently they are doing very well, I have a number of them. Option price when I bought in, £5.03 share price hovers around £9 currently. Should be doubling my money hopefully! I save around £150/m on those (£50 per pot so to speak)

I just checked what I put funds wise each month into pension pot, I'm not far off that, so with my planned increases I should be on that roughly.

I could be doing better, but I think I'm in ok-ish shape, my main issue is i'm 29, I only really started paying in at 25. My first job out of Uni had no pension setups really.

[LC0112G]

Thanks 

Sky does have pension calculator too, been fiddling with that. Sky match up to 8% the system starts with you putting in 4%, them 8%. (now reduced to 6%, luckily I'm on the old scheme) I doubled mine, however after that, they continue at 8%, so my plan is to put in 12% myself + 8 from Sky. I also pay in the additional thing government put in last year? I did not opt out...

I also save via Sharesave scheme, currently they are doing very well, I have a number of them. Option price when I bought in, £5.03 share price hovers around £9 currently. Should be doubling my money hopefully! I save around £150/m on those (£50 per pot so to speak)

I just checked what I put funds wise each month into pension pot, I'm not far off that, so with my planned increases I should be on that roughly.

I could be doing better, but I think I'm in ok-ish shape, my main issue is i'm 29, I only really started paying in at 25. My first job out of Uni had no pension setups really.

Another rule of thumb is to have a pension pot of £35K by the time you're 35. If you're on target for that, then I think I'd stick at 8% if that's all Sky will match. Is the sharesave scheme stilll open? If it is I'd be lumping the excess in on that (and hoping not too many people abandon their Sky contracts in favour of extra pension payments  )

One of the 'problems' with pension schemes is that you cannot get ANY of the money out till you're 55 (and rising to 57) except if you're about to peg it. This is both good and bad.  You can't pi55 it up a wall till you're 55, but on the other hand you can't use it as a deposit for a house, or fund a buisness etc.

So don't go putting all the available money in your pension pot. Keep some of it easily accessible (cash), some in short term investments (fixed term accounts, bonds etc) some in longer term accounts (sharesave, Stocks and shares ISA) and some in your pension.

[tunnie]

That's sound advice. Thanks. I might consider putting more in share save which have far quicker return

[LC0112G]

Ok, home now and sitting outside a half bottle of Italian red, so a few more thoughts...

Hummm, I started my 'proper' pension in 2010 when I joined Sky full time, looking online my fund is around 20% higher than what's paid in.

So ~5% growth year, which looks average?

No. More like 9% growth per year.

You see, not all the money has been in there for the full 4 years. If you're putting in £100 per month, then over 4 years only £100 has been in there for the full 48 months, £200 for 47 months, £300 for 46 months....£4700 for 1 month and £4800 total now. But your actual fund is npw worth 20% more than than the total you've payed in - £5760. The effect of this drip feeding is that your actual return is double the apparant yearly return. To get the same return from a bank account you'd have to get an interest rate of 10%.

And then there is compounding. In order to get an effective APR equivalent, you have to compound, meaning that you get interest on the interest. This results in a slightly lower effective interest rate. My Excell spreadsheet reckons that to get a 20% increase in value over 48 equal monthly payments, you need a 9.04% growth rate. Inflation is currently 2.5% ish, so you're currently well ahead of the nominal 5% growth rate (after inflation) I suggested you plan for.

Next up, your sharesave scheme. Keep buying any discounted shares that are available, but make sure you sell (most of) them once they are available for you to do so - which is usually after either 3 or 5 years. Few experianced investors would ever invest in only one share - it's far far too risky. To spread the risk you need at least 7-10 shares spread over a diverse range of companies. If you keep piling money into only Sky shares, and never sell any, you become horribly exposed should the Evil Murdock empire ever fall apart. Lots of former employees of big companies (like LLoyds bank, and Northern Rock) diligently saved into the companies share scheemes all their working lives. Then when the banks went belly up in 2007, they lost the lot, because the shares became (almost) worthless. Don't fall into that trap.

Finally, I'm not an IFA, or a FA, or anything else. These are my oppinions, not professional advice. And oppinions are like ar5eholes - everyone has one.