Investment & Investing

From moneybelper.org.uk: Although you can usually access your pension from age 55, this is set to change to 57 on 6 April 2028. This could affect your defined contribution or defined benefit pension.

Anyone born on or after 6 April 1973 may see their minimum pension age move to 57. This means you might not be able to take some or all of your pension benefits until you reach that age,

In my case I just scraped in to the population able to take pension at 55 being born 1972, but my wife is 1 year younger and will have to wait until she is 57, so effectively 3 years after me.

I don’t actually plan to take anything at that age barring a miracle in my investment performance…

I'll be in the 57 group then. 2 years doesn't seem like such a big deal though.

"You sacrifice some of your salary to your pension. This figure is deducted from your gross salary, so you do not pay tax and ni on the amount you have sacrificed. The total deducted is then paid into your pension scheme along with 50% of the Employer’s NI savings that we as company save by you sacrificing some of your salary. For instance, if you chose to sacrifice £100 per month the total amount paid into your pension scheme per month is £106.90. (£100.00 x 13.8% / 2 = £106.90)"

I emailed payroll about how much I could contribute per month as well as how often I could adjust it, ie. if I needed more money leading up to an event or something.

You can put it up to £60000 a year now.

It was more a question of do I specify a % of my income or a fixed £ amount per month. I'm not going from £0 to £60k! :D

I need to have a think about how much I'd dump into the pension. It's a company pension too so it could be shit, right? :)

Yeah, whoever is the pension provider is probably shit.

Depending on the scheme you might be able to tell them how your contributions are invested. You can choose an investment fund based on your risk appetite.

You pay income tax on your pension withdrawals if your total annual ‘non-savings, non-dividend’ income is more than your personal allowance – the amount every person is entitled to earn before they start paying income tax. For the 2023/24 tax year the standard personal allowance is £12,570.1
Your total annual non-savings, non-dividend income could include the State Pension, a private person or workplace pension, earnings from a job or self-employment, income from a rental property and any taxable benefits.
You’ll pay basic rate income tax at 20% on total annual non-savings, non-dividend income between £12,570 and £50,270. Above this threshold you pay a higher rate of 40% – and on income above £125,140, you’ll pay tax at 45%.1 Also, if your total income is greater than £100,000, then your personal allowance will be reduced by £1 for every £2 of income you earn over £100,000.

You save tax by paying into your pension but then cop it when it pays out. So, what's the benefit? If you live cheap you pay less tax overall?

Oh, there's a 25% tax-free lump sum rule? So, some of your pension is tax free?

Assuming we are talking about Defined Contribution schemes here, then the responsibility for what the pension pot is invested in lies entirely with the user i.e. hippy.

The pension provider (ime) will put you on a default fund if you don't tell them otherwise. But there will/should always be a range of funds that the user can choose. When I was part of a defined contribution scheme, I called the provider to complain about the limited range of funds and their high fees and they replied to say "if you ask you can invest in all these too....." and basically the whole market was available. I then picked a low cost global equity tracker fund. They make this difficult so most users invest in their default or one they push which has higher fees.

For most people the main benefit is that employers make a contribution into pension and this is free money.

You pay income tax on withdrawal or income from annuity but there’s no cap gains to pay and yea there’s the 25% tax free.

Typically folks are in a lower tax bracket on the withdrawal compared to the paying in. Obvs. there are exceptions.

I'm not really interested in watching markets and that kind of shit. I just want to stick stuff into tracker funds or whatever boring shit works most of the time.

Yeah, I guess you can just tune it so you're in lower bracket whereas if you're a high earner you're screwed somewhat (unless you dump everything into a pension or you can afford all the dodgy tax accountants or you're a fraudy sorry I mean Tory and can hide your money in some company or fund or PPE misdealings or whatever)

I agree. What is your pot currently invested in?

Dunno. Whatever the pension provider fund is I think.

I've got a couple due to moving from subsidiary to the parent company a few years back.

My missus has this - hers matches her contribs up to a percent.

Mine seems less good - they share 50% of their Employer NI savings:

"For instance, if you chose to sacrifice £100 per month the total amount paid into your pension scheme per month is £106.90. (£100.00 x 13.8% / 2 = £106.90)"

I guess that's not insubstantial if you're contributing a decent amount of time.

they share 50% of their Employer NI savings:

Wow, that's remarkably ungenerous.

I thought if you were covered by automatic enrolment I to a workplace scheme (which most people are) then the employer has to make a minimum 3% contribution and employee makes minimum 5% contribution, and that employers can choose to match additional employee contributions beyond the minimum up to a certain level. I generally only invest up to the amount that brings additional contributions from my employer (i.e free money), beyond that you still get the tax/NI incentive but no more free money from employer

@hippy imo it would be worth you engaging with a financial advisor. You have a lot of variables to play with in terms of where to put your available money and your partners available money:

Overpay mortgage
Pay more into your pension
Pay more into partner's pension
Pay into stocks and shares ISA
Pay into cash ISA

The answers will depend on what your current financial situation is (how much savings you have Inc pensions), when you want to retire and what your retirement income will need to be to sustain your lifestyle. Until your position on these points are established, no one can tell you where best for you to put your money going forwards.

I would suggest engaging a financial advisor via unbiased.co.uk. You answer some basic questions and unbiased match you with an advisor. You have a free, no obligation chat with advisor and decide whether to engage them to come up with a plan. Reckon about £2-5k for a plan. Given sums involved and the differences in your finances that this plan can make, I think it would be money well spent.

Perhaps. Not as much fun as posting questions on bike forums though :)

So, employer is contributing to the pension already, presumably whatever the government minimum is although it looks like it's more than that. I didn't think I was chipping anything in. My payslips don't seem to show anything going in to pension.

My rough plan would be to stick some extra in, via the salary sacrifice thing.

Ha, no fun in this thread, just cold maths telling us we are poor

Worth checking who the pension provider is and what funds they offer before making any decisions. Mine is NEST and their funds are shit so there's not much point dumping a load of money in there. If the funds you've got to choose from are shitty then it might be worth prioritising the mortgage or a SIPP over the pension.

Investing £100 in equities is probably better than investing £107 in ultraconservative bonds over a timescale of a few years

I had a small NEST fund, found the Sharia fund was the best performing, but no sure they made it easy to select your own investments

For instance, if you chose to sacrifice £100 per month the total amount paid into your pension scheme per month is £106.90. (£100.00 x 13.8% / 2 = £106.90)"

This might be obvious but you're sacrificing pre tax income. So if you pay 40% marginal tax, you are sacrificing (£60 minus whatever the employees NI is) to get the £106.90.

Yeah, because the Sharia fund is the only one that is 100% equities instead of shite like low-yield bonds (because those are not compliant with Sharia law). But the Sharia fund is heavily weighted towards US tech stocks. Fine if you're confident in those, not so great if you're not

AIUI it's because NEST were setup so that small employers could start doing auto-enrollment without massive fees or high risk investments that might upset the employees when there's a downturn. Fine for those people who are scared of investing but not so good if you know what you're doing