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Workplace pension help

Investment discussion for beginners. Why you should invest your money, get help getting started
plaguedbyfoibles
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Workplace pension help

#463960

Postby plaguedbyfoibles » December 7th, 2021, 7:18 pm

Hey again all

I am getting stuff ready for my personal pension and am feeling much more proactive about a lot of this stuff when previously it would have scared me stiff, so thanks to everyone who's endured my inane questions :lol:

But in the meantime, I was wondering if someone wouldn't mind reviewing the default fund in which my auto enrolment workplace pension is invested.

The fact sheet for the default fund can be found at https://fundcentres.lgim.com/srp/docume ... tSheet.pdf

Again, I earn slightly over minimum wage (my net annual salary for this year is roughly £15,113.40), and in terms of the contribution breakdown for my workplace pension, it's as per the standard, i.e. 5% on my end, and 3% from the employer.

How best can I make my workplace pension work for me?

A friend has suggested looking into SIPPs as an alternative route for my contributions, but it seems like it would involve quite a big learning curve on my end.

Thanks in advance.

Alaric
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Re: Workplace pension help

#463987

Postby Alaric » December 7th, 2021, 8:33 pm

plaguedbyfoibles wrote:A friend has suggested looking into SIPPs as an alternative route for my contributions, but it seems like it would involve quite a big learning curve on my end.


If you are confident of handling a Self Select ISA, the parallel SIPP from the same platform is not a lot different. The "but" is that when you are in employment, the employer's contribution is equivalent to deferred pay, but very likely only available when you become a member of the employer's scheme.

What those who change employers fairly often may do, is to always join the in house scheme, but when they leave transfer the value that has been built up into their own private SIPP.

TUK020
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Re: Workplace pension help

#463990

Postby TUK020 » December 7th, 2021, 8:38 pm

Something that would help set out the context in order to frame the response would be to give some idea of:
- your investment time horizon. Are you early in your career, with decades ahead of you?
- your likely future earnings trajectory. Just getting started, or at the tail end of your working life?
- your current cash cushion/expenditure vs earnings?

If you are early in your career, and expect your earnings to rise over time, expect to change jobs several times over your career, and don't have much of a cushion already in place, then you might like to think about the following suggestions:

a) important to contribute enough into your employers pension scheme to get their matching earnings. Use their standard scheme for the moment
b) when you get some spare (after points d&e) cash, open a SIPP to get started, and start reading up on investment matters.
c) as you change jobs, transfer the workplace DC schemes finishing balance into your SIPP. You will want to have some idea on what you are doing for investments by this time.
d) try to build a cash cushion to cover life's setbacks that will happen - loss of job, car dying and needing immediate replacement etc etc. Minimum 3 months living expenses to cover the time to get another job if your current company goes bust etc etc.
e) pay down any debt. In general you do not want to incur any debt whatsoever, aside from that involved in improving your earnings capacity (education) or to buy an appreciating asset on low interest terms (mortgage).

Other than doing the minimum to get what you can from the employer's contributions towards pension, you may have other priorities - cash cushion, eradicate debt etc before worrying about pension contributions, and which scheme.

Please excuse me if I have missed the target, but I am assuming that you are young, and so I have offered thoughts that I would give to my children.
tuk020

plaguedbyfoibles
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Re: Workplace pension help

#463997

Postby plaguedbyfoibles » December 7th, 2021, 8:51 pm

TUK020 wrote:Something that would help set out the context in order to frame the response would be to give some idea of:
- your investment time horizon. Are you early in your career, with decades ahead of you?
- your likely future earnings trajectory. Just getting started, or at the tail end of your working life?
- your current cash cushion/expenditure vs earnings?

If you are early in your career, and expect your earnings to rise over time, expect to change jobs several times over your career, and don't have much of a cushion already in place, then you might like to think about the following suggestions:

a) important to contribute enough into your employers pension scheme to get their matching earnings. Use their standard scheme for the moment
b) when you get some spare (after points d&e) cash, open a SIPP to get started, and start reading up on investment matters.
c) as you change jobs, transfer the workplace DC schemes finishing balance into your SIPP. You will want to have some idea on what you are doing for investments by this time.
d) try to build a cash cushion to cover life's setbacks that will happen - loss of job, car dying and needing immediate replacement etc etc. Minimum 3 months living expenses to cover the time to get another job if your current company goes bust etc etc.
e) pay down any debt. In general you do not want to incur any debt whatsoever, aside from that involved in improving your earnings capacity (education) or to buy an appreciating asset on low interest terms (mortgage).

Other than doing the minimum to get what you can from the employer's contributions towards pension, you may have other priorities - cash cushion, eradicate debt etc before worrying about pension contributions, and which scheme.

Please excuse me if I have missed the target, but I am assuming that you are young, and so I have offered thoughts that I would give to my children.
tuk020


Hi, thanks for the detailed response.

To answer your questions, I am in my late twenties (27), working as a mid level web developer but at an agency whose pay scales aren't the greatest (I have provided my estimated net annual salary for this year already).

My highest level of education is sixth form / FE college (both A levels and BTECs at level 3 respectively), although I have been adding to my raft of qualifications somewhat since working full time, mostly in the form of fully funded professional certificates.

My dad has saved a fair amount for me over the years, but always through savings accounts, which is not viable in the current climate of low interest rates.

Currently I have no debt.

I have an emergency cash buffer in place.

TUK020
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Re: Workplace pension help

#464159

Postby TUK020 » December 8th, 2021, 9:52 am

plaguedbyfoibles wrote:
Hi, thanks for the detailed response.

To answer your questions, I am in my late twenties (27), working as a mid level web developer but at an agency whose pay scales aren't the greatest (I have provided my estimated net annual salary for this year already).

My highest level of education is sixth form / FE college (both A levels and BTECs at level 3 respectively), although I have been adding to my raft of qualifications somewhat since working full time, mostly in the form of fully funded professional certificates.

My dad has saved a fair amount for me over the years, but always through savings accounts, which is not viable in the current climate of low interest rates.

Currently I have no debt.

I have an emergency cash buffer in place.


What you are doing well:
- no debt
- continuing professional development (even better that it is employer funded)
- cash cushion in place
- starting to think about longer term finances.
This is an excellent place to be for a 27 year old. Well done.

It is a good idea to participate in the workplace pension, to take advantage of the employer contributions.
Beyond this, pensions are probably not your highest priority, as you are likely to have more near term calls on your money than retirement. You have not mentioned marriage/starting a family/mortgage, any of which will change your priorities.
Any additional savings you can afford now should probably go into a S&S ISA as you would have the flexibility to access sooner.

Given the scale of the sums you are likely to be able to put aside, investing in single company shares will not be cost effective and give you sufficient diversification in the near term. Your investing possibilities should probably be focused on collective investments in the form of index trackers/Exchange Traded Funds (buy the market) or Investment Trusts (shares of companies that owns shares of other companies).

A good place to start reading up is the Monevator web site, particularly the passive investing bit.
https://monevator.com/

tjh290633
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Re: Workplace pension help

#464273

Postby tjh290633 » December 8th, 2021, 3:55 pm

When I was 27, 26 actually, I started investing £3 a month into a unit trust. That was 5% of my take home pay. I gradually increased the amount saved and the media with time and this laid the foundation for a decent portfolio on retirement. I also used endowment insurance at about the same rate, but nowadays I would be using investment trusts instead. Others will advocate tracker funds, but they are not my choice. Indices have changed over the years, back then the FT30 was the only one available. The FTSE series are Johnny come lately efforts.

I found that a combination of nominally equal weighting and an emphasis on dividend payers allowed me to beat the main index most of the time. Inflation in the form of the RPI as well, both in terms of capital value we and income generated.

The important thing, in my view, is to choose a good investment vehicle and invest regularly, regardless of the level of the market.

TJH


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