Archived on 6/5/2022

Pensions & Procrastination

13 Jun '21

Like most tradesmen I always tell myself that I’ll eventually get into property and fund my retirement from accumulated assets. Well, so far that hasn’t happened and it’s time to start looking at other options. I’ve heard and read online a lot of positive things about Scottish Widows. Can anyone provide this financial dinosaur with any insight into pension providers they’re currently using. I’m actually quite good with money in the sense that I’m not a big spender and have a good credit score and live within my means. I’ve been putting this off for so long it’s becoming a joke so any recommendations or advice would be greatly appreciated.

13 Jun '21

I had a personal pension with Scottish Widows. I was very pleased with them. They charged the lowest rate for managing my pension fund. But I transferred this pension to Aviva when I cashed it in as Aviva gave me the highest annuity. You can shop around when you are looking for an annuity.
I worked for a firm of accountants and we were at various times offered pensions from Aviva, Aegon and Scottish Widows. Personally, (only my personal opinion) I think these are the market leaders.
If you ask a financial advisor about a pension, be aware that they are offered commission by pension providers.
The way my pension worked was that I could choose a risk level for investment. In any event as you approach retirement age the pension fund should be placed in a less risky investment.
Pensions are the most tax-effective way of saving. You don’t pay tax on the money you put in a pension fund. Your employer (if you have one) also makes a contribution. But I think your employer may only offer one pension scheme.
The earlier you start saving in a pension fund, the better your pension is likely to be.

14 Jun '21

Hi Swagger.
I gather from some of your previous posts that you’re in the building trade - and in this post you mention the idea of property to fund your retirement.
I’ve been investing in property since 1986 and I have a very wide and varied knowledge; and I’d be happy to meet up with you for a chat to try to help you understand how you might be able to combine your practical skills with property ownership to help you achieve your goal.
I also recall you saying that you’re a tenant?
Anyway, I’m not fishing for anything for myself here, I’ve got loads of free time and I’m just hoping that a few words over a beer and a sandwich (I’ll even pay!) might give you some insight that could help you somewhere down the line.
Having said that, a regular pension may turn out to suit you better.
Anyway, all the best!

14 Jun '21

If you can claim tax relief, then pensions are a good savings vehicle. You’ll also get some (up to 25%) back tax free if you take it as a lump sum. However, those savings are tied up until you’re 55 - and if the opportunity to invest in property did come up between now and then, you might be snookered.

Depending on how much you want to put away, how risk-averse you are, you might want to consider an ISA (some stock ISAs have had good returns in recent years) as being a bit more flexible. Seem to recall reading somewhere that you should be putting away a % that’s half your age as a proportion of salary. That was quite a while ago so no idea how true that still holds - or if it ever did.

14 Jun '21

Here’s a little thing that might be of interest in your situation - especially if you are already familiar with being in a shared rental property.
If you buy a 2 bed property, you can use a fantastic tax concession called Rent a Room Allowance to take in a lodger for £7,500 a year rental income - tax free!
Also, it doesn’t affect your 100% Capital Gains Tax exemption when selling the property, providing it is you principal private residence.

14 Jun '21

I’m sure many of us prevaricate in exactly the same way so good for you looking to move it on a bit.

Scottish Widows is a perfectly respectable provider, and I had a self employed pension fund with them for quite a while which accumulated quite satisfactorily. But it’s probably less about the name and more about the spread of funds within the provider like Scottish Widows that the the money is invested. Ie different funds have different elements of risk and reward.

Depending on your age, hopefully you will be able to build up a good pension fund in your good earning years. If you are a long way from retirement then you might be able to stand a higher amount of risk with your money which also allows a higher reward, maybe using a variety of funds within a single provider- such as Scottish Widows.

The nearer you are to retirement, the safer you might want your investment to be, so that a sudden drop , say in world stock markets, doesn’t hit your fund too hard just as you were about to need it.

If this is your first important venture into pensions then I’d say it is worthwhile getting professional advice. This will cost you, either in commission or in a fee, but if this is the start of, say, a 20 year investment of your hard earned money, then making a decision that you feel properly informed and comfortable about is important. Any professional advisor should be quite open about fee or commission arrangements.

This was a good article about pensions in last Saturdays paper and I think you might find it an interesting read. It says over 50s but the information here applies at any age really.