Re: pension or life cover ?
 

I dont see the point in putting money into a pension scheme - firstly it's taxed when you receive it so ignore the bull**** about it being tax free. Secondly, those who havent saved for retirement get better means tested funds from the state than those who have provided for themselves - so you get shafted for saving. you're probably not earning loads yet - so enjoy your money rather than let yourself be taken in by the great pensions con.

Go for a cash ISA - the funds you put in will be net of tax but income gained and funds you take out arent taxed. you can use this money for your first house as others have suggested.

Re: pension or life cover ?
 

Kronas, DONT go to a high street bank and ask for an appointment with a financial adviser. I'll say that again so I can be sure you read it right. DONT. They can only advise you on their products, or the companies they are affiliated with. You won't get a fair view of the market place from there.

Get the Yellow Pages out and look for INDEPENDENT financial advisers, then ring around them and ask what their charging policy is. Many are free, well to you they are free but when they recommend you a policy and you take it they get a payment from the relevant company (just like the ones at the high street banks and building society's), the difference is they will go through all the policy's that are around to get the right one for you.

They will go through the whole process for you even if you are only interested in one type of product (its the law) I think its called LIPS, Life cover, Insurance, Pensions and Savings. Or something like that, but I think you'll find they will tell you that paying into a pension is a complete waist of time at your age as that was the advice when I asked one of the advisers at Abbey when I briefly worked there a few years ago. She told me to put the money into a cash ISA and then I would have a nest egg to use as a deposit when it came to mortgage time. Apparently it would save you more money in interest when used as a deposit then it would make money in a private pension.

Before you jump in make sure its an independent financial adviser you see (did i say that already ;) ). I'm sure you'll research it for yourself and find the best product on the market, and I'm glad there are some younger people out there that are actually looking forward in like regards money and not just ****ing it up the wall.

As for me, I'm not going to have a pension, I'd much rather spend the money either paying off my mortgage quicker(when I get one), and then putting what I would have been paying in interest and capitol repayment into some form of savings. Much less riskier then letting others look after it for me.


Edit - As for life cover, if you feel you want the security of a small policy, then when you are speaking with the adviser let him/her know and they will be able to do you a quote. They don't have to be made out to your children or partner, they can be made out to anyone, so if you want to know that your funeral (bit morbid I know but needs mentioning) will be paid when you die then this is a great way ;)

Re: pension or life cover ?
 

Well it might be best to use word of mouth as to going by advertising.I suspect that there well may be plenty of expertise on this site alone.Failing that how about your bank/building society?Just as a place to start.Ask anyone you know who has taken out a pension how they went about it and whom did they ask for advice and are they happy.

Mind my solicitor brother-in-law reckons putting your spare cash into a building society is as good a way of planning for your old age.Just make sure to keep switching to a higher rate of interest account(the older an account the lower the interest).

Looking at the fiasco that many people are finding themselves in because the company pension they took out is no longer supported by the company,you will need to put a lot of thought and effort into the whole process.

You are very sensible to be thinking about it now.Too many young people your age haven't thought about it yet.My daughter at 21 still has to organise herself one(mind she needs a job first).

Anyway let us know how you get on-it would make a very good thread for others who have yet to take the plunge.

Incog :)

EDIT: I bow to dell's better knowledge.See I told you there were some good financially sound folk here.

Re: pension or life cover ?
 

i totally understand your point, however by the time that kronie retires there might not be any state help available.. so starting a pension now means he has a bit of a head start.

as dell said, do not go into hign street banks, as obviously they are going to push their products.... but you could always wonder in and pick up leaflets and see what is on offer before you commit to anything.

another thing if you do decide to consult a independent finaincal advisor make sure there isn't a fee for the consultation

and i think starting a pension is a good idea, when i've paid of the majority of my student debts (although the gov will be waiting a long time till they get all theirs back) i will put some money into a pension scheme

Re: pension or life cover ?
 

Kronas - dependents or not. At 18 I hope none. Thus life insurance is for the benefit of whom. Your parents?

So Pension. But you also still live at home, and pay basic rate tax? So Pension is a fairly inflexible savings scheme. You cannot get at the cash until 55+, and by that point would want to leave it for 10 more years if you could.

What I would recommend is a Cash ISA.

http://www.thisismoney.com/savings_rates/isa.shtml

Congrats, Bexy, must be an easy sell.

You will want this money for a deposit for a house (car) at some point.

This all said, see if your employer makes contributions to a ee pension scheme. Mine is most generous and for my 2.5% contribution adds a further 9%, this is effectvly a 9% payrise, though I don't see it. In this case it is worth checking out.

Re: pension or life cover ?
 

Whilst your second paragraph is the advice I concur with.

Pensions are tax free at the point of investment. A basic rate taxpayer will contribute £78 and the fund will reclaim tax of £22 from the govt making the contribution £100.

Which? and many others have pointed out the problem of low value pension savings just meaning that the govt pays less and you recieve the same overall, so this is true, and what has skuttled the whole stakeholder pension dreams of our Tony, man of the people.

Re: pension or life cover ?
 

I would start paying into a pension scheme as soon as you can, if your employer does a scheme and adds a percentage to it so much the better (that's free money to you). You don't have to pay much to start with you can top it up later in life when you have more available funds, but get it going now, the more years it's going the better.
I can't agree more with some of the other posters INDEPENDANT financial advice is what you want.

Re: pension or life cover ?
 

most people do have ISA's now..... but don't forget for mini cash ISA's the gov are lowering the limit to £1000 next tax year, so until march 05 you have a limit of £3000

Re: pension or life cover ?
 

You have to remember the difference between life insurance and life assurance. The former pays out in the event of death, the latter at a predetermined time or death, whichever comes first.

Re: pension or life cover ?
 

The best time to start investing in a pension is *as soon as possible*! If you can even only afford to put away £100 a month, that will start your "pot" growing and you can always top it up later. (Pension contributions can be backdated to previous years if you get a lump sum)

Life Insurance tends to cover your partner or your dependants if you die and AIUI has no investment value. Life *Assurance* has an investment value which can be cashed in at a later date, although it's often better to sell the entire policy to a specialist broker instead. If you're worried about loss of income through being unable to work, you could also consider Critical Illness Cover or Income Protection Insurance.

Your best bet is to get some Independant Financial Advice, and I'd recommend going to a Bradford and Bingley and talking to their "Marketplace" IFA because not only are their advisers not tied to any company/ product range, but also they get paid a flat salary, any commission going to the B&B, so they have no incentive to push another product that gives them a bigger bonus.

Re: pension or life cover ?
 

However pensions, having a large stockmarket element, grow much quicker.

At the moment "high interest" accounts are pretty much of a joke. For instance the best one available at the moment according to http://www.moneyfacts.co.uk is 5.25% gross from the "Universal Building Society", but that's really not great. (I'd check what rate you're getting from the B&B, if it's the account I think it is, you may only be getting 4.25%)

If you're looking to invest for the longer term (around 5 years at least) then the stock market is the only way to go. Yes, it can go down as well as up, I've currently got a PEP that I opened with £3000 when PEPs were being withdrawn and the market was over 6,000 but it's currently only worth about £2000, but I know it's a long term investment.

Because of that I've also got a Shares ISA that I opened with £1,000 when the market dropped below 3,500 and it's now worth £1,285 ie it's gone up 28.5% in the past year, much better than any savings account! I'm also "drip feeding" £25 a month into it, so the value is steadily ticking up and at a much better rate than 5%!

Re: pension or life cover ?
 

Interesting points, I bet Kronas is more confused now ;)

To sum up a bit - for my own benefit as much as Kronas' :dozey:

don't go to a bank for financial advice, they can only sell their own products. I'm not sure if dellwear, made that clear :) - go for an independent advisor, but check they don't charge a fee for a consultation.

At Kronas' age with no dependents, life Insurance is not a priority.

That leaves the choice between a pension & some kind of alternative savings scheme.

ok, at this point it gets more difficult

- as has been pointed out a private pension qualifies for tax relief on the contributions. The contributions are used to subscribe to a fund which theoretically grows in value and at the end can have one third withdrawn as a tax free lump sum. The remaining 2 thirds must be used to buy an annuity, which is what funds the actual pension payments - these payments are liable for tax.

- an ISA is a savings account that allows you to pay into an account which accrues interest that is not liable for taxation. There is no tax liability for cashing it in, either.

To be honest, I would be swayed by the ISA route, if I was 18, the points made about flexibility in respect of needing money for major milestones like house purchase etc are very relevant.

That decision would be even more compelling if a company pension option was available - as I see it, the ideal combination is a company pension scheme combined with an ISA - especially if, like mine, the company pension also offers a 'death in service' benefit.

I agree You are being very sensible in thinking about it now, kronas, but take your time & weigh up all your options, before deciding what is best for YOU :)

<edit> I hadn't seen Grahams info about B&B 'marketplace', when I posted, that looks good :)

Re: pension or life cover ?
 

I am not sure but I believe that dear old G.Brown has also closed off this avenue.


I took out my first investment product when I was 18 years old and working on a farm earning £11 for a 75 hour week.:( It was an endowment with the Co-op. It matures when I reach 65 but is currently worth over £5,000 and still has at least 10 years to run, my contributions to this policy are just under £20 per annum, but I could cash it in at any time for an excellent return on my investment.
The financial scene has changed dramatically in the past few years and endowments/pensions are not always the sensible choice that they were in the past.
You need to work out in your mind what you envisage for the next 10, 20 or even 50 years, difficult eh.;)

As has been stated above insurance is not for you at your age without dependants, a pension is a good idea only if you have a steady income and reasonable prospects that it will continue. Whilst it is very true that the "sooner the better", you will be paying in for a very long time and pensions and the annuities attached to personal pensions have been hammered in the past few years, again we have G.Brown to thank for that with his £5 billion a year raid on pension funds tax credits as well as the current financial climate which has seen annuity rates drop by almost 40% in the past 5 years.
You need to work out exactly how much you can afford monthly, make a list of all your outgoings first. Would you be able to leave the investment for say 5 or 10 years or longer, or would you need to have quick access in times of need.
I would agree with most of the other comments, find the product with the best interest rate you can, that will not tie up your investments for too long, then if your situation changes you can move your money into a pension fund or property.

Re: pension or life cover ?
 

This whole 'sooner is better' only seems a good idea if you are paying into a company pension scheme that is a final salary scheme. This schemes work out your pension on the number of years that you have contributed and the value of your final salary. So the longer you stay with the company and contribute, the better. However, it has been reported that alot of companies are beginning to or already have done so, stop new members from joining their final salary pension schemes.

Generally, if you begin contributing to a pension at around 20, you would normally contribute a small amount and like most people have said here, the returns on such small amounts is not great by any means. They say that the later you leave it, the more you have to pay per month, however, the older you get you usually earn more and therefore can afford to contribute more. It would seem to be a bit of a struggle for someone to afford to pay into a pension as well as try to afford to buy a house.

If the property market was not so ridiculous as it is now, then the best way to secure your old age would be to get several buy-to-let mortgages. Renting out a property means that the monthly mortgage payment is already covered by the rent you get and after 25 years, you can sell the property without having paid a penny to buy it.

Most people assume that a pension is the best way to go and in most cases this is correct but like I mentioned there are other ways to secure your future. It's just a case of deciding what suits your needs. I don't think contributing to an ISA or savings account will give you enough returns over the years what you need to do is find long term investments and property & land has always been the best long term investment.

Re: pension or life cover ?
 

Tell you what, this is a really educational thread, and some great advice being handed out. Thanks........... :D

Though I have a personal penson with the Prudential (from which I've had to take a payments break). I did at one time have a Prudential 'Prudence' savings account. I was paying £30 a month for 3 or 4 years, and it is great how this quickly builds up over the life of the account. I think the interest rate was about 9% (though I may be well of the mark), and the only reason I closed the account early was because of a problem with a controbution increase that lasted for 5 months. And ended up with me phoning the Pru and demanding my money back because I was sick of the messing around. By the time I closed the account, there was something like £2200 waiting for me. Which wasnt bad considering the amount I paid in.

But to be honest I have no idea if other investers offer similar services, but its something I may look into.

Last thing. I was told 6 or 7 years ago, if you ever have a good chunk of mony comming to you. Then invest in Guilts. As I understood at the time, Guilts are loans to the government to pay off the national debt, and earn a fantastic rate of interest. With, I think, a tax free return at the end of the investment period.

Then again I may be mis-remembering badly, but I'm sure someone on here will correct me if I am once again full of cr@p. ;) :)