pension or life cover ?
 

ok, i maybe young but im always thinking about the future, so i have been thinking about either taking out a personal pension for the future or making inroads to obtaining a life policy, in the long run at this time i can only afford one of these, so for the foreseeable future which would be best to start off first ?

opnions and thoughts are welcomed :)

Re: pension or life cover ?
 

a pension is for you, life cover is to benefit people who depend on you.

- in your case I would imagine a pension would be the first consideration.:)

Re: pension or life cover ?
 

As homealone pointed out, go for the pension.

Hit the highstreet and talk to some independant financil advisers, and see what they say.

Re: pension or life cover ?
 

i thought it would feasable to set a life policy up even for yourself (at the present time) ?

Re: pension or life cover ?
 

I've been looking online reciently at life cover.

The policy was £143 per month for 5 year Term Life Cover. £1 million if killed or £500k if critically injured. Thing is with insurance, you pay for however long the term is and may not make a claim. So you basically loose thousands of pounds, for no return.

Re: pension or life cover ?
 

Nope, life assurance pays out if you die, and is designed to ensure your wife and kids aren't left destitute, and can pay the mortgage etc. There's absolutely no point buying it at your stage in life. Money you put into a pension now though, is worth its weight in gold. If you can save for a pension for the best part of 50 years, you will be much better off than if you leave it.

Re: pension or life cover ?
 

Unless you have dependants (kids or a partner) there's no point having life insurance.
Better to put any spare cash into a pension, the sooner you start, the larger the pension should be (in theory)

WARNING! Your interest in this topic may go up as well as down.

Re: pension or life cover ?
 

yep i realised that :D but you never know if you'll ever meet 'the one' :erm:

to be honest i was going to go for the pension, a personal pension, it seems the most flexible for me....

Re: pension or life cover ?
 

Of course you will. :)

But life assurance isn't a savings plan - it won't be worth any more if you die after paying into it for 5 years instead of just 6 months. The benefit will always be the same, so as with any insurance policy, don't take it out until you actually need it.

A very sensible idea :tu:

Re: pension or life cover ?
 

To be honest i would put it in a high intest savings account, and save it towards the deposit on your first house. After all, your not going to need a pension until you are at 65 (or sooner possible) but you will probably want to buy a house before then!

I put money every month into a 120day notice account with the Bradford and Bingley, and it is surpising how quickly it builds up.

I personally am not going to start paying into my pension until i have saved a fair amount and settle down (maybe five years time) and i agree with what Xaccers said- no point in having life assurance until you have some dependants.

MB

Re: pension or life cover ?
 

Although, at your stage in life it may be a better idea to put the money into a high interest ( :rofl: ) account to save for a deposit on your first home.

D'oh MB beat me to it :D

Re: pension or life cover ?
 

thats why my plan (the original one) is to go for a pension, then try and setup a savings account, only for extreme emergency use something extraordinary.

edit MB and Xaccers must be smoking the same dope ;) i see your point guys hence my reply to towny above just noticed both of your posts, i shall be taking a look at all the branches in my town and see which gives me the most benefit on savings, suited to my needs, although im stuck for someone providing me a pension, who to trust..........

Re: pension or life cover ?
 

Kronas - Go speak to a financial advisor - Don't stick to one company as many will only sell their own products (or those that give them the highest commission!!!). Pensions are a real nightmare to understand but you are the right age to start thinking about it. Remember the earlier you start generally the earlier you can retire and start to enjoy life. :)

Re: pension or life cover ?
 

Errrr...you can put money into a short term insurance policy.I have done this on two occasions.They are both specific 15 year policies.One has already matured(for eldestborn's university career and was very useful)the other is due just about the time the youngest is at university.

Of course at the time I took them out they were really for use as a means of giving my offspring a springboard into life(house deposit,buy a car) but due to this fecking government's ineptitude the first was used for everyday living expenses for eldest whilst at uni.BAH!

I'll never forgive them for the way they screwed up so many young lives.Barstewards!

Anyway IF you are not considering any form of further education maybe it might be better to concentrate on a pension.However be very careful and get some really good professional advice about this.Ask more than one source.

Incog. :)

Re: pension or life cover ?
 

i am thinking of doing a part time course, or (additional) part time work, this decision has not yet been made.

as for the advice, any pointers anyone, to some advisors ? where would i find them ?

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. ;) :)

Re: pension or life cover ?
 

Most of this thread could come under the most helpful post.


Keep it up. :tu:

It's bound to give kronas some idea of what direction he would like to go in.I suspect it may have also given a few others pause for thought. ;)


Incog.

Re: pension or life cover ?
 

It certainly has Incog. I personally will be hitting the independant financil advice shops over the comming weeks. Though I'm in the market for life insurrance, and not a pension.

Re: pension or life cover ?
 

well guys, although you have confused me slightly i do see your points, i was not aware that the personal pension IS taxed, although ISA's are being heavily pushed these days.

i suppose i will have to find a independent financial advisor to achieve what would be most suitable for my needs.

i would just like to thank everyone for a most interesting thread, your contributions have been great, and im sure its been very much an educational experiance for some, has been for me :) :tu:

Re: pension or life cover ?
 

The number of years you can backdate has been reduced, but IIRC you can still do it for the previous financial year which means that, if you time it right, you've effectively got two chronological years to do it.

Re: pension or life cover ?
 

Nope, because I don't have a final salary scheme, just a personal pension but the money still builds up.

Well, actually I have at least two now because of the way I invest, putting in a regular monthly amount, then topping up to the maximum amount permitted at the end of the financial year.

Re: pension or life cover ?
 

Gilts are Government Bonds. They're called that because they're "Gilt Edged" ie they're going to be redeemable unless the entire country's economy goes titsup unlike Corporate Bonds which are effectively loans you make to a company (if it goes bust, you lose everything)

Gilts are complicated instruments because if the Bank of England interest rate goes up, the value of Gilts goes down simply because they pay a fixed rate and that may not be as good as you can get elsewhere.

This does mean that because interest rates are rising, Gilts are now less attractive. For more info see:

http://www.bizhelp24.com/personal_fi...it_trust.shtml

I'd strongly suggest that if anyone wants to get into investment in a big way, they don't jump right in at the deep end with investments like these because if you don't completely understand the way they work, you can end up losing your shirt.

For useful online information see:

http://www.moneyfacts.co.uk/
http://www.iii.co.uk/
http://www.fool.co.uk/
http://www.moneysavingexpert.com/

The last one gives a regular weekly newsletter of helpful tips and information, as well as there being a discussion forum (which will look *very* familiar in style, if not content, to users of this one!)

Other useful resources are:

http://www.switchwithwhich.co.uk/

- How to switch to a better current account/ mortgage/ phone/ energy provider

http://www.unravelit.com/

- How to find cheaper loans, insurance, credit cards etc

http://www.uswitch.com/

- Cheaper gas/ electricity/ phones/ loans/ credit cards etc

Re: pension or life cover ?
 

Which is hardly in line with the governments policy statement to encourage more saving (which is a whole other topic).

I would not be suprised if the £3k limit was extended at the next budget.

Any Assurance policy is a form of investment.

An Insurance policy pays out when an event occurs. Better described as Death Insurance (though it also generally includes Terminal Illness Payout, so if you are diagnosed with say terminal cancer, it pays out at that point, not on death)

Life insurance itself is cheap. My cover (well I suppose it's actually Mrs H's cover) for 300k costs me £12 a month. In the Assurance policy an element will be for this payout, the balance will be an ivestment vehicle such as a low cost endowment, so if you are paying £70 in a month £12 will go to the life cover and the balance of £58 is a savings plan.

THese days it is better to split the products so you are buying the product you specifically needed. The Life Assurance is a throwback to / vehicle that can be used alongside an interest only mortgage. Realistically you would probably be better off separating the policies and getting cheap life cover from say direct line (use an online price comparator) and a low cost endowment from a better perfoming provider, rather than both from a mediocre providor.

Re: pension or life cover ?
 

Cheaper Car Insurance (and others)

http://www.confused.com

Very good.

Re: pension or life cover ?
 

if you put money into a pension scheme all you'll enjoy is gloating over nice figures on a piece of paper. if you put it into a home you will see your money grow and be enjoying it in some tangable form.

Re: pension or life cover ?
 

With all due respect, unless you have very wealthy parents, have inherited a large amount of money or won the lottery, you will have to have a very substantial income or have already saved prudently to afford to invest in property in the first place.

Re: pension or life cover ?
 

but you see this is tax free savings. with interest rates going up it means that you earn better interest in normal savings accounts and the higher, longer term, less flexible savings accounts. therefore it doesn't stop people saving but the gov get their share of it.

i see your point, but on retirement, you may have paid off your mortgage but you may not have a regular income to subsidise your living expenses

Re: pension or life cover ?
 

And tax free is a good encouragement to do something. Docklands and many other parts of the country were regenerated with Enterprise zone tax breaks.

It also makes a big difference to the end result. For a taxpayer, a 5% gross rate means a 4% tax rate net, for a basic rate taxpayer and 3% net rate for a 40%

So an Isa paying 3.5% is a better investment for anyone, than a standard account paying 5%. An Isa is a pretty flexible savings account, immediate withdrawal, CAT standard 0 charges, the ability to transfer between savings providers.

But hopefully a pile of capital you can drawdown over your retirement, just no inheretence for your children.

Re: pension or life cover ?
 

i am not disputing anything that you have said here. however i do think the gov are being sneaky by reducing the limit on the ISA........as far as i remember it was announced at the beginning of this financial year, but those in the financial sector had been expecting it some time. maybe the gov don't see it as capping the amount we can save, since the interest rates on instant and remote access accounts is higher than it has been for a while, so it will still encourage people to save

Re: pension or life cover ?
 

Personally, I don't think there is any such thing as an independant financial advisor (and if there are any on this board I apologise for offending you). The only way you can truly get independant advice is to get out on the 'net yourself and look at the products around - all advisors get paid from the companies that have the the policies that they sell you - and I don't always think that what is best for you, and what makes them a good profit, always go hand in hand.

My old company stopped using their IFA after he told them to move their pension scheme, for a third time - was it pure coincidence that he got a percentage of all the funds moved across? - I don't think so.

Maybe I'm just very cynical but when it comes to money it's very hard to find someone you trust

Re: pension or life cover ?
 

As I mentioned above, those who work for Bradford and Bingley's Market Place service, get a flat salary. Any bonuses/ commissions go to the B&B not to the IFA.

Re: pension or life cover ?
 

Thanks for the links graham, I'll be lookin over these in the next couple of days, and see what grabs my attension. That is if I can understand what I'm reading. :dunce:

Anyway, have a good rep. :) ;)

Re: pension or life cover ?
 

The whole backdating thing is largely an arbitary offer by the Inland Revenue, as the limits for contribution are set fairly high each year.

http://www.inlandrevenue.gov.uk/pensionschemes/ir3.pdf

To start thinking about backdating you need to have controbuted over 17.5% of your salary to a PPP. So someone earning £24,000 / year will need to contribute £4,200 or £350 (before tax) / £238 of takehome, something that most cannot do unless they have an inheretence / windfall to tuck away somewhere safe.