28 years old - private pension advice
Discussion
Hi,
Using a throwaway account so info is not tied to my main account.
I'm 28 and currently serving in the Army as a Captain, thinking about leaving in next two years (12 month notice period).
I have a small pension from a civilian company I worked for before I joined up, and my (likely to be tiny military pension - will have only been in 6/7 years when I leave as a Captain).
I'm also planning on starting a private pension in next few months - I understand I can transfer other pensions into it. Would it make sense to put my other pension into it, or spread risk (???) and keep them separate. The other pension is through Friends Provident and was from when I was working for a large USA corporation.
As I understand it, military pension is irrelevant until I'm 65, can't do anything with it.
Got 17k in bank, saving around 6-800pcm do I can buy a house to live in / rent out while u live with girlfriend. Gross salary is £42k.
I suppose I have a few questions:
Can I combine pensions and should I?
Should I start a private pension too? I'm planning on maxing out whatever pension my future civilian employer does (if they match my contributions, does it have to go in their scheme or can it go in mine).
Should I thrash myself to save a bit more and get a house (no idea where!) before putting money into private pension each month?
Thanks for any advice!
Using a throwaway account so info is not tied to my main account.
I'm 28 and currently serving in the Army as a Captain, thinking about leaving in next two years (12 month notice period).
I have a small pension from a civilian company I worked for before I joined up, and my (likely to be tiny military pension - will have only been in 6/7 years when I leave as a Captain).
I'm also planning on starting a private pension in next few months - I understand I can transfer other pensions into it. Would it make sense to put my other pension into it, or spread risk (???) and keep them separate. The other pension is through Friends Provident and was from when I was working for a large USA corporation.
As I understand it, military pension is irrelevant until I'm 65, can't do anything with it.
Got 17k in bank, saving around 6-800pcm do I can buy a house to live in / rent out while u live with girlfriend. Gross salary is £42k.
I suppose I have a few questions:
Can I combine pensions and should I?
Should I start a private pension too? I'm planning on maxing out whatever pension my future civilian employer does (if they match my contributions, does it have to go in their scheme or can it go in mine).
Should I thrash myself to save a bit more and get a house (no idea where!) before putting money into private pension each month?
Thanks for any advice!
You're thinking about the right things so you're 90% of the way there already!
Any pension savings are tied up to age 55 so that needs to be in your mind re. future house purchase etc.
There's no need to spread risk by having multiple pension schemes. You can open a SIPP any time you like and contribute to it as and when you want to. A SIPP has very wide scope for investments so you can spread your risk appropriately inside one SIPP. A SIPP can be run in parallel with any other scheme or schemes you might be in.
Personally I think it's a good idea to combine arrangements for ease of administration wherever possible, but it's not essential. All sorts of things can be transferred into a SIPP. Your military pension should almost certainly not be touched under any circumstances and absolutely certainly not touched without taking independent financial advice.
If you can get 40% tax relief it's almost invariably a good idea to make some pension contributions. Just do it.
If you are only going to get 20% tax relief then things are more finely balanced and ISA might make its way to the top of your savings priorities - especially if future house purchase is on the cards.
Any pension savings are tied up to age 55 so that needs to be in your mind re. future house purchase etc.
There's no need to spread risk by having multiple pension schemes. You can open a SIPP any time you like and contribute to it as and when you want to. A SIPP has very wide scope for investments so you can spread your risk appropriately inside one SIPP. A SIPP can be run in parallel with any other scheme or schemes you might be in.
Personally I think it's a good idea to combine arrangements for ease of administration wherever possible, but it's not essential. All sorts of things can be transferred into a SIPP. Your military pension should almost certainly not be touched under any circumstances and absolutely certainly not touched without taking independent financial advice.
If you can get 40% tax relief it's almost invariably a good idea to make some pension contributions. Just do it.
If you are only going to get 20% tax relief then things are more finely balanced and ISA might make its way to the top of your savings priorities - especially if future house purchase is on the cards.
Id also be asking what your earning potential is going to be.
If you are going to be earning 6 figures or starting a business which will result in a 7 figure value over time etc then you should be spending your money there.
Your best return is likely to be in yourself first.
Pensions, savings, investments etc are basically what you do to bank your gains. You dont get rich that way.
Total life earnings is where its at. Not maximum savings from low salaries.
My 2p
If you are going to be earning 6 figures or starting a business which will result in a 7 figure value over time etc then you should be spending your money there.
Your best return is likely to be in yourself first.
Pensions, savings, investments etc are basically what you do to bank your gains. You dont get rich that way.
Total life earnings is where its at. Not maximum savings from low salaries.
My 2p
I agree with everything Ozzie has said.
Your mind is in the right place and that is to your advantage and gives you a head start.
Make sure you are getting the best return on your savings (and with cash an ISA may not be the best option for you as the rates are so low and you shouldn't be paying any tax on the interest you receive under the new rules) and whilst you remain serving in the Army save as much as you possibly can before considering a pension so you can get a good deposit down on a house.
Look at moving your old pension into a SIPP if the returns have been disappointing. Of course there is no guarantee that the investments in your SIPP will do any better, but at least you have choice. Obviously don't touch the Army pension.
When you leave the Army then consider a potential employer's pension contribution as part of the overall package. A company offering a smaller salary but a high pension contribution could be a far better package than a higher headline salary with the minimum pension contribution.
That may sound obvious, but as an employer myself I would be very surprised and impressed with someone who requested such an arrangement as it shows knowledge, discipline and a long term commitment for the future - rather than a focus solely on today.
Your mind is in the right place and that is to your advantage and gives you a head start.
Make sure you are getting the best return on your savings (and with cash an ISA may not be the best option for you as the rates are so low and you shouldn't be paying any tax on the interest you receive under the new rules) and whilst you remain serving in the Army save as much as you possibly can before considering a pension so you can get a good deposit down on a house.
Look at moving your old pension into a SIPP if the returns have been disappointing. Of course there is no guarantee that the investments in your SIPP will do any better, but at least you have choice. Obviously don't touch the Army pension.
When you leave the Army then consider a potential employer's pension contribution as part of the overall package. A company offering a smaller salary but a high pension contribution could be a far better package than a higher headline salary with the minimum pension contribution.
That may sound obvious, but as an employer myself I would be very surprised and impressed with someone who requested such an arrangement as it shows knowledge, discipline and a long term commitment for the future - rather than a focus solely on today.
JJ,
A good maxim of financial planning is to keep things zero impact unless unavoidable or demonstrably preferable to do otherwise. Take a look at the charges and performance of the FP contract that you have - if that's ok, if you can add to it, why wouldn't that be your default setting? In other words, if you have a single contribution to chuck at a pension, what's so wrong with putting it with FP for a year or so until you leave and start your new job? In the event that FP performance isn't so hot, look at the funds - are they suitable?
In principle though, if you can add to it, you can also transfer away from it of course. If you're unhappy with it, yes, you can certainly open a new personal pension whilst serving and if your next occupational scheme allows (and if it isn't a DB one, why wouldn't it?) it, you can then roll up the one you're considering opening now, into it. Same goes for the FP one.
If you're on 42k, you'll have no higher rate contributions to shout about, especially once you've worked out your notional AFPS contribution. But still, chucking something at it in this financial year, if it makes sense, is a good premise to start from.
In terms of priorities, getting a roof over your head probably has to be P1. Before you commit to a beefy pension contribution, get in touch with Joint Services Housing Advice Office and ask for details of your options in civvy strasse. It'd be a sickener to miss out on a home because you're a few k too short - money that you put into the pension instead would be a folly, a chain around your ankles.
In respect of AFPS, the tiny fillet you'll have on '05 is accessible at aged 55 (going up to 57) but with an actuarial reduction to allow for earlier access. Your '15 contributions, because you're not working until full term, may not reach your sticky mitts until your're older than 65 anyway, without the need for further consultation. The new Armed Forces Pensions Act has all manner of sneaky additions put in that don't require subsequent primary legislation.
You can't transfer out of AFPS into a boggo standard DC contract any longer, because it's an unfunded public sector scheme. If you could have done, the merits of doing so were always based on unique and individual circumstances, but in these days of pensions freedoms, the old mantra of prescriptively never doing so (especially for a smaller pot and with gilt yields as they are) would be increasingly hard to justify.
If you join another organisation that's part of the public sector pension club, though, you can transfer your AFPS notional fund if you think it's a good thing to do. There are almost twenty pages of schemes that are still in the scheme. Some of which may, or may not, subsequently allow transfers out..
http://www.civilservicepensionscheme.org.uk/media/...
Most of my face to face clients are serving officers, please don't hesitate to drop me a line if you want a further steer.
Edit: spelling biff at work that early, needed coffee.
A good maxim of financial planning is to keep things zero impact unless unavoidable or demonstrably preferable to do otherwise. Take a look at the charges and performance of the FP contract that you have - if that's ok, if you can add to it, why wouldn't that be your default setting? In other words, if you have a single contribution to chuck at a pension, what's so wrong with putting it with FP for a year or so until you leave and start your new job? In the event that FP performance isn't so hot, look at the funds - are they suitable?
In principle though, if you can add to it, you can also transfer away from it of course. If you're unhappy with it, yes, you can certainly open a new personal pension whilst serving and if your next occupational scheme allows (and if it isn't a DB one, why wouldn't it?) it, you can then roll up the one you're considering opening now, into it. Same goes for the FP one.
If you're on 42k, you'll have no higher rate contributions to shout about, especially once you've worked out your notional AFPS contribution. But still, chucking something at it in this financial year, if it makes sense, is a good premise to start from.
In terms of priorities, getting a roof over your head probably has to be P1. Before you commit to a beefy pension contribution, get in touch with Joint Services Housing Advice Office and ask for details of your options in civvy strasse. It'd be a sickener to miss out on a home because you're a few k too short - money that you put into the pension instead would be a folly, a chain around your ankles.
In respect of AFPS, the tiny fillet you'll have on '05 is accessible at aged 55 (going up to 57) but with an actuarial reduction to allow for earlier access. Your '15 contributions, because you're not working until full term, may not reach your sticky mitts until your're older than 65 anyway, without the need for further consultation. The new Armed Forces Pensions Act has all manner of sneaky additions put in that don't require subsequent primary legislation.
You can't transfer out of AFPS into a boggo standard DC contract any longer, because it's an unfunded public sector scheme. If you could have done, the merits of doing so were always based on unique and individual circumstances, but in these days of pensions freedoms, the old mantra of prescriptively never doing so (especially for a smaller pot and with gilt yields as they are) would be increasingly hard to justify.
If you join another organisation that's part of the public sector pension club, though, you can transfer your AFPS notional fund if you think it's a good thing to do. There are almost twenty pages of schemes that are still in the scheme. Some of which may, or may not, subsequently allow transfers out..
http://www.civilservicepensionscheme.org.uk/media/...
Most of my face to face clients are serving officers, please don't hesitate to drop me a line if you want a further steer.
Edit: spelling biff at work that early, needed coffee.
Edited by Ginge R on Monday 19th September 12:49
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