Saving for Retirement

First the usual caveats. I'm not a financial advisor, so these are just personal thoughts.

Despite all the recent criticisms of pension schemes, I don't think you can go far wrong by investing a percentage of your savings in an AVC/FSAVC, particularly as you'll be eligible for tax relief. I honestly can't see any government cutting back on this given all the recent bad press. Over the next 30 years the stock market will almost certainly have outpaced savings accounts, so I'd be looking at provider that offers a balanced Unit trust type AVC/FSAVC, where your money is spread around the world in equities, with a mix of income and capital gain funds. There's plenty of time, at least another 20 years before you'd need to think of gradually moving your fund from equities into savings or government bonds so that in your last years you reduce the exposure risk to the market.

Make sure you understand the commission and charges that are paid by the pension companies to your financial advisor. My experience is that these can vary quite a bit, and are not always as transparent as they should be. Your employer may have a favourable arrangement with the main pension scheme provider, and if so the charges should be less than if you just walk in off the street.

Think about what you give them as your retirement age. My FSAVC ceased to make charges after I'd reached my nominated retirement age, even though I didn't retire and went on contributing afterwards. I had the feeling that I could have given them an even earlier retirement age, and stopped the charges earlier.

There seems to be a rule of thumb that you should be saving about half your age as a % of your salary. Hence 17% of 34K is £481 / month which is well within your current savings, suggesting that you're on the right course. Depending on your propensity for risk, you may want to put more or less than £481 per month into a pension fund, with the balance to £600 in a savings account.

There are of course limitations on what you can do with your pension pot, but I'd certainly hope that in the next 30 years the government will at some stage have seen sense and provided more choice at the time of drawing the pension. If you felt that you couldn't trust the government to have relaxed the rules by then, you might want to reduce the amount you put into an AVC/FSAVC, and invest directly in any tax free savings schemes and/or unit trusts.

Is your main university pension scheme a public sector final salary scheme? If so I'd suggest that other things being equal, that should be an extremely good risk and perhap lead you to take a bit more risk with your AVC route.

The other investment of course is property. As someone once remarked about land, 'they're not making any more of it', so it too should be a reasonably safe bet over 30 years, barring war/terrorism of course.

I think whatever you do, the main advice has to be spread the risk.

Rgds

__ Richard Buttrey Grappenhall, Cheshire, UK __________________________

Sure they're not making any more of it. That's not the issue. They can build a lot more property on it if they want. The recent Barker report suggested something like an extra 170,000 a year to meet demand.

Personally I don't think this will happen, as the government will attempt to use peoples investment in property as a get out of jail free card for the looming pensions shortfall.

Daytona

"Richard Buttrey" wrote

But would the earlier charges have been higher?

Thanks very much for that comprehensive answer. Seems very sound advice. Would anyone else like to add anything?

Best regards,

Ed.

snipped-for-privacy@ntu.ac.uk (Ed_Zep) wrote in news: snipped-for-privacy@posting.google.com:

Make it your aim to live rent-free or mortgage-free as soon as you can. Get on the property ladder, because you can't beat property as a long term investment. Also, the ever-increasing costs of renting or mortgaging property are such that you want to be shot of them well before you retire, so that they do not have to be met out of your retirement income.

Also be prepared for the unexpected. For all to many of us who have passed the age of 50, retirement comes as a sudden and unexpected fact of life if we have been made redundant or compulsorily retired before we reach 65. Ageism is still rife, and although the problem may be improved in 20 years' time, you may also find that it is still harder to find work after 50. So make it your aim to become as self-sufficient as you can as early as possible.

Don't forget that you are probably going to live much longer than your parents or grandparents did, and that you are going to continue to need to finance car purchase etc during those years.

Good luck!

In that case, what are you doing to protect against dolphins falling out of the sky on to you?

It's a FAQ so search the archive

Daytona

Which IMHO will best be achieved by waiting for the inevitable fall in prices and buying in then.

At current levels? You're having a laugh!

This is true, but buying in at the top of the market, jsut because it is sooner is not the best way to achieve this.

tim

What annoys me is that some people say in the 20's/30's now who are actively saving for the future with pensions etc etc are still going to end up paying for the people who have done nothing!

At 30, I have been in company pension schemes since the age of 21.. and also have a good amount of financial common sense.

BUT, what the hell sort of motivation have I got to save? I'll only end up getting means tested at retirement age, so the people who have pissed it all away throughout their lives will do just as well out of my hard earned savings... Where is the benefit in that? Should I bother... why should I subidise the idiots in later life?

Andy

How do you know that ?

Not necessarily. It depends if you've saved using investments likely to be easy for the benefits people to a) find and b) value. Investing in antiques has been mentioned before, and strikes me as good idea within a balanced approach.

What's stopping you moving to a more beneficial financial environment in another country ?

Daytona