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    • maxie014
    • By maxie014 4th Oct 17, 2:41 PM
    • 134Posts
    • 65Thanks
    maxie014
    23 yo starting pension.
    • #1
    • 4th Oct 17, 2:41 PM
    23 yo starting pension. 4th Oct 17 at 2:41 PM
    My son has finally finished uni and got on a decent grad scheme.
    He has been asking me about his pension and what he should be putting into it.
    My first thoughts were the max but thats looking at it from my position.
    I havent got all his info as he has just sprung it on me, and he has started work this week so not seen much of him.
    Would he best to max it out from the beginning?
    As he will need to buy a house and all the other life costs at some stage as well?
    Im a bit baffled to tell the truth???????
    Ive googled and searched but not much has came up.
Page 1
    • JoeCrystal
    • By JoeCrystal 4th Oct 17, 2:45 PM
    • 1,277 Posts
    • 730 Thanks
    JoeCrystal
    • #2
    • 4th Oct 17, 2:45 PM
    • #2
    • 4th Oct 17, 2:45 PM
    Well, what kind of pension scheme does his employer offer and how much they contribute into it? At least he is asking the right question at the right time! He should find out much as possible regarding this scheme so he can make the best decision. I am tempted to say whatever the employer is matching up to. After all, it is part of his overall pay! If he doesn't take full advantage of it, then he is taking a pay cut basically.

    Of course, he can always ask question on this pension forum and we will be more than happy to answer any of the questions.
    Last edited by JoeCrystal; 04-10-2017 at 2:53 PM.
    • maxie014
    • By maxie014 4th Oct 17, 3:48 PM
    • 134 Posts
    • 65 Thanks
    maxie014
    • #3
    • 4th Oct 17, 3:48 PM
    • #3
    • 4th Oct 17, 3:48 PM
    Its a dc pension,just had a quick look and his max contribution is 7% matched by employer at 13.5%.
    Blackroth life path options to invest,or self select.
    • JoeCrystal
    • By JoeCrystal 4th Oct 17, 3:56 PM
    • 1,277 Posts
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    JoeCrystal
    • #4
    • 4th Oct 17, 3:56 PM
    • #4
    • 4th Oct 17, 3:56 PM
    Then he should contribute at maximum of 7%. That is extraordinary good deal for a DC pension.

    The average employer's contribution for DC pension in 2016 is 3.2% for example. (With employee at 1%!)

    And more importantly, if he starts contributing into a pension scheme then he would get used to doing it for the rest of his life. Otherwise, if he put it off for different reason then there is a line of reasons that will keep him from doing it in the future.
    Last edited by JoeCrystal; 04-10-2017 at 4:02 PM.
    • xylophone
    • By xylophone 4th Oct 17, 4:14 PM
    • 23,153 Posts
    • 13,416 Thanks
    xylophone
    • #5
    • 4th Oct 17, 4:14 PM
    • #5
    • 4th Oct 17, 4:14 PM
    And a LISA for house purchase.......?

    https://www.moneysavingexpert.com/savings/lifetime-ISAs
    • Phil&Michelle
    • By Phil&Michelle 4th Oct 17, 5:49 PM
    • 74 Posts
    • 43 Thanks
    Phil&Michelle
    • #6
    • 4th Oct 17, 5:49 PM
    • #6
    • 4th Oct 17, 5:49 PM
    Good on him for thinking about his future. I'm 37 now and only started a pension 4 years ago but wish I had started when I was 18 which is when I started full time work.

    Not making the same mistakes with my kids though and set all theirs up at birth and pay in a small amount each month in the hope they will continue when they start work. I will drum it into them to save 10% of whatever they earn and they should be able to retire earlier unlike me who'll be working into my 90s lol.

    The pension sounds like a good'n so go for it. Sadly my employer only contributes 1% regardless of what I put in :-(
    • OldMusicGuy
    • By OldMusicGuy 4th Oct 17, 8:37 PM
    • 137 Posts
    • 221 Thanks
    OldMusicGuy
    • #7
    • 4th Oct 17, 8:37 PM
    • #7
    • 4th Oct 17, 8:37 PM
    Extraordinarily good deal and as a parent you should be making sure he puts the 7% in to get the 13.5% free money. If you read any of the advice from people coming up to retirement, they pretty much all wish they had saved more earlier (apart from those that DID save a lot early on). I know I do and I wish I had received better advice from my parents.

    He needs to get used to that 7% going out of his pay and he should use the remainder for everything else. He should think of his take home pay as the money after pension deductions. FYI my son started his first job after uni last month and is putting 10% into the pension scheme, his employer matches that with another 10%.

    Someone is offering him a lot of free money to invest in a pension, to which the state will add 20%. It will be one of the most stupid decisions of his life to pass that up!
    • crv1963
    • By crv1963 5th Oct 17, 7:49 AM
    • 136 Posts
    • 399 Thanks
    crv1963
    • #8
    • 5th Oct 17, 7:49 AM
    • #8
    • 5th Oct 17, 7:49 AM
    Hi Maxie014,


    I recently asked for some advice on here for my son- I don't know how to post a link but it is "Advice for a 20 year old starting out".


    In summary my son is putting 8% of his salary and employer 6% -the employer current maximum contribution to the pension scheme. Son has saved 2 months salary as a rainy day fund, is saving the difference between what he gives his mother (we are divorced) for his board and what it would cost to rent his own place in order to test the affordability of getting somewhere of his own.


    On advice from here he has opened a LISA as well as a H2BISA and will save into that the above difference in these, he is going to his building society to discuss what amount he needs to save towards getting a mortgage and then he will decide if he is going down buying or renting.


    He intends opening a SIPP, once he has got himself his deposit for a property purchase saved.


    CRV
    CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!
    • Farel01
    • By Farel01 5th Oct 17, 1:33 PM
    • 93 Posts
    • 114 Thanks
    Farel01
    • #9
    • 5th Oct 17, 1:33 PM
    • #9
    • 5th Oct 17, 1:33 PM
    From this artice: http://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html

    "Someone who starts saving at the age of 21 and then stops at 30 will end up with a bigger pension pot than a saver who starts at 30 and puts money aside for the next 40 years until retiring at 70.
    This astonishing outcome is entirely due to the power of compound interest – the way that investment returns themselves generate future gains. Having 10 extra years for compound interest to work its magic has the same result as all those years of extra contributions."

    So yes?
    Debt free as per 22/12/16 -
    • Alexland
    • By Alexland 5th Oct 17, 11:50 PM
    • 451 Posts
    • 268 Thanks
    Alexland
    7% contribution (less after the tax benefit) isn't a lot of sacrifice to have your pension on track and is unlikely to make a difference in their ability to get on the housing ladder.
    • bigadaj
    • By bigadaj 6th Oct 17, 12:30 PM
    • 10,358 Posts
    • 6,651 Thanks
    bigadaj
    Default position for someone at a young age would be to harvest the full employer contribution and potentially pay anything in above higher rate tax threshold when they get to that level.

    Once people get older then maybe worth more thought but with things like house purchase being unaffordable for many there are other considerations, as well as enjoying some life pre retirement, the latter obviously isn't a focus of this board.
    • maxie014
    • By maxie014 6th Oct 17, 7:00 PM
    • 134 Posts
    • 65 Thanks
    maxie014
    Cheers for the replies we live way up north where house prices are highish but not the ludicrous high down the country.
    His max contribution was 7% and the company pays 13.5%,but he can pay more himself but no more from them,he is thinking about paying 12% for now.
    • Alexland
    • By Alexland 6th Oct 17, 8:57 PM
    • 451 Posts
    • 268 Thanks
    Alexland
    To be honest I wouldn't pay more than required to get the max employer contribution for now unless it also helps get 40% tax relief or he is saving NI via salary sacrifice.

    20.5% is a perfectly adequate contribution at 23.

    I would suggest any other spare income should go towards the house deposit. Having a higher deposit may enable him to buy a bigger house and get the long term capital appreciation.

    There is plenty of time to stuff the pension in his 30s and 40s. If he puts too much in the pension now he might end up having to throttle back later even if he can get 40% tax relief later to avoid the LTA issue.

    Alex
    • Mutton Geoff
    • By Mutton Geoff 6th Oct 17, 9:43 PM
    • 890 Posts
    • 939 Thanks
    Mutton Geoff
    http://www.telegraph.co.uk/finance/personalfinance/investing/10742396/When-saving-for-10-years-pays-more-than-saving-for-40.html
    Compensations/Refunds from Banks & Institutions - £4,165 | Stooz Profits - £7,636 | Quidco - £3,963

    All with a big thank you to Martin and MSE.com from Mutton Geoff!
    • Terron
    • By Terron 7th Oct 17, 10:53 AM
    • 82 Posts
    • 89 Thanks
    Terron
    I would suggest any other spare income should go towards the house deposit. Having a higher deposit may enable him to buy a bigger house and get the long term capital appreciation.
    Originally posted by Alexland
    Or a lower mortgage rate. Though there are parts of the North where a bigger house would likely get higher capital growth it would br unlikely be in the same league as the South used to get,
    • Alexland
    • By Alexland 7th Oct 17, 11:13 AM
    • 451 Posts
    • 268 Thanks
    Alexland
    Yup getting on the housing ladder earlier would reduce wasteful rent payments and start long term capital growth on the larger value earlier. Sounds like the OPs son has a bright future.
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