Am i wasting my money

PaulDonn

Hello,
This is my first post on these forums and i am looking for some good advice on Pensions.
I am 23 and through my employer i pay £150 into a scottish widows pension per month, my employer also pays the same into it.

I have had many different opinions on paying into a pension, some guys say not to, as it will be worth nothin when i am 65, if i reach that age. some swear by it, and advise me to think about when i retire.

My dad thinks i should stop paying into it and put any spare money i have into property.

Will my pension be worth nothing is the big question ? The way i look at it is, when i m 65 will £150 get me a pint of milk ? When you look at the way prices have changed over the years its got to just keep going up and up.

Thanks for any advice.:D

dunstonh

I have had many different opinions on paying into a pension

Oh dear, thats a bad start.

some guys say not to s it will be worth nothin when i am 65

You can call them idiots.

if i reach that age

4 in 5 men reach retirement. If you dont then the value built up, including the employer contribution, tax relief and tax free growth is paid out to your beneficiaries.

some swear by it, and advise me to think about when i retire.

The sensible ones. The basic state pension is £4700 a year. Just think how you would live on that today to decide if its important for you or not.

£150 from you is not actually costing you £150. Its costing you £120. Plus you are getting £150 from the employer. So, for a net cost of £120, you are getting £300pm paid into investments.

Your state retirement is 68 (not 65 in case you didnt realise). So, do you fancy having to wait that long?

Lets assume you keep your monthly payments up with inflation, you will have a pension pot of around £1,000,000 in retirement. Not bad going at all. The idiots that tell you not to take the free money from the employer probably dont have a clue about the state pension and what it will pay or are planning to live in near poverty. You decide which you want.

Oh, and if the "idiots" tell you to put that £120 in a savings account then the end result on that one will be around £230,000

My dad thinks i should stop paying into it and put any spare money i have into property.

I'm afraid your dad is very wrong. It would mean giving up around £150pm of free money. Think about going to the cashpoint each month, drawing £150 and setting fire to it. That £150pm of free money is worth half a million pounds of pension fund at your retirement age. What property do you know of that costs nothing but will give you £500k ?

PaulDonn

How is it only costing me £120 ? i see £150 deducted monthly on payslip.
68 and all of that money, gold slippers and pipe maybe. hah.

Thanks for that, think al keep paying into it then.

dunstonh

How is it only costing me £120 ? i see £150 deducted monthly on payslip.

pensions come off before basic rate tax. So your tax taken is £30 less. If you stopped the pension contribution then your pay would only go up £120 because of increase in tax. (its known as tax relief).

68 and all of that money, gold slippers and pipe maybe. hah.

68 and 1 mill in the pension pot and having a care free, enjoyable retirement or 68 and basic state pension, brought up to £6900 with benefits. With your life expectancy going to be 25 years or so after that, which would you prefer? Do you want to spend more years than you have already lived in basic poverty or do you want to take it easy and enjoy those years?

Of course, you dont have to wait until you have a massive pot. You could wait until you have enough to have a good retirement and finish at 60.

The free money from the employer really makes this a no-brainer.

PaulDonn

Ok good stuff dunstonh !
My mind is at ease now with my pension plan.
Thanks alot !

Cozworth806

Depends also on the investment plans that you have your cash going onto, given the fact that the money you put in now will buy more units than it did a year ago then it is still worth being aggressive in the portfolio, whereas the nearer you get to retirement would suggest that you may want to become more defensive.
I would anyone with a pension to take an interest in where the money is being invested and the charges of the funds which can eat into the returns.

Maybe your dad is just trying to hint at getting you out the door

Curious_Moose

dunstonh wrote: »

The free money from the employer really makes this a no-brainer.

Correct.....

rich010273

If the £150 a month being invested is not having a diverse affect on your life then definitely keep it up.
However, if you are scraping by or getting into debt becuase of your pension contribution then look to reduce your investment.
Something being invested is better than nothing but at 23 I'd not be thinking solely pension as there is too much living to do!

PaulDonn

Thanks for that cozworth i will look into how it is being invested.
The 150 a month is not a problem, i might put more in if my company match whatever i put in.
What would happen if i was not classed as a UK resident ? Would my pension freeze, can i still pay into it ?

ailuro2

Is there anywhere else that you could make an instant 150% on your money?

That's what you're looking at when your £120 automatically becomes £300:D

PaulDonn

Well i am trying to become a resisdent of Cyprus, where i live, for cheaper tax. a question is posted about this in the taxation section of forum.
If i become a resisdent there though will my pension freeze in uk or can i still pay into it although not paying uk tax ?