Pension - Should I be pay anything?

davidjohndean

I work for a very rewarding company who contribute 14% of my annual salary into a personal pension every June (which equals to £3,000 per year).

I am 22 and don't know whether I should contribute any money directly myself. I have read and heard all the recent news in regard to the pensions crisis and really don't want to be in a 'sticky' position when its my turn to hang my coat up!

Any advice would be fantastic.

Many thanks

lipidicman

Usually your company wont pay if you dont. Mine is 14% if I pay in 6.35%. I would have to be mad to miss out on this I think. It would be like throwing money away. And as the pension is based on my salary (average over 10 years, not final) the risks seem pretty low.

The current problems seem to stem from people expecting more than they are going to get (and hence they haven't paid in enough as a result). With lower expectations now it is hard to see people being disappointed, and who would believe that any investment was guaranteed?

dunstonh

Not that we can give financial advice here. However, someone with a company paying 15% of their salary into a pension should be very happy. Especially at age 22. If i was in that situation, I wouldnt be as concerned with extra pension funding but perhaps concentrate on lump sum saving, such as ISAs (including equity ISAs).

I would also be interested in where that 14% was being invested. Ideally a spread of 5-6 sectors and 5-10 funds. If it was going into 1 fund, say a "managed" or "balanced managed" funds, I would investigate what other funds are available with that pension (most providers have a range of funds).

lipidicman

dunstonh wrote:

If i was in that situation, I wouldnt be as concerned with extra pension funding but perhaps concentrate on lump sum saving, such as ISAs (including equity ISAs).

You mean if the OP wants to save in addition to their pension?

dunstonh wrote:

I would also be interested in where that 14% was being invested. Ideally a spread of 5-6 sectors and 5-10 funds. If it was going into 1 fund, say a "managed" or "balanced managed" funds, I would investigate what other funds are available with that pension (most providers have a range of funds).

I might also need to look at the investments for my pension, however I think my scheme lacks this flexibility.

dunstonh

You mean if the OP wants to save in addition to their pension?

I read the post as additional money to the 14%. 14% at 22 is excellent. Now he has a chance to fund his middleage and children/family years if applicable.

I might also need to look at the investments for my pension, however I think my scheme lacks this flexibility.

Everbody should. Sometimes the options would be limited but it is the single most important thing. Yet it is the one thing that tends to be given the least priority.

Pal

I would suggest that any additional spare money should be going towards a house deposit, emergency funds etc outside of a pension.

Once you hit age 30, start thinking about paying something extra in, but for now 14% is a good percentage given your current age.

davidjohndean

Thanks to all those who have responded.

I have decided to concentrate on saving a lump sum firstly as a substantial amount is already being invested into my pension. I do however think that as I get older I will look as the situation and maybe if there is some spare cash invest it then.

Once again - cheers!!

Pal

The other thing is to work your socks off to get your salary up as fast as possible, so that the 14% increases with it.

cheggers

The tight sods at my work only pay in 4%.

dazman_3

No matter how much you have to contribute, do it! it's 14% money for nothing that is tax free for the moment. I wish my employer paid that rate!

Dunstonh makes a good point about checking where it's invested as this will of course make a huge difference over the term. As you have many saving years ahead, try to get it in something passive like a tracker, because over 30 years no fund can match them. This is no matter what a FA tells you - the stats don't lie and they make there money by selling pensions and funds after all. That’s fine for most people but this board is about saving money right!

While you are at it, check how much you are paying for the company advisor’s advice (another FA, who you may have never seen! I never met mine and he was getting 1%!). There are great articles on getting your pension from low cost providers who reinvest the commission an FA would get, if your company allows it.

Hope this helps,

Daz

dunstonh wrote:

Not that we can give financial advice here. However, someone with a company paying 15% of their salary into a pension should be very happy. Especially at age 22. If i was in that situation, I wouldnt be as concerned with extra pension funding but perhaps concentrate on lump sum saving, such as ISAs (including equity ISAs).

I would also be interested in where that 14% was being invested. Ideally a spread of 5-6 sectors and 5-10 funds. If it was going into 1 fund, say a "managed" or "balanced managed" funds, I would investigate what other funds are available with that pension (most providers have a range of funds).