Pension? Whats that?

abby1234519

OK!
19 in a very good fulltime job, lucky enough to have a bright future ahead of me with maybe a surplus of at least £500 a month after I have paid my debts off in a few months.

Pension? Do I put this into a pension so I can have a lovely life when I retire? Is it better to save than put in a Pension? I DONT UNDERSTAND PENSIONS!

Tighthead

Hi, all very good questions. Well done for even thinking about pensions! Most people don't until it's too late to do some serious retirement planning.

First-off, a pension is simply a savings plan that allows you to put some money into a pot, enhanced a bit more by the taxman, so that when you eventually retire you can use the money to live off. Nothing more complicated than that really. Well, perhaps a bit.....!

Does your employer have a pension that you can join? If they do, and they will pay into it, it's probably not a bad idea to join it. You wouldn't turn down a pay rise would you? Well, this pay rise is being paid into a pension for you, rather than your wages.

Otherwise, I would focus on repaying your debts, and staying debt free. I would build-up some cash savings in a Cash ISA first, and then think about pensions/long term savings, after all, you're only young once and you have to live a little.

When your savings are at a decent level, then start thinking about pensions. I always think that if you're going to take out a pension, you're better to be committed and able to put away a meaningful amount. The minimum you can put into a Stakeholder Pension is £20.00. That's it. Not, £20 per month. Just £20! Even if you put away £20.00 per month for 46 years - without growth, tax, charges etc - that's only £11,000 to last your entire retirement! Be prepared to budget for a meaningful, but realistic and affordable amount that you can sustain and increase a little each year.

The best advice of all, go and have a chat with a local financial advisor - an independent one, not the bank. They will (or should) happily sit down with you for half an hour and give this sort of info. for free, in the hope that you will come back and see them in future.

Good luck.

Tighthead

RetireDebtFreeHappy wrote: »

Actually a pension is a steady income given to a person upon retirement, typically in the form of a guaranteed annuity. A pension created by an employer for the benefit of an employee is commonly referred to as an occupational or employer pension. Labor unions, the government, or other organizations may also fund pensions. Go ahead with saving from now itself.

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In the context of the question and the OP's limited experience, it's semantics. As far as the vast majority of people are concerned, a pension plan is the means to an end, which usually results in an annuity. No need to be pedantic about terminology!

abby1234519

Oooh was that spam

Tighthead

Probably. And also a cut a paste job from Wikipedia as well!!