Please help - First pension and totally clueless!

caliwen

I've just started a new job, and, having not yet started a pension plan, thought I'd better start one now.

I've read the pension section on the main site, but am still really confused, and was wondering if someone would mind giving me a bit of advice?

My company offers Stakeholder Scheme with Virgin Money, and, irrespective of how much I contribute, they'll contribute 5% of my basic salary (increasing after 3 & 5 years of service). Employer contributions are made monthly. They do give the option of paying into my own Personal Pension Plan with my own choice of provider.

So I'm trying to work out whether to go with the company scheme, or choose one of my own (and if so which to go for), and how much to contribute myself.

If it's any use, I'm about to turn 27, and my basic salary is £23,000.

I did read that I should contribute half my age as a % of my salary. So 13.5% of £23,000.00 would be £258.75 per month before tax. Or, if my company is contributing 5%, am I okay to contribute 7.5% (£143.75 per month before tax).

The other thing is, I'm trying to pay off some debts so am thinking I'd probably be better off delaying my contribution for up to a year and put that money toward the debt, and start my contributions at 28.

Any help would be greatly appreciated.

EdInvestor

caliwen wrote: »

My company offers Stakeholder Scheme with Virgin Money, and, irrespective of how much I contribute, they'll contribute 5% of my basic salary (increasing after 3 & 5 years of service).

You should take this up now, it's free money

They do give the option of paying into my own Personal Pension Plan with my own choice of provider.

This is also good.Virgin's pension is not very good, very poor choice of investment funds. Try Scottish Widows or Standard Life.Alternatively if you fancy something a bit sexier, try an online SIPP with a discount broker such as https://www.h-l.co.uk

Or, if my company is contributing 5%, am I okay to contribute 7.5% (£143.75 per month before tax).

Sure.

The other thing is, I'm trying to pay off some debts so am thinking I'd probably be better off delaying my contribution for up to a year and put that money toward the debt, and start my contributions at 28.

I wouldn't delay, as it's too easy to put it off so you never do it. Why not put in the minimum (5%) to get the company cont for this year and then increase once your debts are under control?

MrMicawber_2

Just to clarify - will your company still give you the 5% if you start a pension with someone other than Virgin? If so there is no reason to stay with Virgin. If not it needs more thought - the usual consensus is that you max out your employers contributions and then open another pension if you wanted to contribute more (or put extra money in ISAs now to tip into a pension later on to max 40% tax relief if you earn sufficient in the future - couple of problems with this a) Rules on pension tax relief might change b) You might be tempted to spend the money in the ISA's).

I'd assume there are no other benefits you employer offers with the Virgin pension? Worth a check.

I'd agree to start now though - even if it's minimal while you are focussing primarily on paying off your [presumably] expensive debts.