is it worth putting just £30 per week into a pension??

MrMicawber_2

If it was me I'd actually put more into the pension and less into the ISA. My reason for this is that, as Jen & dunstonh have pointed out already, you can't be tempted to spend your pension because you simply can't get at it.

Is your ISA saving for retirement purposes and how disciplined are you with money?

If you swapped around and put £70 into your pension and £30 into the pension you would be saving 9.1% of your income into your pension. If you gt the max 5% from your employer then your pension contributions total 14.1% of your income.

It looks as if you have another £55 per week coming in a few months which you could then add into your ISA, for either long term or to pay off your creidt cards when they come off the 0%.

The Society of consulting actuaries recommends the following as a guide:

Age
Percent of Salary to Save
25
10 – 15%
30
12 – 17%
35
15 – 20%
40
17 – 24%
45
23 – 30%
50
32 – 45%
55
50 – 70%

I.e. start at 25 and you put 10 - 15% of your salary into your pension until you reach 65. Start contributing at 30 and it's 12-17%.
£70 per week therefore puts you in the right sort of area.
HOW MUCH DO YOU NEED TO CONTRIBUTE TO MAX YOUR EMPLOYERS CONTRIBUTION?
There is quite a bi question over your mortgage - is it Repayment or Interest Only? If it's interest only how are you planning to pay the capita off?????

danny69

manchestersaver wrote: »

i work in construction and no firm i work for will ever pay more in to a pension than they legally have to

One of the companies I work for pays in upto 10% of P60 earnings, also the other job I have is for the NHS......

margaretclare

Looking at your outgoings, you have a huge amount going out monthly on HP for a car.

This is just about the most expensive way to buy a car (HP is I mean) and a car is a lump of metal which starts to depreciate in value the moment you drive it off the showroom's car park. It will need replacing in a few short years, whereas your pension is going to be the means of feeding, clothing and keeping you warm for maybe 30-40 years when you're no longer able to work.

Which to put money into? A pension or car HP? It looks like a no-brainer to me.

MrMicawber_2

Granted HP is hideous but manchestersave is where he is. The loan is finished in 6 months, that's £225 per month extra (£55 per week) to save invest in 6 months time. At this point he could up his pension contribution to 17% which would be about £92.50 (plus 5% employers cont) per week leaving an extra £29.46 per week (£127.57 per month) to put into ISA's. Or if he went with the idea of putting £70 per week into the pension now (14% of income with his employer's contributions) he could leave it at that and save / invest in ISA's for the long term.

There are quite a few sensible things to do - but the sort of mortgage is a big factor because if it's interest only the capital has to be paid off. The £225 would grow to about £176,000 after 25 years if it returned 7% pa or about £152,000 if it returned 6% pa. The mortgage could be bigger than this.

gfplux

Just my opinion.
I could not agree more with the comments about a pension is money you have to leave alone. you can not cash it in if you have short term money problems.
When you reach close to pension age hopefully you will look back and be glad you were not able to "break in" to your pension fund.
With all this freedom to save in many different ways and some criticism that "you can't get at your money in a pension" we may (those of us young enough) live to regret this Freedom.

manchestersaver

hi in reply to your queries about my mortgage it is a repayment mortgage and also my car repayments are a loan i took out from the bank but that is not really important now as it is nearly paid up i do appreciate what you mean about a car not being a good investment tho.!
My worry about putting to much into a pension that i cant get at tho is that my industry is not looking to good for the next few months(maybe longer)and i dont have much put away if i end up out of work

jamesd

Then concentrate on building up savings until you have three to six months of spending in them. Better six months or more when times are likely to be bad.

wowgolds987

What kind of ISAs were you thinking of? Cash or shares?

The other advantage (may be/may be not) is that cannot access this until later, and I think, if you were to become bankrupt then the pension fund is protected (may be wrong about this in UK, I was a financial adviser in South Africa).

For myself, I like a combination of ISAs and Pension, but as I get closer to retirement, I'm madly putting money in the pension.

Hopefully someone with some knowledge and intelligence will come to answer your query!

MrMicawber_2

Hi manchestersaver - It is good your mortgage is repayment - one less thing to worry about. As jamesd says, if what you really want is a rainy day fund then save for a 3 - 6 month cushion, then hit your pension hard.

So - I'm guessing that you have £30 of the forthcoming £225 earmarked for your pension which would mean £70 + £195 to put into ISA's. I make it that saving £265 per month will accrue to £22,128 after 6 years at 5% or £21,481 at 4%. And there's nothing to stop you tipping ISA's into a pension later on if you wished.

I'd just double check what the max contribution your employer will give you and if you can contribute enough to achieve their maximum contribution then that is generally considered a good thing to do - after all it's free money. I would also check the portability of your company pension if you did get made unemployed.

cyclonebri1

It,s all good solid advise you're getting but from my perspective you really need to get straight what the point in having both pension and substantial savings is about. Neglect either and the change in lifestyle at retirement could be catastrophic.

Pension saving is a known, providing that you expect to survive. You will retire and you will have to fund that.

The savings aspect is more for the unexpected, ie personal disaster, say divorce, medical issues etc. You need to get the balance right.

Whatever you do do not plan to boost your pension funding in the last 10 years, you never know what will happen.

As an example I had to retire at 55 after a serious accident, I had just done enough to retain a good retirement income, but that was subsidised heavily by gaining increased benefit from my employers scheme due to ill health.

I hope you get what I mean.:beer: