What age should you start a pension??

EdInvestor

MrMicawber wrote: »

The key thing is to be realistic and not to underestimate which it is really easy to do.

IMHO many people have been caught out by the switch to low inflation and low interest rates and the increase in longevity (even the actuaries were caught out by that).

The result of these changes has had a massive effect on pension annuity rates.Ten years ago a fund of 300k would buy you an income for life of 30k a year.Now it's not much more than half that.

Many people are only just waking up to this problem now.

mel19632

I have been paying 8% (3.6% me and 4.4% company - company only matches up to 4% + 10% of what I put in) for the last 3 years (started when I was 19, now 22)

Should I be putting in more, or contributing to another pension? I am contracted out of S2P as well, will that make any difference to my final pension (good or bad)?

Thanks

MrMicawber_2

mel19632 - I'm assuming your pension is not final salary (it doesn't sound like it). So, half your age when you started and that's 9.5%. Or using the table above, the min you should put in if you started at 25 would be 10% - 15%. You've been putting in 8% which is on the one hand possibly slightly low according to the rule of thumb but on the other hand it's absolutely fantastic that you've started off a pension so young. So, I'd think you are in a great position. I'd try to up your payments a bit. If you were able to up your contribution to 7.5% then with your employers 4% plus the extra 10% of your 7.5 I make it 12.25%. A really great place to be at your age.

I note though that you have some debt and, depending on how quickly you are able to pay that off and of course the rate you are paying, this may need to be your top priority.

Your final pension income will be all about the length of time you are saving / investing for (ages in your case - well done) and the return you get. It is worth your while taking an interest in the funds your pension is invested in and in due course you might want to see a fee paying IFA - choose one carefully & talk to lots to make sure you find someone who suits you - see www.unbiased.co.uk.

Then after the pension I'd do ISA's. Some folk prefer ISA's as a retirement vehicle. But I prefer pension 1st and then ISA 2nd for pension (just my opinion) - but of course ISA's are good for other savings / investments as well.

Regarding being contracted out of SERPS - this is common if you have a company scheme - but I will let someone else answer that bit because I am very sketchy on the subject.

EdInvestor

mel19632 wrote: »

Should I be putting in more, or contributing to another pension?

No, the one you have is fine, concentrate on throwing money at the debt.

MrMicawber_2

EdInvestor wrote: »

No, the one you have is fine, concentrate on throwing money at the debt.

Ummmm this would depend on the rate of interest you are paying on the debt and for how long.

Hence my note above - "I note though that you have some debt and, depending on how quickly you are able to pay that off and of course the rate you are paying, this may need to be your top priority."

MrMicawber_2

EdInvestor wrote: »

No, the one you have is fine.

Oversimplification!