Pension Contributions for a 29 year old?

frailpigeon_2

I am 29 and a complete beginner when it comes to pensions. I have recently joined a company who are going to contribute 6% of my salary. Is this the right time for me to start to make contributions? If so, how much per month? (My salary is £28,500).

dunstonh

Is this the right time for me to start to make contributions?

At 29 you are starting a bit late so it certainly is. You have some catching up to do.

if they are going to pay 6% then you should aim for 6-9% if you want a sensible amount to go in. However, it really depends on how much income you want in retirement.

frailpigeon_2

Forgive my ignorance, but is that 6-9% of gross or net salary? How much would that be per month on my gross salary of £28,500 pa?

I am still living at home (yes, at the age of 29!!!), saving hard to move out, so is contributing to a pension more important than saving for a deposit and eventually paying a mortgage?

dunstonh

With pensions you talk gross income. On £29,100, 6% would be £142.50pm gross. That would equate to a net contribution of £114. Not very much at all for an income of that amount.

so is contributing to a pension more important than saving for a deposit and eventually paying a mortgage?

Both are important. The Govt will make it an automatic opt in from 2012 where you pay 5% as a minimum. So, you may as well get used to at least that.

There is no point going 100% for a house only to find you have to sell it to fund your retirement. You need to do both.

exil

Well, you need somewhere to live NOW while you may not even live to collect your pension. There is a balance to be struck. Some people buy a large house and then trade down to fund retirement, nothing wrong with this in principle.

VfM4meplse

I agree with dunstonh, it's never to early to start contributing. When your salary reaches the higher tax band you will be able to claim 40% relief :money:. The earlier repayments bring greater financal rewards because of the compund interest. It's almost always better to go with a company pension plan if offered as the company contributes - if you don't you are effectively kissing goodbye to another chunk of salary.

I also agree you need somewhere to live, but if you pay into a pension from day 1 you never see this money in hand so can't miss it.

EdInvestor

frailpigeon wrote: »

I am 29 and a complete beginner when it comes to pensions. I have recently joined a company who are going to contribute 6% of my salary. Is this the right time for me to start to make contributions? If so, how much per month? (My salary is £28,500).

I suggest you contribute the minimum required to get the company's 6%.

frailpigeon_2

EdInvestor wrote: »

I suggest you contribute the minimum required to get the company's 6%.

Sorry, I'm confused by this - I believe the company will contribute 6% whether I contribute or not? Again, forgive my ignorance.

EdInvestor

Ah, a non-contributory pension, how unusual these days.

In that case you may wish to leave your own contributon till later and boost the house purchase fund, as opportunities are likely to arise in that area fairly soon.

Have you checked how much you will get from the 2 state pensions?

Forecast here: www.thepensionservice.gov.uk

MrMicawber_2

I'd get used to the habit of paying into a pension - so would do both. I'd do my very best to pay 9% myself but if this is impossible less, but not less than 6%. At a total of 12% of your salary per annum you may well need to boost your pension fund at a later date - if your total contributions are 15% this is less likely. There will always be other demands on your money whether it's houses, children, cars whatever and the more you pay the earlier, the less you need to contribute overall.,

JayZed

There is a rough rule of thumb that to provide for a comfortable retirement income, the percentage of your salary that you contribute should be half the age at which you start your contributions. So according to this, you should contribute a total of 14-15% of your gross income (i.e. 6% from the employer and 9% from you), and maintain this percentage throughout your working life.