Pension Advice For 21 y/o

Volvic

Hi everyone, I'm 21 and currently only working part-time. I am looking into setting up a private pension..I hate having to prepare for things so far ahead in time, but the way things are going this seems the bets thing to do. I don't want to pay a lot into it monthly but can anyone reccomend any decent pension plans or companies out there?

Thanks

emma396

the thing with a pension is that you pay in and cannot take back out until you retire. I'm currently 25, i spoke to my dad about me setting up a pension, but im currently still living at home and do supply teaching so not a steady income, he suggested to me that i just save as much as i can in isa and other high interest accounts for now. not sure if it should be same for you, but i'm not worrying too much about pension at the mo.

Aegis

emma396 wrote: »

the thing with a pension is that you pay in and cannot take back out until you retire. I'm currently 25, i spoke to my dad about me setting up a pension, but im currently still living at home and do supply teaching so not a steady income, he suggested to me that i just save as much as i can in isa and other high interest accounts for now. not sure if it should be same for you, but i'm not worrying too much about pension at the mo.

At 25 you have a good incentive to start saving for retirement. There's a general guide which says that to maintain a decent standard of living, you should half the age you start your pension at and put that percentage of your salary aside each year. Starting at 25, that means 12.5% of your salary each year as a rough guide as to how much you should aim to save for the rest of your life.

Saving into a pension means that you can get tax relief on the contributions, i.e. if you put in £80 you will effectively have put aside £100 for your retirement. You don't get that in an ISA, so starting a stakeholder pension is something worth considering.

emma396

Aegis wrote: »

At 25 you have a good incentive to start saving for retirement. There's a general guide which says that to maintain a decent standard of living, you should half the age you start your pension at and put that percentage of your salary aside each year. Starting at 25, that means 12.5% of your salary each year as a rough guide as to how much you should aim to save for the rest of your life.

Saving into a pension means that you can get tax relief on the contributions, i.e. if you put in £80 you will effectively have put aside £100 for your retirement. You don't get that in an ISA, so starting a stakeholder pension is something worth considering.

thanks aegis. i think i need to get a proper job

dazcouz

Can I have some advice too. I'm 22 and am still living at home with parents and have managed to save up (with great difficulty) £20K which is in the bank. Is there a way I can put it in a pension pot or similar or should I just leave my savings in the bank. My job doesn't pay to well so it takes a while to save up

EdInvestor

dazcouz wrote: »

Can I have some advice too. I'm 22 and am still living at home with parents and have managed to save up (with great difficulty) £20K which is in the bank. Is there a way I can put it in a pension pot or similar or should I just leave my savings in the bank.

You realise that if you put this money in a pension, you won't be able to get it out again until you are aged 55, and then you can only get 25%?

Is there a pension at work?Does your company contribute?If so you should sign up, otherwise feed your savings into a tax- free ISA every year, where they will still be accessible shoud you need them for something like a deposit on a property.

You are already contributing to the 2 state pensions.Get a forecast of how much they will pay out here: www.thepensionservice.gov.uk

mark55man

the advantage of pensions are that you are investing gross pay (ie the government rebates it - or more usually it is taken out of your pay before you get it). if you are a higher rate taxpayer that is 40% if you pay no or little tax that is no or little rebate.

if you are not a higher rate taxpayer I would suggest that so long as you are saving some the precise tax free vehicle you are using is less relevant as you have less difference between the gross salary and post tax net salary you are investing. remember pensions just invest in the stockmarket same as other funds.

The main questions you should ask yourself is how you would feel as a 40 year old (or even better as a 60 year old) about the provisions you are making for yourself now. A lot of advice you get given by pension advisors is self serving - of course they will advise it is in your best interest to take out pensions - that's their job.

I strongly advocate you should make preparations for the future, but I think to start a pension you need to be reasonably sure as to your prospects and how long you can sustain your decision.

I know many people who were sold products in their twenties only to find that changes in lifestyle and career renedered them effectively wortheless from a pension perspective - the capital eaten up by fees and locked up for ever.