Pension at 22

shazzer22

Hello, hope someone might be able to tell me if I am doing the right thing, I'm currently working in a fairly good job in an area I hope to persue as a longtime career.

I have taken out a stakeholder pension with my company and about £60 a month gets taken from my pay, the question is, I have quite a few debts, would I be better off stopping my pension (can I even do that now its started) and concentrating on those or should I just carry on knowing that there is an amount building up for me? I'm 22.

thanks

owey

Well done starting it at 22. I would keep it going now you have started it, I wish I had started mine at 22. If you cancel it you will only get back what you have put in, less any deductions. Also if you do cancel, you might find it harder to start again, as at your age you will always think you have better things to spend the money on.

Sorry just noticed how much debt you have :eek: , what do you spend your money on.

shazzer22

nothing anymore! but the debt was accumulated whilst i was at uni, i'd taken a year out and got used to having a decent salary then when i became a student, anything i could afford i just put on a cc! stupid i know but at least i'm sorting it out now!

EdInvestor

If you cancel it you will only get back what you have put in, less any deductions.

Afraid not.Once you put money in a private pension, you can't get any of it out until you're over 50 and only 25% then. If you pay into a company pension for less than 2 years, you can usually get contributions back.

The rules have now changed so that you can put large amounts of money into a pension later and still get tax relief.

So it would be better to use the money to pay off debt now.

shazzer22

Thank you, I've only been paying into it since November. By all accounts from people I work with its quite a good pension so as I'm getting by without the money at the moment I might just continue so that I know I'm working towards something then maybe I could retire early and be a lady of leisure!

K9cuddles

I would say keep it going.. I started at 21.. and look at the debt in my sig!! I figure it's only £35.. topped up by my employee.. and money well worth spent in the long run!!! I'd only regret it if I did stop!!

ReportInvestor

1) Are you a basic rate taxpayer?
2) If so, might you become a higher rate taxpayer later in your career?

I woud pay off debt first. And if the answer to both 1) and 2) is YES then the case for it is even stronger.

Don't forget that in 12 minutes time - A Day - you will be able to invest far more per year into a pension.

Of course, if you would just have spent the money that you are investing into a pension, that would put a different complexion on it.

EdInvestor

Could you just clarify shazzer, whether or not your company is making a contribution into the pension? If it is, then this is free money and you should keep the pension going.

If it isn't, and you are a basic rate taxpaper, it would be better to suspend pension contributions (you can stop and start with a stakeholder with no penalties) and pay off the debt first.

shazzer22

yes my company does make contributions and at the moment I am a basic rate taxpayer

EdInvestor

shazzer22 wrote:

yes my company does make contributions and at the moment I am a basic rate taxpayer

OK, stick with it then.