Help me plan for the future, I'm lost!!

swift_gti

Hi all,

I'd like to start saving for the future so that I don't end up living in a cardboard box when I retire
Here's the situation at present:-

I'm 22 yrs old, earning approx 19k per year - standard barclays bank acct (debit visa) no credit cards, 1 small loan soon to be finished repaying.

I want to get something put away for retirement and also some sort of savings account (maybe for first house) that will maximise anything put in there.
I'm totally lost when it comes to Pep's, ISA's, Pensions etc... so I have no idea where to start - at the moment I am just paying NI for the state pension.

What is the best to do in my situation to try and maximise my savings ??

Help appreciated!!

EdInvestor

If there's no company pension with free money, you'll be best to save in the ISA rather than the pension at present.

There are two types of ISA - cash (max 3k a year) and investment (max 4k a year if cash ISA is also used, 7k if not).

I would suggest you start out with the cash ISA, since you want to accumulate a house deposit, and then when you have got that sorted, then look at the investment ISA for the top-up for your state pension(s).

Get a forecast of how much they will pay out so you know what basic amount you can expect.

chesky369

Firstly, clear up your loan as that's expensive. Then, as you're a Barclays bank account holder already, you should investigate the regular saver option which gives a 10% return on your monthly savings for a year. It's nice and easy and not too complicated to do and it will give you a year to gen up on ISAs for next year.

swift_gti

thanks for the info guys, sounds like a good plan - as for the pension, there is a work pension available (i'm not paying in to it at present) I work in education so I think the pension scheme is fairly good (how do i know what IS good and what isn't??)
What happens with a work pension when I leave the job - do i loose anything? is the money in that pension transferred to a new one? or do i just end up with 20 small pensions by the time i retire :rotfl:

Thanks for the help!

EdInvestor

If you are referring to the teachers' pension scheme - or the USS one for universities - these are both excellent final salary schemes and you should join immediately, as you will be missing out on as much as 15-20% of your total salary package by not doing so.

What happens with a work pension when I leave the job?

It depends.If it's a final salary scheme ( the "good ones") you usually leave it there, whereupon it increases with inflation and you take it when you retire.

do i loose anything?

No

is the money in that pension transferred to a new one?

It can be.If it is a final salary scheme as above, it's usually best not to transfer (except if it's to another similar scheme, eg teachers to local govt or civil service).

or do i just end up with 20 small pensions by the time i retire

These days most people are on non-final salary "money purchase" pensions which can be transferred easdily into one pot set up to receive them , such as a stakeholder or a Sipp.However it doesn't make any difference whether you have a pot made up of one pension fund worth 100k, or 10 separate pension funds worth 10k each, the resulting income will be the same.

It is much easier to keep track of the money and invest it optimally if it's all in one place, though, so the new products, especially the Sipp, are a good idea IMHO.

swift_gti

Thanks for the great info Ed, I work in IT support so our pension is probably different to the teachers one - I will request some info and see what our deal is.

Cheers

seven-day-weekend

Your pension may be the Local Government Pension Scheme - also an excellent Final Salary scheme. If so, join without delay.

If you leave, it will be frozen, but still keep pace with inflation.

LOST

Join your employer pension scheme!

1. they have to contribute (the employer)
2. you may or may not have to contrivute
3. if you leave, the pension will be preserved until retirement and will keep up with inflation - or the pension scheme benefits may be ported to your new scheme depending on who your new employers are and what scheme they have in place.

remember that your contributions are tax relieved at your highest marginal rate of tax i.e. upto 40% releif if your are a high rate tax payer

vital to not miss any employer sponsored pension schemes - just do it!

EdInvestor

remember that your contributions are tax relieved at your highest marginal rate of tax i.e. upto 40% releif if your are a high rate tax payer

While this is a good benefit for higher rate taxpayers, those on basic rate should not get too excited about pension tax relief.Remeber that what you get on the way in is taken away again at retirement as your pension is taxed on the way out.Only the 25% lump sum is tax free - which is not enough, many people think, to justify the loss of control over the capital and restrictions on income due to the rigid pension rules.

Certainly if there is no employer contribtion, basic rate taxpayers should max out their investment ISA first.

Having said that, a public sector final salary scheme is a valuable benefit not to be missed, regardless of your tax level.