Worth starting a pension as a student?

SavvyStudentSaver

Hi guys- I've been looking over these forums for a bit, and I'm just wondering if it's worth starting up a pension yet. I'm not working, and I'm a student, as the title says, and I wouldn't really be able to commit to more then £20/£30 a month. Whilst I know this isn't much, and wouldn't be suitable as a long term monthly contribution, I'm thinking it would at least be some kind of start, and would be helpful to have as a starting point when I'm actually earning.

Whilst I do have more funds available than that, I don't want to tie it up somewhere inaccessible until the age of 55- especially as I'm not earning, and really don't know what will happen after university. The rest of it however, is at least in savings, but I don't want to rely on this for my future, because I'm only 20 at the moment, and have all of life's big expenses yet to come, and don't imagine I'll have the willpower not to dip into my savings when these happen.

So, to summarise all that- worth investing £20-£30 at 20 years old as a starting point, with intention to starting contributing more when I start earning?

cte1111

I would wait until you are paying tax, otherwise there is little advantage to putting it into a pension.

Maybe put it into an account where it is difficult to withdraw then that would stop you dipping into it. Then when you are working and paying tax, you could pay it into a pension then.

Squire_Fulwood

I am of pensionable age so I am now living off the pension I contributed to for all those years. From this standpoint I only have one or two minor regrets.

1. I wish I had started earlier and invested more.

2. I now question the decision of my union to opt out of SERPS on behalf of all its members. Looking back this now seems like short term thinking. I would like to have paid and got a bigger pension now.

So I suppose my point is this. Try to think of things in terms of what you will feel like when you are drawing your pension instead of what your current tax situation is now. Now is the time you should be saving as hard as you can because it's too late when you are old.

I shall now climb down from my soapbox.

ViolaLass

Savvy, do you have emergency savings of at least 6 months living money? How much longer do you have left to study? Do you need to finance any of it yourself e.g. Masters?

Personally, I would not be inclined to tie my money up in your situation, only because you don't know what job you'll be in when you finish your studies, where you'll be, how much you'll need in the first few months as you settle etc.

BUT, you could still put the money into a savings account and call it your 'pension'. Then, once you're earning and more secure, you could consider whether to put it in a pension wrapper. This is what I've been doing for the past 4 years since I left university as I have moved through not always brilliantly paid or secure jobs. I've not touched the money but it's been good to know that I could should I need to.

gadgetmind

SavvyStudentSaver wrote: »

I'm thinking it would at least be some kind of start, and would be helpful to have as a starting point when I'm actually earning.

If you put £16pcm into a pension, the tax man will put in an extra £4. You're effectively getting 20% tax relief even though you're not paying any tax. How neat is that! Starting now also means you will have something running that you can use when working - it removes future intertia.

You can start a pension via Cavendish Online for just £35 up front. I started such a pension for my daughter (an Aviva stakeholder) and she's still at school.

don't imagine I'll have the willpower not to dip into my savings when these happen.

And even better argument for a pension.

However,
1) Might you get a job in the public sector? If so, an additional private pension is rather moot given the gilt-edged public sector one to which you'll barely have to contribute anything.
2) Having non-pensions savings is essential, and arguably a higher priority than a pension, BUT this needs to be done via regular savings, perhaps money being drip fed into an ISA.

You'll hear arguments both ways and only you can decide.

jem16

Squire_Fulwood wrote: »

2. I now question the decision of my union to opt out of SERPS on behalf of all its members. Looking back this now seems like short term thinking. I would like to have paid and got a bigger pension now.

Any reason why you think you would have got a bigger pension by staying in SERPS?

gadgetmind

jem16 wrote: »

Any reason why you think you would have got a bigger pension by staying in SERPS?

New thread please!

atush

As a non taxpayer who isn't working, a pension may not be for you at this time but I would not talk you out of it either. A stakeholder pension is appropriate for non taxpayers who pay in very little.

What I will say is that there are other ways to save in the meantime so would look at regualr saver accts with high interest (and you can't touch the money for a while) and a Cash IS+ S&S ISAs where you put maoney away now as you can have acess to it in emergencies and if not it will retain its tax free status for when in a few years you will be paying tax.

Generally we do tell all here to have a min of 3 months spending in cash easy access, but if you fear your impulse control a reg saver or ain investment trust savings plan for 25-30 quid a month will keep your hands off it for longer ;-)

SavvyStudentSaver

So, I think I'm going to go for it, because if, as said, I get tax relief anyway, that would be worth it. Plus, I reckon it's worth getting the ball rolling at least- if not just to reduce the amount I need to put in later, but also so that I don't forget to do it until I'm 30 or something, because when I'm out of university, I can see life getting in the way, and that I might forget it.

I do have spare money stashed away in other forms of savings at the moment, and should I need it, I reckon I could survive for a year with no form of income (assuming SLC give up on me too- but with two more funded years of my degree left, I should be OK). So anything I put away is not likely to be needed ASAP. And the only temptation I fear is that when I end up with my first house or similar, I may end up thinking "well, I could just BORROW this money for a bit to pay something off, and then put it back later", when 'later' never really arrives.

atush

If you have other savings, then yes- go for it. Nice to hear someone so young be so responsible ;-)

SavvyStudentSaver

atush wrote: »

If you have other savings, then yes- go for it. Nice to hear someone so young be so responsible ;-)

Well, you'll be even happier to hear that I've been saving since 6 years old, because I was told it was a good idea Someone said I should go to university, but it would be expensive, so asked my parents put my Christmas and birthday money into a building society account they'd set up for me as a baby. But not all of it- I kept a little to spend. Effectively, I taught myself to budget before 10, and developed a saving habit XD

Best bit- when I reached university, I found my loans and grants would cover the costs of living, and my savings weren't necessary, so now I have them to distribute as effectively as I can.