Pension or savings?

freakyogre

Hello, I hope someone can offer me a bit of advice on this.

I am starting a new job in January which will give me the opportunity to start putting some money away towards my pension.

I am already aware that at 27 I should have done this a long time ago, but unfortunately my salary hasn't realistically been high enough to consider it. I had a pension with a previous company, however, I was then 'let go of' the following month, so I (perhaps stupidly) forgot all about it as really couldn't be doing with the hassle over one payment.

My new job doesn't offer a pension at all, so this is something I will need to look into myself.

I will admit to not fully understanding pensions, but my main concern is what if I can't afford to pay into it every month?

I have been made redundant 3 times since I started work in 2003 and although I have only been unemployed in this time for 4 months, I feel my concerns are justified! I am worried about being in a position where I am forced to pay into a pension, even if i'm not working.

A friend suggested I look into another savings account instead. I currently have a savings account, but it is easily accessed and I can and do move money around when needed.

It sounds like I may be better off with a savings account that I cannot access and won't get penalised for not paying in every month if the worst happens. But then i've read some bits about not trusting banks with regards to pensions.

What would be my best option?

Thanks for any help.

dunstonh

but my main concern is what if I can't afford to pay into it every month?

Its about time at age 27 that you learn that bills need to be paid each month and that you make sure you afford them.

I am worried about being in a position where I am forced to pay into a pension, even if i'm not working.

Not applicable to modern pensions. They can stop/start, up/down the payments with just a short notice.

A friend suggested I look into another savings account instead. I currently have a savings account, but it is easily accessed and I can and do move money around when needed.

Which is great for short term money but a complete waste of time for long term money.

But then i've read some bits about not trusting banks with regards to pensions.

its not a case about not trusting them. Its just their products are not very good an in general the people they use to advise you are limited and generally low skilled. IFAs account for over 3/4 of pension transactions. So, if you need to use someone, then you should use an IFA.

atush

You need to start a pension at some point, then tranfer in your old pension into it. How much you can afford to put in, is something you have to work out. but you will still have to pay bills in your old age, and given the small size of the state pension you need to suppliment it with something.

Starting at your age, you should be putting in 13-14% of your salary into a pension. But that incl any tax relief, and employer's contribs (the law is changing and most employers will have to pay in in the coming few years). If you can affrod that much rught off, then put in lower and raise it every year as soon as you get a pay rise.

But, as you are already doing you also have to save outside your pension. Into an easy access savings acct for emergencies (get that up to 6 months spending in case you are made redundant) and then into other cash and investments to fund your life and your retirement. Use your ISA allowances to shelter the money from tax.

freakyogre

dunstonh wrote: »

Its about time at age 27 that you learn that bills need to be paid each month and that you make sure you afford them.
.

Although I appreciate your reply, this comment isn't really needed. I am well aware all bills need to be paid and can assure you they are.

Unfortunately I have to prioritise things and the first and most important expense I have is my rent which will always be the most important. Sorry, but in my opinion a pension is something that if needed can be put off for a few months if I was to lose my job. Rent can't. Thank you for clarifying that payments can be stopped/postponed, that is good to know.

dunstonh wrote: »

Not applicable to modern pensions. They can stop/start, up/down the payments with just a short notice.



Which is great for short term money but a complete waste of time for long term money.


its not a case about not trusting them. Its just their products are not very good an in general the people they use to advise you are limited and generally low skilled. IFAs account for over 3/4 of pension transactions. So, if you need to use someone, then you should use an IFA.

atush wrote: »

You need to start a pension at some point, then tranfer in your old pension into it. How much you can afford to put in, is something you have to work out. but you will still have to pay bills in your old age, and given the small size of the state pension you need to suppliment it with something.

Starting at your age, you should be putting in 13-14% of your salary into a pension. But that incl any tax relief, and employer's contribs (the law is changing and most employers will have to pay in in the coming few years). If you can affrod that much rught off, then put in lower and raise it every year as soon as you get a pay rise.

But, as you are already doing you also have to save outside your pension. Into an easy access savings acct for emergencies (get that up to 6 months spending in case you are made redundant) and then into other cash and investments to fund your life and your retirement. Use your ISA allowances to shelter the money from tax.

Sorry, this is a bit out of order in replies. I'm trying to do it on my phone but it's proving difficult!

The percentage you have suggested seems achievable, but I will need to confirm that when I start my new job. I will arrange to talk to someone in the new year and get it sorted.

Thank you to you both. I do have enough saved up not to worry for several months, hence why I'm now looking in a pension.

Andy7856

I'm no pension expert, but a few lessons I have learnt in the university of pension life...

1) Some pension providers / ISA providers let you save as little as £50 per month (aka about £1.66 per day - price of a cup of coffee at any high street outlet... you still sure you cant afford that??)

Even £50 a month into a pension is better that nothing..... like most say on here pensions are lot more flexible than you think, you can stop payments, pay in extra bonus as a one off. and transferr to other providers as you career takes shape...

2) Ok you have only made one payment into your previous pension, but I was ask them if this can be returned to you... cash.. then use this money to start the pension...

3) You should maybe speak to a IFA (not a life company sales man or bank sales man)

spexs

dunstonh wrote: »

Its about time at age 27 that you learn that bills need to be paid each month and that you make sure you afford them.

A bit harsh!

Nine_Lives

I disagree (with it being harsh) but hey ho. You know what they say about opinions.


Have you even done a break down of your monthly income/outgoings?

* The total money you have coming in
* All the bills you HAVE to pay (to live 'barebones'). This does not include spending on booze each weekend, treating yourself to a meal. It's things like rent, fuel, food, 'leccy/gas/water bills etc etc. Things you NEED to pay.

Then you'll be left with an amount. That amount is yours to do whatever you wish with. It's this amount you're working with.

If it means only having a booze up once a month then it's only once a month - nobody is saying don't live, but you'll need to prioritise & IMO planning for retirement comes above going on the razzle & dazzle every weekend.

Have you even broken it down? I'm not talking about guess work, i'm talking about ACTUAL figures, so you know 100% what you're dealing with.

freakyogre

K_P83 wrote: »

I disagree (with it being harsh) but hey ho. You know what they say about opinions.


Have you even done a break down of your monthly income/outgoings?

* The total money you have coming in
* All the bills you HAVE to pay (to live 'barebones'). This does not include spending on booze each weekend, treating yourself to a meal. It's things like rent, fuel, food, 'leccy/gas/water bills etc etc. Things you NEED to pay.

Then you'll be left with an amount. That amount is yours to do whatever you wish with. It's this amount you're working with.

If it means only having a booze up once a month then it's only once a month - nobody is saying don't live, but you'll need to prioritise & IMO planning for retirement comes above going on the razzle & dazzle every weekend.

Have you even broken it down? I'm not talking about guess work, i'm talking about ACTUAL figures, so you know 100% what you're dealing with.

Yes I have, but from your post I get the impression you are getting at why I haven't paid into a pension previously, rather than my actual questions asked.

I have actually just used the budget planner again and without putting in any additional spends (although this does include internet and mobile phone which I know aren't essential) and am showing as spending too much each month. This isn't the case as some things aren't a regular cost and of course some months I have had addtional costs, but it does indicate that I haven't got much leftover, hence why I haven't felt comfortable putting more in to a pension until now.

To clarify a few things and without going off on a total tangent. I don't smoke, I very rarely drink (and by rarely I mean about twice a year!) I don't spend money on the 'razzle and dazzle' on any weekend as I have never been one for going out like that.

I do spend money on the odd meal out, but I actually love cooking so 99% of the time, I eat at home. From my signature you can see how much I spend on groceries each month and to be honest, i'm pretty impressed with that figure already.

Because I spend so little on 'entertainment' I do treat myself once in a while. That will never change, otherwise what's the point?!

The reason I have posted about this now is because my new job is an increase in salary, not by a huge amount, but enough for me to feel comfortable putting some money aside.

At the moment almost half of my salary goes straight on rent. Then of course I have the usual council tax, gas/electric/water, car insurance, petrol, mobile phone (I don't have a landline), internet, TV licence etc etc. As I live on my own, none of these bills are split which I think some people struggle to realise!

I do have savings, as already stated. I have NEVER been in any debt and only buy things when I can afford them. If I can't, I either don't have them, or save until I can afford it. I have only ever had two things on finance, the first being my car (paid in full years ago and I only had it on finance as my car had just been written off) and the second is part finance on a brace I currently have. I did that over the shortest period as didn't want it hanging around. That will have finished in May, so I will have a bit more to put away.

Sorry to go on, but I just got the impression that you assume that I waste what money I have, which simply isn't the case. I wonder if the replies would have been different if the money I have in savings, was in an official pension?

RenovationMan

freakyogre wrote: »

At the moment almost half of my salary goes straight on rent. Then of course I have the usual council tax, gas/electric/water, car insurance, petrol, mobile phone (I don't have a landline), internet, TV licence etc etc. As I live on my own, none of these bills are split which I think some people struggle to realise!

Spending 50% of your income on rent is a huge proportion of your take-home. It looks to me that you are struggling to afford where you are currently living and should perhaps look for somewhere cheaper or get a house share, which would split the household bills.

freakyogre

RenovationMan wrote: »

Spending 50% of your income on rent is a huge proportion of your take-home. It looks to me that you are struggling to afford where you are currently living and should perhaps look for somewhere cheaper or get a house share, which would split the household bills.

I've lived here for 3 years on varying salaries (including less than I am currently on) and have never struggled, even when unemployed.

I appreciate my rent is a big proportion of my expenditure, however, I did live in a shared house for a year when I left home and wouldn't want to do it again unless I had to. The only good thing about it was I managed to save some money while there, but it was a pretty sad existence basically living in one room.

When I decided it was time to move I looked at a LOT of properties before I settled here. Trust me, there are some total dumps out there which I wasn't prepared to live in (and no, that's not me being fussy or a snob - my dad came to view a few with me and was disgusted with some of them).

I am happy to balance it out here. Yes, the rent may be higher, but it's a lovely place and I am happy here. In the future I will no doubt move somewhere else, but that's not something i'm thinking about at the moment.

RenovationMan

freakyogre wrote: »

I've lived here for 3 years on varying salaries (including less than I am currently on) and have never struggled, even when unemployed.

I appreciate my rent is a big proportion of my expenditure, however, I did live in a shared house for a year when I left home and wouldn't want to do it again unless I had to. The only good thing about it was I managed to save some money while there, but it was a pretty sad existence basically living in one room.

When I decided it was time to move I looked at a LOT of properties before I settled here. Trust me, there are some total dumps out there which I wasn't prepared to live in (and no, that's not me being fussy or a snob - my dad came to view a few with me and was disgusted with some of them).

I am happy to balance it out here. Yes, the rent may be higher, but it's a lovely place and I am happy here. In the future I will no doubt move somewhere else, but that's not something i'm thinking about at the moment.

Well there's your answer then. You have made a conscious decision to have a nice place to live, with all the additional expense that incurrs and so somethings have to be sacrficied. In your case it's retirement savings.

Unless you can increase your income or reduce your outgoings, there seems to be very little you can do as far as saving for a pension is concerned.