Pension or savings?

Derivative

RenovationMan wrote: »

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.

You manage to put what I wanted to say in rather nice terms.
Sometimes I get the feeling people don't quite get it.

Why look at things backwards?
If you have nothing left at the end of the month, obviously you can't do anything about that - because you wouldn't know until it's already too late.

Get a spreadsheet, or even a piece of paper. Write down your rent, annually. Same with water, electricity, gas, council tax. Anything else is non-essential - you choose convenience over your future. (include food, yes, but include food at say £15/week, then you can add on whatever luxuries you want)

We live in an age in which having additional money is actually possible for the common man, and to see people squander the opportunity is just sad.

If you want a pension or savings, do the work and go for it. Don't expect money to just 'be there at the end'.

Something I've found in one of Loughton Monkey's posts comes to mind, managed to find it:

Loughton_Monkey wrote: »

It then follows, that if you are spending everything you earn, then savings doesn't enter into it. If you spend less than you earn, then by definition you are 'saving' the balance. So model what you spend and want to spend in the future. And then wrap around that what your income will be - earned and unearned (interest). The resulting calculation then tells you when you can retire.

If this gives unsatisfactory answers? Then go back to the drawing board. The answer, invariably, is to spend less. [Yes, I know this is really the same as saving more, but I very strongly counsel you to think from the spending angle. Because that's what lifestyle really means.

DMFR

Do you have a boyfriend you can move in with, or he moves in with you. If you have the household bills should be shared leaving spare cash to invest.

freakyogre

Just a short reply as I'm at work.

I think some of you have perhaps missed the point. Where have I said I cannot afford to pay into a pension (with my new job) or have savings? I haven't.

As already explained, my current salary isn't enough for ME to feel comfortable putting more money aside. It doesn't matter if you think I can, I haven't been happy to do so.

I finish here in less than 2 weeks and in my new job I will feel comfortable doing it (hopefully on top of savings). I have to be realistic though as sadly I won't be earning a fortune!

To be frank, how much I pay for rent isn't really relevant to my questions asked so I'm not going over that again. I don't have a boyfriend so the suggestion of moving in together isn't possible.

I do appreciate your replies, but it just seems my original questions have been ignored for an excuse to have a dig about other things which aren't an issue!

foreversummer

I must say I am pretty amazed by the attitude of some of the posters here. This lady seems to be asking some sensible questions regarding pensions which she starts by saying she does not really understand. She seems to have her finances pretty well under control - she works and is not reckless. Cut her some slack!

atush

I and some others gave the info needed.

Start a pension at an amt you 'think' you will be able to afford every month. More can be put in when you are flush, and payments increased with rises in salary. And modern pensions can also be stopped and started or changed in pmt of things get tight. Something to look into when starting one. And save for emergencies outside your pension (this help you keep form going the stop/start route)

So, Start one ASAP ;-)

fairleads

freakyogre wrote: »

To be frank, how much I pay for rent isn't really relevant to my questions asked so I'm not going over that again. I don't have a boyfriend so the suggested of moving in together isn't possible.

I do appreciate your replies, but it just seems my original questions have been ignored for an excuse to have a dig about other things which aren't an issue!

Welcome to the world of the internet forum where more often than not the replier's ego usurps experience. Suffice it to say that contributing to a pension without the benefit of an employer's contribution can be a waste of money. Before plunging into a pension situation, suggest you first start learning more about investing.

RenovationMan

foreversummer wrote: »

I must say I am pretty amazed by the attitude of some of the posters here. This lady seems to be asking some sensible questions regarding pensions which she starts by saying she does not really understand. She seems to have her finances pretty well under control - she works and is not reckless. Cut her some slack!

I'm sorry but I have to disagree. The lady is asking about starting a pension and while at age 27 it's not too late to start one, she is on the back foot and will have to put more money in than someone who started a pension at age 23 (for instance).

She has stated that she didn't have enough money left over for a pension after the usual expenses (rent, bills, food, etc.) and she has a very frugal lifestyle. She also stated that her new job has an increase in salary, not by a huge amount, but enough for her to feel comfortable putting some money aside.

I therefore don't think that it's 'out of order' to assume that even with her increase in salary, it might not be enough to fund a realistic contribution to a pension and that perhaps hard choices need to be made in order to do so, provided that a pension was a real priority for her. She replied that her priority was on a comfortable home. No probs, as long as she is aware that this may impact her pension savings.

Often when you ask a question on an internet forum you receive diverse advice and not what you were expecting, but that doesn't mean that the advice was wrong or that it was bad.

My own view is that you look at pensions savings not with a 'how much money do I have left each month to put in a pension plan', but instead 'how much money will I need in order to retire comfortably and how close am I to that goal with my current contributions'? For me, a pension should be the first 'bill' paid, not the last.

EDIT: Here is a pension pot calculator http://www.thisismoney.co.uk/money/pensions/article-1633402/Pension-pot-calculator-How-need-save-retirement.html. I'd suggest that anyone interested in a pension should calculate what they think they will need in retirement. For example, if we needed £20k per year to maintain our current lifestyles then we'd subtract £6k off that figure to account for the state pension and we'd be left with a £14k shortfall to fill. According to the pension pot calculator above we would need to save £233,800. Sounds a lot, and it is, but the earlier we start the more achievable it is. It's not achievable if we put away £50 per week because that's all we have left after rent, bills, socialising, food, etc.

Derivative

RenovationMan wrote: »

My own view is that you look at pensions savings not with a 'how much money do I have left each month to put in a pension plan', but instead 'how much money will I need in order to retire comfortably and how close am I to that goal with my current contributions'? For me, a pension should be the first 'bill' paid, not the last.

I would add to the above that it doesn't really matter what you want to 'prioritise', in the end, mathematics will do it for you. When you're 60 and can't afford to feed yourself, I'm sure you won't be looking back on the good old times when your rented home was shiny.

Nine_Lives

freakyogre wrote: »

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.

Sorry to go on, but I just got the impression that you assume that I waste what money I have,

Nonsense & down right incorrect.

I had no impression at all and was not judging. You've not paid into a pension previously - but what do i care? That's your choice. At 28 i've not paid into a pension either.

No. I wasn't judging at all or creating any sort of impression, i was merely trying to help you.

I don't know you! Therefore i have to give you the basics. I can't assume you're someone who knows what to do. As harsh as it sounds i have to assume you're totally clueless. We may address things you're already aware of - but that causes no harm. However if we assume you know everything & don't reply - then that DOES cause harm doesn't it.

Which is why i had to give you the basics - drawing up an ins and outs list, noting things down bit by bit. It's taking things to the basic. My gf couldn't grasp this but when she did it i helped her clear £thousands of debt.
If you're already aware then great, if not then it can only help.

As for some payments don't come out each month, that's easy to get round - you can manage your calculations to work yearly or whatever.
For example, my car insurance doesn't come out every year as it's CHEAPER to pay in 1 lump. Let's say it's £500. 500/12 = £41.666666666 per month, so straight away we have a monthly value for it, even though it's a yearly payment.

And so on.



The only impression that i have formed of you, is that you're quite defensive.

Nine_Lives

freakyogre wrote: »

To be frank, how much I pay for rent isn't really relevant to my questions asked so I'm not going over that again.

While you feel it isn't relevant to your original question, it most certainly impacts heavily on what you can and can't do (but you'll already know this i'm quite sure).

Don't get me wrong, i'm well aware of how certain vultures of MSE can be. I've had it myself where certain members only seem to register on MSE in order to aggravate others & i really don't agree with it. I don't think it's going on here though. I think you're getting some sound advice.


My own personal opinion (we're all entitled to one, even me ) is that you're unable or unwilling to ditch some of lifes luxuries right now in order to save for retirement.
Would living with parents be an option? A friend? Other relatives - in order to lower your spends & increase your contributions?

Based on the advice i have been given for myself & my brother, as well as my gf, and based on what you've given so far, i would reckon you'd be better off dumping your money in a cash ISA until you're in a position to throw it into a pension/S&S ISA as a lump sum & then contribute something decent that you can comfortably afford. That is the advice given to myself & i'd hazard a guess at it being applicable to yourself also.

So there would be my view - savings. That answers your original question