Pension or savings?

holderness

Okay, one thing to bear in mind at your age, savings are easily accessible, pensions are not... also if you are in the unfortunate position of having to claim jobseekers or housing benefit you will have to spend these savings to support yourself. telling the jobcentre or whatever that they are savings for your retirement wont wash...

dunstonh

The bottom line is that you are going to earn a finite amount during your working life. What you spend, how you spend and how much you spend will determine your lifestyle now, in the short term, medium term and long term.

if you spend it all now, you will be paying for that later.

Think of it like a see saw. If you push down on one side, it goes up in the other. Same applies to your spending. If you spend more now, it is money you wont have later.

There are very large segments of the UK population that are in for a pretty large drop in living standards when they retire because the consumer lifestyle they have lived, often based on credit, is no longer affordable because they failed to put aside for their later years. B&Q can employ so many pensioners.

freakyogre

Apologies for such a long reply. I thought i'd do it all together as my connection isn't great tonight. The joys of internet via a dongle - it's all mod-cons here!

atush wrote: »

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 ;-)

You did and I really do appreciate it. It has helped to know payments can be stopped if needed. Thank you again.

fairleads wrote: »

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.

My new employer do not offer a pension (it was made clear in the interview), so that is something I will just have to deal with. I don't have a choice in this unfortunately.

I will be looking into it shortly as like I said initially, I do not fully understand pensions so will need advice.

RenovationMan wrote: »

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.

I know I am behind in doing this, again, I stated that in my first post. Unfortunately I can't turn back time though!

Thank you for your reply, it is good to get more information. Once again, I might be about to ask a silly question, but is there a way of using the figure generated using the link above to find out how much 'ideally' I would need to pay in a month?
It would help to have a rough idea of what i'm aiming for. I have looked, but don't know what the interest rate would be to calculate it on there.

K_P83 wrote: »

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.

I appreciate your reply. I can be defensive (clearly ) but I just felt from your reply that you assumed I was (to be blunt) pi**ing my money away. I realise that you have to assume the basics though.

What I meant by not having the same things going in/out each month is for example; in my current job I get paid extra for working a Sunday, but that isn't guaranteed. Generally I work 2 a month, but not always, so that can't be included. Same with our quarterly bonus - I don't know how much this would be each time as it varies.

On the flip side I have 'one off' payments going out every so often. Again, as an example I started a course in September (luckily paid for by a relative before I get slated for spending money on that!!) In order to be entered for the exams (it's an accounting course) I had to register with the AAT, so that was around £100.
That is a one off though (for this year at least) and that's the kind of thing I meant that can't be worked into my budget.

When I put my basic salary in the calculator, I am effectively doomed, but that isn't the case. Trust me, I am terrified of ever being in debt so if I really was struggling I would do something about it.

K_P83 wrote: »

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

I suppose the way I look at it is quite black and white. I either

a) move, save money on rent, but live 'badly' now or
b) stay, spend money on rent and live 'badly' when i'm older

Neither sounds very appealing.

I cannot live with my parents, there is no issue there, but the main reason I moved out of home when I did is because the rent where we lived was so high (maybe I just live in a very expensive part of the country!) so we all 'relocated'. My dad and stepmum have recently both retired anyway - I will be having a chat with them about pensions

I cannot really think of anyone else I could practically live with. I don't have a huge number of friends anyway (i'm really selling myself here aren't I?!)

holderness wrote: »

Okay, one thing to bear in mind at your age, savings are easily accessible, pensions are not... also if you are in the unfortunate position of having to claim jobseekers or housing benefit you will have to spend these savings to support yourself. telling the jobcentre or whatever that they are savings for your retirement wont wash...

That's a very good point and one I hadn't considered, thank you. I know when I was unemployed I only had part of my rent paid and I understand it has recently changed to an even lower amount based on age etc. I haven't claimed since 2009 though, so it may well be totally different, but either way, I would have to use my savings.

Nine_Lives

freakyogre wrote: »

I appreciate your reply. I can be defensive (clearly ) but I just felt from your reply that you assumed I was (to be blunt) pi**ing my money away. I realise that you have to assume the basics though.

Well it wasn't meant that way. A lot of people 18+ booze a bit so you make your assumptions. Personally i rarely drink so it doesn't apply to me, but it doesn't have to be drink - it was an example. Substitute it for meals out or anything that may eat into your remaining money.

I have the discussion with the gf & she says she's not living life as a recluse. We/you don't have to, but being dismissive is only going to lead the individual down road 1.
People these days seem to love the excuses (i'm not saying you're giving excuses, but i'm also not saying that you're not). Quick to come up with reasons/excuses why they can't save. Need a new hairdo, need makeup, need to buy that cheesecake because you had a bad day at work - whatever.
Unless you're on megamoney then nobody said it's going to be easy.

What I meant by not having the same things going in/out each month is for example; in my current job I get paid extra for working a Sunday, but that isn't guaranteed.

The same for myself. An IFA asked what i earn - but it's not a question i can answer. My gf knows what she gets paid from month-to-month. She knows what she'll be picking up next May. I don't.
We're not even guaranteed 40hours anymore. 40 hours will get me approx £230net. I can get up to about £330 with overtime, but £330 is rare. My average would be about £270-£290, but it varies all the time.
If i have to make any calculations then i play safe - and use a 40hour basic of £230.
If i assume i'm always picking up £300 i'll come unstuck, so you have to play safe.

You say these calculators say you're going to sink. If that's the case then you can't afford your current lifestyle & while you may be comfortable with it, something will have to give.

How much money do you have each month to do what you wish with, once everything else is taken care of? (bearing in mind i explained earlier how to factor in one off payments such as car insurance).

On the flip side I have 'one off' payments going out every so often. Again, as an example I started a course in September (luckily paid for by a relative before I get slated for spending money on that!!) In order to be entered for the exams (it's an accounting course) I had to register with the AAT, so that was around £100.

Why would anyone slate you? If you're trying to better yourself that should only ever be :T

if I really was struggling I would do something about it.

Are you someone who can see it coming & do something before it's too late, or are you someone who's stubborn & will only do something when you're forced - which wont leave you in a great position.

I suppose the way I look at it is quite black and white. I either

a) move, save money on rent, but live 'badly' now or
b) stay, spend money on rent and live 'badly' when i'm older

Neither sounds very appealing.

True, but we can't all live in palaces.
I'd rather have a bit of a struggle in my earlier years though tbh. Retirement age is the wrong time of life to be struggling - that's just my opinion which i appreciate not everyone will agree with. "You have to be able to live" is one that i see a lot. I agree, but i've also seen old people who can't get by & are too old to do much about it & it's not nice.

Can't you move to something that's cheaper?Instead of £500pm, isn't there anything £400pm for e.g.? It's £1200 over 12 months.

. I don't have a huge number of friends anyway (i'm really selling myself here aren't I?!)

ditto



Anyway, good luck with your choices. I hope it works out.

atush

What I meant by not having the same things going in/out each month is for example; in my current job I get paid extra for working a Sunday, but that isn't guaranteed. Generally I work 2 a month, but not always, so that can't be included. Same with our quarterly bonus - I don't know how much this would be each time as it varies.

So base your first pension contribs on a % of basic salary not inlc the extras and use the extras for general saving adn pension extras.

As for the pensions vs ISA/savings debates, I've said it before and I will say it again as fairleads and others wont-both are good. Pensions get an immediate uplift of 20+ %, and isas don't. Both can be invested in many of the same assets so performance and management fees don't matter as much (but still matter overall). And usually not mentionned is that pension savings tend to be 'safe' from life's horrible little events such as benefits elegibility, and creditors. Isas and other savings can be fair game. Anothe thing not mentionned by ISa onk operators is that employers with mroe than 5 will have to start paying into pensions in the next 4 years.

but ISas can be used shorter term so are better for things you need money for prior to age 55.

Each has their place, neither is fully superior.