Complete pension newbie - help!

freedo50

Hi all,

I've been employed for nearly a year now, and haven't started any pension planning yet. I have a decent pot of savings and know how to look after money, but I have no idea how to go about setting up a pension plan, or even finding out if pensions are the best way to save for the future.

A bit about me:

• 22 year old graduate with no debts, except a 3 year student loan
• London resident
• Annual salary of £30k + bonus(es), which totalled £2k this year
• Monthly outgoings total around £1000 - £1100 (mainly rent and travel), which leaves about £600-£700 surplus

I've heard the old saying that you should put half your age in % into your pension (i.e. 11% for me), but I'm not sure if this is still good advice or not.


Ideally I wouldn't want to put more than half of my surplus into a pension because I want to start putting money away for property too.



Any help would be much appreciated, as you can probably tell, I'm not very knowledgeable on this front!

atush

First of all, doesn't your company have a pension plan? If not, by 2016 they will have to. If they have one join it.

As for you, savings- good. how much? 6 months spending? If not, save more in cash.

What other goals so you have? Home ownership? With 6-700 extra per month a personal pension of 100 per month until your company opens one is a good idea. and fill your cash and S&S isas with the rest.

freedo50

My company does have a pension plan, but no-one else in the company is currently enrolled in it, and the company doesn't make any contributions, so its no better than a private pension really. I'll have a about 9 months worth of outgoings saved (or at least I will have when my next paycheck comes in, it's a little larger than normal ), so I'm pretty good on that front.

In the future, yes I'd like to own property, but probably not for a few years yet, although obviously it'd be nice to already have a deposit saved when I do want to buy some!

I've just set up a regular savings account that I'm going to put the max. £300 monthly allowance into, and I'll be looking at the ISAs from there. Is it just not worth getting my own personal pension then?

BobQ

freedo50 wrote: »

Hi all,

I've been employed for nearly a year now, and haven't started any pension planning yet. .............

Remarkable! A young person with some sense! Well done.

Nothing to add to Atush's excellent advice.

atush

freedo50 wrote: »

My company does have a pension plan, but no-one else in the company is currently enrolled in it, and the company doesn't make any contributions, so its no better than a private pension really. I'll have a about 9 months worth of outgoings saved (or at least I will have when my next paycheck comes in, it's a little larger than normal ), so I'm pretty good on that front.

In the future, yes I'd like to own property, but probably not for a few years yet, although obviously it'd be nice to already have a deposit saved when I do want to buy some!

I've just set up a regular savings account that I'm going to put the max. £300 monthly allowance into, and I'll be looking at the ISAs from there. Is it just not worth getting my own personal pension then?

So, Cash, check.

Savings for short term, only you can decide but cash or S&S depending on the term. in general you dont go for equities in terms of les than 5 years but you don't knwo when you'll need it, and therehave been far worse times to buy (such as the top of a market).

But for a bit of long term, you can put in 100 into a pension alongside your 300into cash and your 200 into wherever.

if your company's or a personal one will depend on the costs and the investments available inside.

knuckledragger

freedo50,
<putting my flame proof suit on>
Have a look at:
https://forums.moneysavingexpert.com/discussion/3655837

Too late for me but in your position I'd be all over this.
Please don't re-ignite the moral debate.

atush

Don't see how that would help as he has no house no kids (ie the benefits part)?

knuckledragger

atush,
getting his rent/council tax paid in exchange for a big contribution to his pension provision seems a fair deal.

atush

Rent perhaps, but again the OP in the thread you were referring to also got HRTax releif on some of it?

In any case, that sort of scheme wouldn't see the OP here able to buy a house etc as all cash would be going into a pension.

Unlike some here, I don't say pensions are a waste of time- I beleive in them esp now you don't have to buy an annuity. But having said that, there are other aims in life such as owning your own home etc that need addressing by saving Outside of a pension into things like ISAs as well. Maybe we can leave such questionable schemes for those who already own their own homes and are earning HRTax ;-)

Rob_IFA

Hi Freedo

Firstly it is refereshing to see some one of your age looking at investing in a pension.

Just to give the basics:

Personal pensions are an excellent tax efficient savings vehicle.
the tax benefits include:

tax relief of 20%, 40% or 50% depedning on the tax rate you pay.
On your income you would receive 20% tax relief. That is of you invested £100 per month gross, you would only pay £80 and the pension povider would reclaim the other £20 from HMRC. Yiu can invest an equivalent of your annual earnings each year.

The fund grows virtually tax free and also on detah the fund can be Inheritance Tax free if the person you leave the fund to does soemthing with it within 2 years of your death.

You can vest the pension from age 55, which would include taking 25% as a tax free cash sum and the rest as an income. There are other options available at this time.

If you are thinking about starting one, think about what amount if income you would like at retirement (difficult I know as so far off) then you can do calculations to find what monthly amount yuou would need to invest.

the monies are then invested via a pension provider and can be invested in many different types of investments.

Hope this helps but you need to receive advice from a Independent Fianancial Adviser such as myself.

regards

Rob