Should I pay in extra?

Reue

Hey guys,

Ive been reading through all the guides and some of the threads on here and have some questions:

Im 25 and am paying in 4% to my pension with my employer putting in another 4%. Unfortunatly this employer contribution isnt matched so if I raise my % they would not raise theirs.

- Is it worth me upping my %? MSE recommends age/2 so about 13% for me which would need me to up mine to 9%.

- Im also trying to save for a house deposit, would I be better staying at 4% to save for the house instead?

- What do you guys think is a 'decent' pension amount and what sort of final amount would I need to have accumulated in my pension pot to obtain that level?

Many thanks!

atush

In most cases I would say to up your pension. BUT

If you have debt, or you haven't saved an emergency fund of 3 months salary, or you need to save up for a deposit I would throw all my extra income that way at this time. If you don't feel you will buy in less than 5 years, Iw ould consider saving half in equities and half in cash and fill your ISAs if you pay tax.

With a proviso that you increase your pension contribs everytime you get a salary increase. Do it form the first month before you get used to this extra income.

How long have you been making pension contribs?

Reue

atush wrote: »

In most cases I would say to up your pension. BUT

If you have debt, or you haven't saved an emergency fund of 3 months salary, or you need to save up for a deposit I would throw all my extra income that way at this time. If you don't feel you will buy in less than 5 years, Iw ould consider saving half in equities and half in cash and fill your ISAs if you pay tax.

With a proviso that you increase your pension contribs everytime you get a salary increase. Do it form the first month before you get used to this extra income.

How long have you been making pension contribs?

Hi, thanks for the quick response!

I have no debt (aside from student loan of 11k) and have emergency fund savings in the ISA.

I've been making pension contributions for about 2 years so far and the pot value is 5k at the moment.

atush

Which means 12% is the figure it would have been best to save as 24 is when you started.

But, you can't entirely put your life on hold, and you have started your emergency fund (does it hold 3 months salary?). So saving for a deposit and other life goals should commence. But do increase your pension when you get payrises as 8% while good is not enough in the longer term. Other savings and investments such as equity ISAs can be used for retirement if you still hold them once you get there.

A good general plan of holding cash, pensions, property (incl the home you live in) and investments (ie equities) is always wise as you wont have all your eggs in one basket.

jamesd

Given your age and not owning a home I suggest that you stick to the 4% plus 4% employer match.

This is in part because rents tend to cost more than owning in many parts of the country, so getting into a place that you own can save you money long term.

It's also well worth considering buying a more inexpensive home initially and upgrading later. That way you start to get any lower costs sooner. You'll also benefit for a while from current low interest rates if you can get started on owning soon.

ukjoel

Do you have kids - Do you get any tax credits?

As pension contributions are not counted as income when claiming certain benefits you may find that your credits rise as a result of increasing your pension contributions.

Reue

ukjoel wrote: »

Do you have kids - Do you get any tax credits?

No kids or benefits of any kind.