Wait for goverment pension scheme or private pension

Will.ii.am

I was wondering what peoples thoughts were about this situation. I don't have a pension of any description, i'm 26 and on a low wage and was looking at putting £50 a month away(all i can afford at the moment) from next month in a private pension, but as we know the goverment pension scheme is here but because i work for a small company mine will not come into effect until 2014/15 i believe or there abouts as my company will not be taking it up until they need to. So is it worth waiting or starting a private pension as i'm not to familiar with pensions, any advice woud be greatly appreciated.

kidmugsy

Will.ii.am wrote: »

Ii'm 26 and on a low wage and was looking at putting £50 a month away(all i can afford at the moment) from next month in a private pension, but as we know the goverment pension scheme is here but because i work for a small company mine will not come into effect until 2014/15

Have you got a "rainy day" cash fund saved up e.g. six months' outgoings? If not I'd start there. Either put your £50 p.m. into an instant access Cash ISA or use a regular saver that lets you draw money out on demand. When the saver matures you can contribute the money to a Cash ISA and open a new regular saver. As well as accumulating some savings, learning to live on £50 a month less than otherwise will make it easier for you to adjust when you do start an auto-enrollment pension.

Will.ii.am

Thanks for the reply, luckily i'm in a situation of living at home at the moment and most of my money i can save goes into a cash ISA as i'm saving for a flat/small house so i do have a rainy day fund if i needed. I was just looking at starting to save for my retirement in some sort of fashion in the form of a pension. This is the amount i could save comfortable even if i got a mortgage at some point in the future.

kidmugsy

My own feeling is that pensions are an attractive deal when either (i) an employer contributes too, or (ii) you use them to avoid higher rate income tax, or (iii) you are close enough to retirement that the money is tied up for only a short time. Since none of these applies to you it might (who knows?) be better to save more for your house-buying plans. If you end up with a loan at a smaller loan-to-value ratio, it might be cheaper in the interest rate they charge you, or give you a wider choice of mortgages. A regular saver account might be a good way to go about this.

atush

I disagree (for somneone your age). Although you will only get BRTax relief, you will have 40 years of compound interest and investment returns to look forwards to. So the 50 a month you put away now will be well worth it. Id start right away.

If you can't afford to keep it up when you start your employer's scheme in a few years, you can transfer your pot or leave it to grow.

Will.ii.am

Thanks again for the replys, i was unsure if you could transfer a personal pension to this new workplace pension?

atush

You wont know until the time.