Starting pension when only 20 --Update #49

Anselm

Firstly, I struggled with the title, so it may not get across what I wanted it too.

But, basically, I've worked for a department store part time for 3 years, and we have the option to contribute to a private pension and I want to know if I should do it.

Off the top of my head (because I don't have the exact details at hand) my employer will match my contribution and double it, and I can choose whether I want it to go into low/medium/high risk places.

As I'm 20, is it worth paying into the pension scheme, and if so, which category of risk should I put it in? It would only be a small amount of around £50 a month.

Any help/ideas/advice would be greatly appreciated.

JoeCrystal

Yes. Absolutely! Starting at such an early age meant you got more time to do well in your retirement. You need to double check the company contribution but it is still free money! The pension contribution gets tax relief so while it may be £50, you still only pay £40 and if they match contribution, your pension fund gets £100 instead. If it is more than matching contribution, even better! Where else you can double your money?

Cheers,
Joe

atush

yes,m the best time to start a pension is when youa re young, and the money has 40 or more years to grow.

Join it.

but I would say, i'd use spare money to pay off debt before saving in other ways.

Anselm

JoeCrystal wrote: »

Yes. Absolutely! Starting at such an early age meant you got more time to do well in your retirement. You need to double check the company contribution but it is still free money! The pension contribution gets tax relief so while it may be £50, you still only pay £40 and if they match contribution, your pension fund gets £100 instead. If it is more than matching contribution, even better! Where else you can double your money?

Cheers,
Joe

Thanks for replying Joe. When I'm next in work, I'll ask them for all the paperwork, so I can double check etc.

Would you be able to clarify the bit in bold please? I don't pay tax as I earn below the threshold, so would £50+employers contribution not go into the pension? Can you tell I'm struggling? :rotfl:

ETA:

atush wrote: »

yes,m the best time to start a pension is when youa re young, and the money has 40 or more years to grow.

Join it.
but I would say, i'd use spare money to pay off debt before saving in other ways.

Hi atush, thanks for your help. I currently hold no debt other than student loans and maintenance loans. I get a small wage from work that I don't need desperately, because uni loans cover my outgoings - so essentially, I end up spending the wage on crap, so I was looking at ways to use it better. I wanted to look at S&S ISAs and pensions, but I need to learn more about them first!

bigfreddiel

Anselm wrote: »

my employer will match my contribution and double it,

no brainer innit - your company is GIVING you money - grab it

also hmg will give you even more a wopping 20% in other words if you put £100 pounds intoyour pension hmg will give you a furthr £20, so all of a sudden you've put in £100 and your pension total is £220 - fantatastic

keep that up for 40 years, compound the intererst and you will have a very happy retirement

btw as you're only 20 the rule of thumb says you should aim for half your age as a percentage of your salary to contribute to your pension, i.e. 10%

go for it

fj

McKneff

If your company is offering you a pension, they are giving you free money along side your contribution. Now, you'd be daft to turn free money down wouldn't you.

IsAs are great but they are a temptation to dip into when you want/need something further along the line.

Even if you jst stay with this company for 5 years, it will be worth a tidy little sum in 40 odd years time.

Get in there as soon as you can.

Anselm

bigfreddiel wrote: »

no brainer innit - your company is GIVING you money - grab it

also hmg will give you even more a wopping 20% in other words if you put £100 pounds intoyour pension hmg will give you a furthr £20, so all of a sudden you've put in £100 and your pension total is £220 - fantatastic
go for it

fj

Cheers. Yes, a no brainer - now I'm starting to realise I should have started it a year after joining the company!

Is the extra 20% automatic - I don't pay tax on my wage

McKneff wrote: »

If your company is offering you a pension, they are giving you free money along side your contribution. Now, you'd be daft to turn free money down wouldn't you.

IsAs are great but they are a temptation to dip into when you want/need something further along the line.

Even if you jst stay with this company for 5 years, it will be worth a tidy little sum in 40 odd years time.

Get in there as soon as you can.

Indeed, I'm rueing all the free money I haven't gotten

With the ISA, I was thinking putting a small amount in i.e £500, possibly into an S&S ISA and leaving it - but I haven't properly delved into the ins and outs.

I know I'll be with the company for the duration of my degree and possibly afterwards depending on prospects! So, atleast another 2 and a half years.

Thanks all for your help.

jamesd

For a young person, high risk is the best choice on pure investment grounds. But you do need to be sure that you can stomach a drop in value of at least 50% during a bad year. High risk should mean bad year drops of at least that much. That's what the main UK stock market is expected to do.

The general guidance in investing is that the higher the level of investment risk you take, the more the money grows over the long term, but the greater the short term variations in value are. Picking a risk level so the short term variations don't cause you to panic sell or give up is important.

Tammer

Hi OP,

You've asked twice so far and no answers yet.

You can normally pay up to £3,600 a year into a pension and get tax relief, even if you pay no tax.

This applies to personal pensions, including group personal pensions.

T.

Anselm

Tammer wrote: »

Hi OP,

You've asked twice so far and no answers yet.

You can normally pay up to £3,600 a year into a pension and get tax relief, even if you pay no tax.

This applies to personal pensions, including group personal pensions.

T.

Thanks a lot :beer:
Just to clarify, is the £3600 made up of mine + employers contribution, or solely my contributions?

Tammer

Hi,

Your contributions.