We’d like to remind Forumites to please avoid political debate on the Forum.
This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.
📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide
Starting pension when only 20 --Update #49
Comments
-
I would kindly suggest the OP does both. I started my pension at 23, when I was still renting and occasionally car-less (when a banger failed an MOT). Looking back now I am nearing 40, I am incredibly glad I have those early pension years under my belt.
I remain unconvinced I would have been better off in my 20s driving instead of catching the bus, or paying a mortgage instead of sharing with mates.
p.s. I am not a financial advisor either.
Ok, but my point is that it all depends on your individual circumstances. If the OP is due to inherit £100k from his gran then he can plan in one way, and if he is living in a bedsit after being kicked out of home by his parents then he should plan in another way. It all depends!! What is right for you might not be right for someone else.0 -
It's not a reimbursement of tax as OP has already stated that he is a non-taxpayer, but even if was tax already paid, OP gets it back by making a pension contribution, rather than it remaining with the treasury. And to pick up on a point you made earlier, the employer contribution is free money - if the OP doesn't make a pension contribution he doesn't get it.
Tax relief, tax reimbursement - splitting hairs here - I was referring to tax relief on contributions made. And I reiterate: there is no such thing as free money!! This is the most stupid phrase I've ever heard. Any employer contribution is money that is part of the person's remuneration. Some employers offer extra salary in lieu of joining the pension scheme.I also understand how ISA's work. However, consider this - OP can invest in exactly the same way in a pension and and ISA. Paying £80 into the investment via his employer's pension will get him a £200 contribution. Paying £80 into the same investment via an ISA will get him an £80 contribution. The ISA is never going to catch up.
The pension money is locked until at least age 55 and any annuity purchased with it will be subject to tax. Not so the ISA. I've already said my bit about the employer's contribution.I never suggested it is the most important item to save for. In an ideal world, the OP will make use of both, to utilise the tax efficiency of each wrapper, and maximise the flexibility. Regardless of how old OP is, to turn down what is being offered would be unwise. And getting in the discipline early gives OP the best opportunity of providing for a comfortable retirement.
I agree that he shouldn't turn down the pension if the employer chips in, but my point is that the OP needs to think carefully about his financial priorities at this stage.0 -
The pension money is locked until at least age 55 and any annuity purchased with it will be subject to tax.
Other than the 25% tax free and the roughly £10k that's covered by personal allowance.
My wife is also a non tax payer and puts her £2880 into her SIPP, into which the tax man puts an extra £720. So, she pays no tax yet gets £720 extra into her SIPP.
Sounds like free money to me particularly as she won't be paying tax in retirement either.I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
Just another vote here for the obvious choice:
Do the pension, it's a complete no-brainer for the following reasons:
1. You're young and waiting too late is one of the biggest problems with many people's retirement plans
2. You get free money from the employer
3. You get free money from HMRC because you get tax relief despite not not paying any tax!!
It's absolutely right that there are other things to consider, but this could be the single act which puts you on track for retirement. Once you've got the pot started (with all this tasty free money) you'll be much more motivated to keep it going and grow it further.0 -
Hi all, thank you all for your suggestions and comments so far.
I just thought I'd add some more into the mix and tell you what I'd like to achieve in an ideal world.
I plan to finish Uni (currently in first year) and save as much of my loans/grants as possible to give me a nice buffer of savings (I realised some of this will have to be paid back, but in the short term they'll be helpful)
Then I plan to complete the LPC - fingers crossed
In the meantime, for my duration of uni i'll probably still live at home as I commute, but if I moved out, it'd probably be into rented accommodation so saving for a house deposit isn't really a huge priority at the moment.
At the moment, I want to save as much of the uni money as possible and hopefully make it grow through ISA's etc, whilst putting my wage into a pension or ISA to give me a good starting point for the future.
Edit to add: can anybody tell me what SIPP stands for, and what it is please?
"Nothing, Lucilius, is ours, except time." - Seneca
Moral letters to Lucilius/Letter 10 -
Ok, but my point is that it all depends on your individual circumstances. If the OP is due to inherit £100k from his gran then he can plan in one way, and if he is living in a bedsit after being kicked out of home by his parents then he should plan in another way. It all depends!! What is right for you might not be right for someone else.
you never know what you wil inherit. You might just get 5K of that 100K if the gran has to spend it all funding a care home.
Relying on inheritance for retirement is unwise to the extreme.0 -
Anselm,
Can I ask what rate your student loans are? I heard that they were going up, but mine don't have them so am not sure.0 -
Relying on inheritance for retirement is unwise to the extreme.
I totally agree. You should assume that you're going to get zero from inheritance, and even assuming anything from state pension is risky!I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.
Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.0 -
For courses starting before 2012, I don't know what you pay back sorry.Anselm,
Can I ask what rate your student loans are? I heard that they were going up, but mine don't have them so am not sure.
If I'm looking at the correct thing, these are for anybody starting a course in September 2012 onwards
https://www.gov.uk/student-finance/repayments
The actual bit I pay back is 9% if you earn over £21k I think.
This is for the interest:
While you’re studyingRate of inflation (Retail Price Index) plus 3%£21,000 or lessRate of inflation£21,000 to £41,000Rate of inflation plus up to 3%£41,000 and overRate of inflation plus 3%Self Invested Personal Pension.
It's a type of pension, you can invest in many different areas, individual stocks, funds etc.
Thanks a lot. In my case would it be best to avoid a SIPP and pay the minimum into employers pension"Nothing, Lucilius, is ours, except time." - Seneca
Moral letters to Lucilius/Letter 10
This discussion has been closed.
Confirm your email address to Create Threads and Reply
Categories
- All Categories
- 354K Banking & Borrowing
- 254.3K Reduce Debt & Boost Income
- 455.3K Spending & Discounts
- 247.1K Work, Benefits & Business
- 603.7K Mortgages, Homes & Bills
- 178.3K Life & Family
- 261.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 16.1K Discuss & Feedback
- 37.7K Read-Only Boards