Personal Pension into Sipp

sh856531

Im currently 19 at university and self employed.

I want to get the most out of my money.

Just one added thing that I didn't see mentioned - that you may want to consider. If its the case that you rent your home or will need to in the future - you may well want to consider prioritising getting a house deposit over saving for a pension.

If you are renting - you are probably setting fire to hundreds of pounds a month with nothing to show for it. Whilst this is absolutely fine - when you think about the amount of money involved - you may want to consider sorting that situation out before thinking about pensions.

Either way - kudos for thinking about pensions at such a young age! ;-)

S

xmodz

Currently living at home while at uni, didnt see the point in getting more debt to live somewhere else

sh856531

Currently living at home while at uni, didnt see the point in getting more debt to live somewhere else

Sure - bear in mind though - at some point you will need to move out and personally I'd want to be paying off my own mortgage rather than someone else's as quickly as possible ;-)

Good luck!

jamesd

Since you don't currently own your own home and I assume that you will want to at some point in the next few years, I suggest that you give S&S ISA investing priority over pension investing at the moment. The difference between rent and owning costs can be substantial and that's a potential nice bit of long term gain for you.

If you get a job where the employer pays in, do join that pension scheme and pay in enough to get their maximum match. Two exceptions to this: NEST-based pensions and that of one of the main supermarket chains, both of which are best avoided at younger ages.

xmodz

jamesd wrote: »

Since you don't currently own your own home and I assume that you will want to at some point in the next few years, I suggest that you give S&S ISA investing priority over pension investing at the moment. The difference between rent and owning costs can be substantial and that's a potential nice bit of long term gain for you.

If you get a job where the employer pays in, do join that pension scheme and pay in enough to get their maximum match. Two exceptions to this: NEST-based pensions and that of one of the main supermarket chains, both of which are best avoided at younger ages.

yes, iv only been able to fill around half my stocks and shares isa this year, after april i will hopefully be able to subscribe my whole S&S.

the only reason i want to start is to get a little ahead

xmodz

sh856531 wrote: »

Sure - bear in mind though - at some point you will need to move out and personally I'd want to be paying off my own mortgage rather than someone else's as quickly as possible ;-)

Good luck!

Thank you
yes, my plan was to build up my s&s isa for 6/7 il be around 25 then.


hopefully will have enough for a house deposit by then

jamesd

Don't worry about getting ahead on the pension. That pension tax relief is available later if you want to move ISA money into a pension at some point. But once it's in the pension it's no longer available for your property deposit.

If you want to think longer term, you might start wondering if you want to retire early, perhaps before age 55 or whenever you can take pension income under the rules that'll apply for you in 35+ years. Any amount can be taken from an ISA but there's a cap on how much that can be taken from a pension. That combination of availability before the pension and no cap makes ISA use a really good part of early retirement planning. Not to the exclusion of pension use, but as part of the mixture.

Another possibly interesting bit of tax exploiting is use of a pension lump sum with an interest only mortgage. You can end up with the pension lump sum clearing the mortgage so it effectively costs you nothing because it'll all be covered by the tax relief you got on the way in. But first you need to buy the place and for that the ISA is the best tool.

xmodz

jamesd wrote: »

Don't worry about getting ahead on the pension. That pension tax relief is available later if you want to move ISA money into a pension at some point. But once it's in the pension it's no longer available for your property deposit.

If you want to think longer term, you might start wondering if you want to retire early, perhaps before age 55 or whenever you can take pension income under the rules that'll apply for you in 35+ years. Any amount can be taken from an ISA but there's a cap on how much that can be taken from a pension. That combination of availability before the pension and no cap makes ISA use a really good part of early retirement planning. Not to the exclusion of pension use, but as part of the mixture.

Another possibly interesting bit of tax exploiting is use of a pension lump sum with an interest only mortgage. You can end up with the pension lump sum clearing the mortgage so it effectively costs you nothing because it'll all be covered by the tax relief you got on the way in. But first you need to buy the place and for that the ISA is the best tool.

thats actually a good idea, but me being 55 is so far away, the rules might change