I have debts - should I still start a pension?

stressqueen

I am a recently married 33 yr old. I am about 10k in debt (I know, I know). All my cards are on 0% and I am expecting a very small windfall shortly which will help me clear a small loan but still leave me with several k on cards.

I am extremely concerned about my financial future and want to get my house in order. I paid into a pension for about four years between the ages of 23-27. I stopped my pension contributions during a difficult period financially and never resumed them. I would like to do so now, but is there any point when I am in debt? We own our house but have an enormous mortgage - 150k.

Any advice you can give me would be most appreciated.

Thanks, sq

CLAPTON

clear the debts...then start the savings, then start the pension (now if your employer was also contributing to the pension then maybe that would be different )

Paul_Herring

What sort of pension does your employer provide? Defined Contribution or Defined Benefit?

If DC, do they offer to match any contributions?

stressqueen

Paul_Herring wrote: »

What sort of pension does your employer provide? Defined Contribution or Defined Benefit?

If DC, do they offer to match any contributions?

Hi. I should have made this clear in my original post.

I am a freelancer in the film industry, and so I do not have an employers pension of any description. We have to arrange all of these things for ourselves.

I am tempted to just restart my pension contributions anyway, as I am likely to be carrying my card debts for a while yet, although always have them on 0% or as low as I can get them. I hear all these scare stories about people not making a provision for the future, and I hear that the earlier you make contributions, the better it is.

Dithering_Dad

I'm a freelancer too, but in I.T. and I set up a stakeholder pension. This allows me to invest £300 a month, with no questions asked about my actual income. I can also make payments straight into it from my limited company. I'm still just starting out though, so haven't made an "employer" contribution as yet. The advantage of the stakeholder is that I can stop and start contributions without penalty for those periods when I am not working and so need to cut back my outgoings.

I'd start a pension whether in debt or not because as you said, the longer timeframe you have to invest, the greater the gains. If you take the logic of not investing because you have debts to the next step, a mortgage is a debt (and a very large one at that) so should you not pay into a pension if you have a mortgage?

dunstonh

I am a freelancer in the film industry, and so I do not have an employers pension of any description. We have to arrange all of these things for ourselves.

Pension has just moved up the priority list then as you dont qualify for SERPS/S2P. Just the basic state pension at little over £4300 a year.

I'm a freelancer too, but in I.T. and I set up a stakeholder pension. This allows me to invest £300 a month

Oh DD, at £300pm you really need better than a stakeholder. I cringe at an amount like that being invested in a bog standard managed fund. Still, we have your thread for that

stressqueen

What sort of pension should I have if I only have £100 a month to put away?

dunstonh

Your state retirement age is 67 and early retirement is not likely to be an option for you so that gives you 34 years to build up a pot.

£100pm for 34 years using 5% for growth to take into account some inflation and charges would give you a fund pot at the end of £118,094. At 5% p.a. that would give you £5904 a year income. However, you would have to increase that £100pm periodically to ensure it maintains real value. Otherwise that £5904 will buy you a mars bar in 34 years time.

Thats a quick and dirty calculation and not an actual projection using a proper contract.

stressqueen

Of course I would increase it - and I already have the contributions I made in my twenties.

stressqueen

So a stakeholder pension is the best option (only option?) for me? Or would you advise another type of product? (I need something I can't access). And another stupid question - this pension would be in addition to the state pension?

dunstonh

Of course I would increase it - and I already have the contributions I made in my twenties.

Didnt want to assume anything when I said that. Far too many people leave their pension contributions at the amount they start with and never top them up.

So a stakeholder pension is the best option (only option?) for me? Or would you advise another type of product?

If you are going to do it yourself and you have no investment knowledge, then go with a stakeholder. If you have investment experience or going to use an IFA, then I would use a personal pension.

And another stupid question - this pension would be in addition to the state pension?

Yes. You still get the basic state pension. It's only the second state pension you wont get and thats because you are not employed but self employed.