📨 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!

Unsure - Pension or OP

Hi All,

Looking for some advice and need to know what you would do.

A little about me, I'm 26 with a little one on the way. Currently I have no pension and little savings

I make small overpayments on mortgage each month (£50-100) but got thinking recently, should I be putting this money into a pension instead?

My company offer a pension where they will match my personal contribution between 3 - 7.5%

I earn around 32k so I don't think I am a higher rate tax payer

What would the mse do? Please advise

P.s - don't think I could stretch to doing both
Mortgage 2013 - [STRIKE]122'000[/STRIKE] 115'863
OP 2013 - 100
Loan 2013 - 3600
Credit Card 0% - 3800

2013 Will be my year for clearing debt
«13

Comments

  • Proxy
    Proxy Posts: 245 Forumite
    Your company is offering you free money. You should be reaching for this with both hands - with the tax relief the immediate profit is large.

    However you should take some concern to clear your existing high interest debts, such as your loan and CC (when it's not 0%)
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I agree, join the pension, you have been throwing away free money each month/year.

    And stop overpaying your mtg until you have cleared unsecured debt and built up some emergency cash. You need to have an emergency cash pot.

    With a little one on the way, time to start grown up finances lol.
  • dunstonh
    dunstonh Posts: 119,811 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    My company offer a pension where they will match my personal contribution between 3 - 7.5%

    You earn £32k a year. Currently you are throwing away £2400 a year of free money from the employer.

    If you paid 7.5% into the pension it would cost you £160pm (less if they operate salary sacrifice). You get £40 tax relief and the company add £200 (free money). So, each month your £160 is turned into £400. Nothing else comes close to that and you should join now. Employer pension schemes frequently offer death in service or employer provided life assurance as part of the package. Important with a child on the way. Plus, on death the pension fund value is paid out tax free.

    You need to improve your savings as well as clear your loan and short term debt. Stop overpaying the mortgage. Mortgages are cheap long term debt. You should not prioritise that.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • Ben-_2
    Ben-_2 Posts: 24 Forumite
    Ok, thanks for the advice.
    I will take up my company's pension scheme but could not afford/justify 160 per month... Will start do with 3-4%

    Will I receive 20% or 40% tax relief?
    Mortgage 2013 - [STRIKE]122'000[/STRIKE] 115'863
    OP 2013 - 100
    Loan 2013 - 3600
    Credit Card 0% - 3800

    2013 Will be my year for clearing debt
  • Southend1
    Southend1 Posts: 3,362 Forumite
    Ninth Anniversary 1,000 Posts Combo Breaker
    You should be contributing a lot more than 3-4%. Future Ben won't be very impressed when he's living off baked beans because present Ben didn't contribute enough to his pension!
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    Ben- wrote: »
    I earn around 32k so I don't think I am a higher rate tax payer

    Not even close: put that worry out of your mind.
    Free the dunston one next time too.
  • atush
    atush Posts: 18,731 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I will take up my company's pension scheme but could not afford/justify 160 per month... Will start do with 3-4%
    [/QUOTE

    If you put in 160, it gets rounded up to 200 by HMRC, and work puts in another 200.

    How can you not justify turning your 160 into 400 overnight?

    Future Ben won't just be dissapointed with you, he may just be disgusted as will Mrs Ben.

    Perhaps you need to cut back on luxuries and other discretional spending to afford this?
  • Ben-_2
    Ben-_2 Posts: 24 Forumite
    kidmugsy wrote: »
    Not even close: put that worry out of your mind.

    Are you sure... I'm not 100% hence my question

    But, my tax code is k50 due to company car, free fuel and private health care.
    Hasn't the 40% reduced to 32k?

    Please advise

    Appreciate the help!
    Mortgage 2013 - [STRIKE]122'000[/STRIKE] 115'863
    OP 2013 - 100
    Loan 2013 - 3600
    Credit Card 0% - 3800

    2013 Will be my year for clearing debt
  • Linton
    Linton Posts: 18,194 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Ben- wrote: »
    Are you sure... I'm not 100% hence my question

    But, my tax code is k50 due to company car, free fuel and private health care.
    Hasn't the 40% reduced to 32k?

    Please advise

    Appreciate the help!


    32K + tax free allowance = 37K in your case
  • Ben-_2
    Ben-_2 Posts: 24 Forumite
    Linton wrote: »
    32K + tax free allowance = 37K in your case

    But I'm in a negative tax code?
    Mortgage 2013 - [STRIKE]122'000[/STRIKE] 115'863
    OP 2013 - 100
    Loan 2013 - 3600
    Credit Card 0% - 3800

    2013 Will be my year for clearing debt
This discussion has been closed.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 351.2K Banking & Borrowing
  • 253.2K Reduce Debt & Boost Income
  • 453.7K Spending & Discounts
  • 244.2K Work, Benefits & Business
  • 599.3K Mortgages, Homes & Bills
  • 177.1K Life & Family
  • 257.7K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.2K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.