Pension Advice (22 Years old)

shadowcaz

Hi,
I am 22 years old and just about to start my first permanent job. With my contract i have the option to join the company pension scheme for which i have a few questions i have listed:

- What is a good percentage to put in my pension pot (employer will match the contribution), i have read the sticky which suggests 10%?

- i currently have a choice of 9 different funds. I can decide what percentage i want invested in each of the different funds:

• Aquila life UK equity fund - invests shares in UK and aims to achieve a return consistent with the return of FTSE
• Aquila life World (ex UK) index fund - Invests in shares overseas
• Aquila life currency hedged overseas equity index fund - Invests in shares in overseas companies split 50:50 with Europe and America
• Aquila Life over 5 Yrs Index-Linked Gilt Index fund - invests in UK government index-linked securities of 5 years or longer
• Aquila Life over 15 Yrs UK Gilt Index fund - invests in UK government fixed interests securities
• Aquila Life All Stocks Corporate Bond index fund - invests in investment grade corporate bonds denominated in sterling
• Aquila Life cash fund
• Aquila Life market advantage fund (ALMA)
• BLL Life diversified growth fund - mix of underlying BlackRock funds

BlackRock LifePath Funds - is the default fund
Not sure at all what i want to do here.

Thanks.

hcb42

you need to speak to their adviser, if you cannot decide for yourself, how risk adverse you are etc, not take advice here.

As for how much to put in, well if they are going to match it, see it as a pay rise, and put in the max you can afford.

redbuzzard

1. Sign up.

2. Put in at least what you need to to secure the maximum company contribution - how much is that?

3. Read the fact sheets for the funds. I haven't read them all and can't advise you, but at your age I'd probably be ignoring the gilts, bonds, cash and life funds and concentrating on equities. Some will sniff, but at this stage the Lifepath option is a reasonable choice, as it should be for a default. It uses a blend of mainly equity index funds, 40% UK, 60% rest of the world including c. 20% US.

25 years from retirement it starts to phase into less volatile funds but that's a long way off for you - until then, unless and until you switch your contributions will go into the equity index blend, and when markets are down your contributions will buy more units for you.

When you've done those three things, and made your fund selection, you can take a bit of time to consider whether you could and should do more, and whether that is better in the pension or in another form of investment/saving.

You can also take some time to read and learn, and form your own opinions about where best to invest, and the funds in your pension.

shadowcaz

Thanks for the quick reply and advice. Yeh i guess something around 10% would affordable. (still living at home with parents)

The employer contribution is age related. As i fall into the 16 to 34 bracket the employer will match contribution up to 6%.

Sorry i forgot to mention the pension booklet i am reading states my employer "cannot give investment advice. If you need advice you should contact an Independent Financial Adviser 'IFA'."

atush

at 22, I would say 11% overall (incl employer's contrib). So if you put in 6% and they put in 6% you are good to go.

I agree with redbuzzard, no problem with the lifestyle default overall here, but like he I have not looked at the performance of the funds so I would do that if I were you.

After this decide how much else you can put away. 3-6 months spending in cash ISas, followed by other savings in S&S isas and cash depending on when the money is/will be needed.

redbuzzard

atush wrote: »

...no problem with the lifestyle default overall here, but... I have not looked at the performance of the funds so I would do that if I were you.

Bearing in mind that last year's best performer is unlikely to be this year's;)

After this decide how much else you can put away. 3-6 months spending in cash ISas, followed by other savings in S&S isas and cash depending on when the money is/will be needed.

Yup. If you need a house deposit in the future, it's no good in your pension.

It can be quite hard to decide where best to save for later life, in particular how much to put beyond earlier reach in a pension. But the first bit is easy when you are getting free money from your employer. After that you need to review occasionally.

Very few people have too much pension, and it will be even fewer in the future.