What % contribution should I make?

jamesd

And sometimes they can be the only way to do salary sacrifice and save the NI. Not that they have to use salary sacrifice, so that would need to be checked.

abundant1972

Thanks again everyone...

So it's looking like the best plan is:

1) Clear debt
2) Save money for a mortgage deposit in an ISA
3) Start up a personal pension that I can use as a lump sum if needed

Getting overtime or increasing my hours worked per week is the best way to achieve this quicker.

Thanks for all the advice

jem16

abundant1972 wrote: »

3) Start up a personal pension that I can use as a lump sum if needed

A pension will only allow you access to a 25% tax-free lump sum. The rest you will have to take as a monthly income, either through an annuity or drawdown.

abundant1972

Thanks...

Better the lump sum come from a private pension though rather than my work pension where commutation rate is £12 lump sum for every £1 pension... Before I open a private pension I need to check the rate is better, right?

jem16

abundant1972 wrote: »

Better the lump sum come from a private pension though rather than my work pension where commutation rate is £12 lump sum for every £1 pension.

Before I open a private pension I need to check the rate is better, right?

Commutation rates don't apply to defined contribution pensions - they only apply to defined benefit pensions.

When you open a defined contribution pension, you choose investment funds to go inside the pension tax wrapper. Over the years these funds will go up and down as is normal.

Once you are ready to retire you will have built up a pot of money. 25% of this you can take as a tax-free lump sum, with the rest providing a monthly income.

With your defined benefit pension there is no pot of money. Your pension is worked out on the number of years service. In your case you are part of the NHS scheme where there is no automatic lump sum as in the case of earlier schemes. You are better off not taking a lump sum as the commutation rate is dire.

abundant1972

Thanks Jem... that's really helpful too.

I think I'm beginning to see the wood for the trees finally...

Today I worked out how much I need to clear my debt and am increasing my direct debit accordingly so it's automatic, even though it's going to use up all my spare monthly income pretty much. I'll be putting £560 per month from January into my debt...

After that has gone, I'll have £560 per month to go towards a deposit and I'll be used to living without it... so I should be able to save a £10,000 deposit in under 2 years... Once that's in place I can look at the pension market then, as it is likely things may have changed in the next couple of years...

I'll re-visit you all and see what's current and worth paying into. Thanks for all your help everyone!!!

:T

ispookie666

Good plan mate.. You have got me motivated aswell