Need to start something asap

fleetingmind

So I'm 34 and have no pension and know I need to get cracking on something. Must admit I'm geting depressed about the whole thing and scared I've left it too long.

Say I'm on £40k a year which equates to £3,333 per month before tax and NI. If I pay in 5% and my company pays in 5% am I correct that my 5% (166.66) is taken off and not taxed? So I'm taxed on £3166.34.

I understand I should be putting in 17% (half my age) but not sure I can manage that.

I also have no idea who to go for and also which one. Thinking a medium risk one. Any suggestions really appreciated.

xylophone

Is there a company pension scheme?

dunstonh

I understand I should be putting in 17% (half my age) but not sure I can manage that.

that is a rough guide for those wanting to retire at state pension age on a reasonable amount. However, it is not a fine tuned amount to suit circumstances.

There are consequences of you leaving it so late. You are about £35k behind where you would look to be at this stage (again, just a rough guide). So, having to pay more to make it up is one option. The other is to resign yourself to 25-30 years in retirement on a lower living standard.

If we use the 17% guide, you have 5% from the employer. That leaves you 12% to find. However, 2.4% of that is covered by tax relief. So, you only have to find 9.6%. That is a net contribution of £320 on your income.

You could start at what you can afford but then each year add another 1%. it will again cost you more later as you have to make up the missing amounts but 1% increases each year may be easy to find.

bigadaj

I agree with what dunstonh says but finances aren't fixed, and there are different approaches that can be utilised.

Pensions are good in so far as you get tax relief and employer contributions, so it's normally recommended to contribute to maximise employer contribution and also any 40% tax relief.

Beyond that the isa contributions are useful as you can access this money which you can't with a pension, and potentially use it to bridge a gap before the state pension kicks in for example. Many people also look at overpaying their mortgages as well.

People seem to be obsessed with retirement at 55, and whilst it's nice to be able to retire at 55 that leaves possibly 30 years to finance and fill. Gradational retirement seems far better for most people to me, slowly reducing days or hours until full time retirement. Pensions need to be considered as a part of your wider finances, including loans and credit card debt, house and mortgage, savings and investments including isas as well as pensions.

atush

I would go ahead and join the work pension at 5% matched, if that is the highest they will match to. Then see about raising your contribution. Ideally to 17% min, and adding more each time you get a pay rise in future.

Go thru you budget and do the MSE stuff like getting the best deals on phone, utilities, insurance etc. Make sure you have paid off all non mtg debt. Whack whatever you save extra into your pension.

fleetingmind

xylophone wrote: »

Is there a company pension scheme?

No not yet.

fleetingmind

dunstonh wrote: »

that is a rough guide for those wanting to retire at state pension age on a reasonable amount. However, it is not a fine tuned amount to suit circumstances.

There are consequences of you leaving it so late. You are about £35k behind where you would look to be at this stage (again, just a rough guide). So, having to pay more to make it up is one option. The other is to resign yourself to 25-30 years in retirement on a lower living standard.

If we use the 17% guide, you have 5% from the employer. That leaves you 12% to find. However, 2.4% of that is covered by tax relief. So, you only have to find 9.6%. That is a net contribution of £320 on your income.

You could start at what you can afford but then each year add another 1%. it will again cost you more later as you have to make up the missing amounts but 1% increases each year may be easy to find.

Thank you so much for your reply. Has eased my concerns a lot.

Any suggestions who/what pension to go for?

xylophone

No not yet.

There will soon have to be - do you know when? http://www.thepensionsregulator.gov.uk/automatic-enrolment.aspx

atush

fleetingmind wrote: »

No not yet.

But I thought you said they out in 5% matching?

If I pay in 5% and my company pays in 5% am I correct that my 5% (166.66) is taken off and not taxed?

atush

fleetingmind wrote: »

Thank you so much for your reply. Has eased my concerns a lot.

Any suggestions who/what pension to go for?

I would take out a PP via HL or Cavendish online, and use a basket of low cost trackers or a lifestyling fund, Until you get a pot large enough to make using an IFA worthwhile.


I assume you saw that the Chancellor made pensions even a better deal today, so get on it. Only difference for you is you wont be able to draw until age 57.

fleetingmind

atush wrote: »

But I thought you said they out in 5% matching?

They obviously will have to get one by the deadline for small companies. Currently they will match up to 5% on my own pension.