At 24, should I worry about a pension?

cupofjava

Hello,

I'm 24, and I do want to start a pension with my current employer who offer a good pension scheme. However, this is my second 'proper job' since University and I'm not sure I'll stay for that long. I really haven't decided on a career, so I want to try new roles and gain new experiences. I may also be moving to the other side of the country soon for personal reasons. So, my point is - what do people who are just starting their working lives do about pensions? I didn't start one at my last job because the scheme was very poor, and I knew I wouldn't be there for long. Now, I've been at my current job 6 months and envisage being there at least another 6, so I want to take advantage of the good scheme they offer, but I'm worried about what will happen when I leave.

I can understand a pension is great if you're planning to stay with the same company for many years, but at the moment I have no plans for that. Yet, I don't want to jeopardize my future savings and understand that I'm essentially turning down 'free' money.

I also understand I can consolidate pension pots, but it looks like this isn't that easy and has several pitfalls? I really don't like the idea of having many 'mini' pensions scattered all over the place and really wish the system was more flexible!

It's causing me quite a bit of worry and I don't know whether to just suck it up and pay in, or wait a few years until I hopefully settle into a career somewhere.

atush

your plans re a job, career or location have NO influence at all on the decision.

Apart from trying to justify any additional expenditure you'd like to make now with your portion of the money.


It doesnt matter how long you work at a company- any money they pay into a pension for you is FREE MONEY you do NOT get if you dont join the pension; It is 100% free to you, as is the govt money to you ie tax relief. It could be 5-10% of your salary on t op- for free?

Here is a possible example (but will change due to your situation). Say you put in 80, and your company matches that. So you out in 80 and they do and you have 160. And the govt puts up yours to 100 (with the tax) so you get 180 for your 80. Every month. And sometimes your company will match inlc the TR so you'd get 100, and sometimes if you get salary sacrifice you'd get even more as you would not pay NICS on your contribution (company saves money too).

It is a 100% win win. For you.

As for moving pensions, it tends to be fairly easy. Easiest is to move ALL of the funds (not jus t your part but ALL) in to your new pension. Or leave the money in the old pension if allowed. Or move it to a personal pension. It may cost, but will be a tiny % of all the money you made on employer contributions and tax relief so worth doing.

So stop making excuses, and join today and stop flushing free money down your nearest toilet?

jem16

atush wrote: »

Say you put in 80, and your company matches that. So you out in 80 and they do and you have 160. And the govt puts up yours to 100 (with the tax) so you get 180 for your 80. Every month. And sometimes your company will match inlc the TR so you'd get 1000,

That would be great tax relief.

I'm sure you meant to say that you'd have £200 for a contribution of £80.

kinger101

The right age to join a company pension is the age at which you realize free money is good thing.

Archi_Bald

cupofjava wrote: »

I can understand a pension is great if you're planning to stay with the same company for many years, but at the moment I have no plans for that.

prepare yourself for the possibility that it might not be your decision how long you stay with the same company

cupofjava wrote: »

Yet, I don't want to jeopardize my future savings and understand that I'm essentially turning down 'free' money.

so why are you turning down the free money?

cupofjava wrote: »

I also understand I can consolidate pension pots, but it looks like this isn't that easy and has several pitfalls?

not sure it isn't easy but obviously it does involve some work. Deciding on what to do with your accumulated pension(s) is just part and parcel of moving jobs.

cupofjava wrote: »

I really don't like the idea of having many 'mini' pensions scattered all over the place and really wish the system was more flexible!

how much more flexibility do you want? You can either leave some or all of your pensions where they are or you can transfer some or all of them, and if you transfer them you can do it now or later.

cupofjava wrote: »

I don't know whether to just suck it up and pay in, or wait a few years until I hopefully settle into a career somewhere.

the one thing you can be certain about is that you will never get your employers' contributions retroactively. Also, every month you don't save up for a pension will be a month missing from accumulating your retirement funds. Not starting a pension now can also take years off your chances for early retirement.

It's your decision about your future.

meer53

At 24, yes, you should worry about a pension. If you don't, when you get to retirement age you will worry even more.

Start a pension now, pay as much as you can afford into it.

PeacefulWaters

Don't worry about it.

Just get started with one, pay in, maximise the free money your employer adds and then consider paying in more.

Simples.

cupofjava

So what does happen when I change jobs? You've all said that it's possible but surely having many different small pots becomes time consuming and costly to manage? Not to mention many advice sites suggest the possibility of fees involved with doing so. Who has actually done this?

I will be moving on within the next year. Aside from getting fired I'm not sure what I need to understand about how long being at a company for may not be my choice? If I move across the country I obviously won't carry on working for the same company.

DigForVictory

Sooner you start, sooner the creeping miracle of compound interest begins to work. Yes, keeping tabs on it all over decades is a bit of a chore but starting now it'll grow like a fruit tree.
Not worth Worrying about, just step up & pay in! Not unlike brushing teeth to minimise cavities - minor short term loss, big time longterm payoff!

PuzzledDave

cupofjava wrote: »

At 24, should I worry about a pension?

No, the time to start worrying about a pension is the day you start work as an adult. However, lets not get too hung up on the idea you are already a little late to the party but that you are considering showing up at all.

Look at it this way, assuming you have been employed for the 3 years since leaving university you could have put away just £50 per month and probably gotten your employer to match that. Total missing from you pension pot today:

£50 (yours) + £10 tax relief + £50 from employer = £110 x 36 months: £3,940

If you could have gone to £100, that would be: £7,920

And that's ignoring the hefty gains almost all funds have enjoyed over the last three years. If your employer has a final salary pension or similar -- the loss you have made is even larger.

I read elsewhere that you are concerned about moving/changing jobs... Well, sad as it is a job for life has long gone the way of the Dodo. No matter what your job is you cannot be sure that in 6 months you are not looking at redundancy/injury/company closure/other.
What will happen to your pension depends on the scheme but most likely it will be gaining slowly thanks to the investments your money is put into, best to think of it as a savings account -- it'll sit in the pension company until you retire.

kidmugsy

You are young enough to take this on the chin. Your question is bloody stupid. OK?