At 24, should I worry about a pension?

TheTracker

A contrarian view. I'm glad I didn't start a pension until my late 30s. Deciding not to do so in my early 20s was one of the wisest decisions I ever made. I ploughed all my money into preparing for and starting my own businesses in my 30s, saving a house deposit, enriching myself through study and travel along the way. I was doing very well for myself at age 24 working for the man. I sincerely believe if I'd taken some of these 'free' perks like pension matching when I was in my 20s I'd still be working for the man, with a healthy pension, but far less happy and less wealthy than I am now. Much depends on your own ambitions and working life strategy. If you have any bent for entrepreneurship or want to run your own business in future, I'd advise taking that into consideration while making your decision.

Prayer-in-C

I was enrolled into one of the largest UK (DB) final salary schemes when I was 17, scheme rules mean that I cannot pay in for more than 40 years, which means when I'm 57, if the funds keep performing the way they are, I will be retiring much sooner than most! Especially as I'm also paying an additional £20/week into an AVC (in house scheme, BRASS), which is also tax efficient in the way it is deducted from my salary.

I've only really joined the forum to encourage the OP to get a grip and start paying into a pension scheme NOW! Free money is free money, and it may well be a case of short term pain, long term gain!

Incidentally, in my case, I pay in £41.37/week, and my employer pays in £62.06/week.

I then pay in an additional £20/week, (so total £123.43/week).

If my thinking is correct, I'm also saving £12.27/week in tax (£638 a year), (20% £61.37)

So whilst I may be paying in £3191 year, it's only costing me £2553.

jem16

Prayer-in-C wrote: »

I was enrolled into one of the largest UK (DB) final salary schemes when I was 17, scheme rules mean that I cannot pay in for more than 40 years, which means when I'm 57, if the funds keep performing the way they are, I will be retiring much sooner than most!

A Defined Benefit scheme doesn't have funds which perform. It has a defined set of benefits which pay out according to years of service and salary. Your retiral age is set in the scheme and is most likely to be age 60 or age 65. Taking it at age 57 even though you may have the full 40 years would see an actuarial reduction of around 5%pa.

Especially as I'm also paying an additional £20/week into an AVC (in house scheme, BRASS), which is also tax efficient in the way it is deducted from my salary.

All pension contributions are tax efficient as you get tax relief no matter how it's paid. In some cases an AVC can be less tax efficient than a PP or SIPP if your normal contribution takes you below the personal allowance.

Some AVC schems allow you to take your tax free lump sum from the AVC pot and keep valuable index linked pension. This is good but otherwise AVCs are pretty much redundant nowadays and you would be better using a PP or SIPP which could be taken earlier and avoid reducing the main DB scheme.

atush

stclair wrote: »

I have my own little theory pensions are questionable.

Personally I'm 38 and think by the time I get to retirement age if their is one by then I'll just be expected to work until I die at my desk.

I have a little theory that people who think like you will never afford to retire. Because they didn't save for it

atush

cupofjava wrote: »

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.

I answered that in my first post.

You leave it where it is, you move it to your new job, or you move it to a personal pension.

atush

cupofjava wrote: »

Damn, you're a condescending bunch!

Considering the auto enrollment age is 22 and I know people reaching 30 who have no pension yet, I would say I've got plenty of time. You also don't know my personal circumstances.

Anyway. My worry was what would happen to multiple pension schemes over multiple jobs. But since everyone's just focused on telling me to just shut up and join without understanding the ins and outs, I guess I'll just go back to the independent advice sites.

Not condescending, just answered your question.

And basing your decisions on the very bad decisions of others (ie your friends at 30 with no pensions) is bonkers. You dont have plenty of time if A- you want a good retirement or B- you want to retire before state pension age.

Join the pension, get the free money.

atush

cupofjava wrote: »

I appreciate the point you're trying to make. My first job was minimum wage and offered no pension. With this job I'm just finishing my probation which gives me access to the company scheme.

I did ask specifically about changing jobs, because I don't see a job as being a job for life. I was questioning what would happen over to all the different schemes from the different jobs

And I answered it twice along with others

atush

TheTracker wrote: »

A contrarian view. I'm glad I didn't start a pension until my late 30s. Deciding not to do so in my early 20s was one of the wisest decisions I ever made. I ploughed all my money into preparing for and starting my own businesses in my 30s, saving a house deposit, enriching myself through study and travel along the way. I was doing very well for myself at age 24 working for the man. I sincerely believe if I'd taken some of these 'free' perks like pension matching when I was in my 20s I'd still be working for the man, with a healthy pension, but far less happy and less wealthy than I am now. Much depends on your own ambitions and working life strategy. If you have any bent for entrepreneurship or want to run your own business in future, I'd advise taking that into consideration while making your decision.

I take the view you were lucky starting your company made you wealthy. Most people dont start their own, and some that do the company fails.

ViolaLass

stclair wrote: »

I have my own little theory pensions are questionable.

Personally I'm 38 and think by the time I get to retirement age if their is one by then I'll just be expected to work until I die at my desk.

You do realise, don't you, that the Government can't force you to keep working? They can move the state retirement age back, that's all, but that's separate to company pensions.

Spidernick

The trouble is, at 24 pensionable age seems a lifetime away and not worth worrying about to many. I was talking to a group of mid-20s colleagues a few weeks back and made the point that putting into a pension now and having a pot that has 30+ years to grow is a must (I'm pleasantly surprised at how my pensions from my early employments have grown and I wasn't paying in large sums at that time). Unfortunately most of them just gave me blank looks.

To the OP I would say join the scheme and very soon you won't even notice the contributions coming out (another early lesson is not to look at gross salary and compare it to net after tax, NI, etc. as it can be too depressing!) but meanwhile your pot should grow nicely. No guarantees, of course, but history suggests that, in the long time, the stock market will only go up and of course there are dividends and interest adding to the fund in any case, which themselves also serve to increase the overall pot.