Just Started to Save

atush

Ok first of all, before you mentioned it would be nice to have a 'pot' of money come a rainy day.

well what if it rained tomorrow? Do you have any cash savings at all? Or are you just treading water?


You should really have an emergency savings pot. Of at least 3 months outgoings. So if you dont have one, do this. I would say instead of pension, but given you are a HRTpayer, I would split your extra into pension and emergency savings. then all into pension after your pot is as big as you need it to be.

2006Kuredu

Thanks Atush - My rainy day fund so far consists of under £500 so I think its worth putting into that then a pension isnt it?

Notfarfromtheborder

2006Kuredu wrote: »

Thanks Atush - My rainy day fund so far consists of under £500 so I think its worth putting into that then a pension isnt it?

In an ideal world, yes, however there is speculation of 40% tax relief being reduced, your £300 'savings' would equate to £500 contribution in a pension (as long as you have enough 40% allowance to cover £6,000 per year contributions)


It may not be the most popular response on here but I was in a similar boat and am just lumping into my pension as much as I can whilst 40% relief is still there.


All depends on circumstances, doesn't have to be all or nothing, some could be saved, some into pension.

atush

Your rain day fund is far too low for someone of your salary and responsibilities. Tax relief or no, you are just too close to the edge.

however, unlike many here, I dont think you have to put 100% of your savings in any one vehicle (and myself I use 4 or more).

Plus pensions these days can't Vanish as such. Unless you try to transfer an existing pension thru a scammer offering you investments in forests, colored gems, property abroad and the like.

In your case, with the competing attractions of tax relief at 40% and avoiding financial meltdown i'd choose to split your 300 pot 200 pension, 100 savings probably in my case as it would take you only 5 months to get to 1K, and 10 to get to 1500, plus in that time you would get an extra 800 in tax relief on your pension contributions. Win win

2006Kuredu

Thanks Atush.

I am going to start doing an immediate injection into my rainy day fund. I have just received this from my company pension scheme, not sure if this changes the advice received along this thread......


Thank you for your email. With regards to your query

As you are contributing via salary sacrifice, you are contributing from your Gross salary, before Tax and National Insurance contributions have been deducted. This means that you are receiving full tax relief (at your marginal tax rate) on your employee contributions immediately, and therefore you do not have to claim the additional tax relief from the HMRC.

Furthermore, given the basis of your contributions, i.e. salary sacrifice, all contributions are treated as employer contributions because they have not been taxed. Therefore, according to the pension provider your total contributions are classed as such.

2006Kuredu

So the first part is done, I've changed my pension contributions to 10% of salary so £375 per month however by my calculations it seems it will only cost me £225 per month so Im getting £150 free from the tax man and another £187 free from my employer! Sounds too good to be true getting £562 for £225!! There must be a catch somewhere

The £100 extra I think shall now go in the rainy day pot as suggested along with any other "spare" I ever find

atush

Do a spending Diary and see where every penny you spend goes.

You will soon find waste, to convert to more savings.

And no, there is no "catch". this is why we were so adamant you pay more in. And in fact, you'll save an extra 2% of nics (on HRT, 12% on basic rate) on those contributions ie the 225. Due to it being salary sacrifice.

f you weren't sailing so close tot eh wind with just 500 in savings, we would have said bung the lot in (which you can do later once you have a larger pot)

2006Kuredu

Thanks Atush and All - Once Ive filled my other rainy day pot Ill bung more into the pension. I guess the only thing I dont know is what the pension is like in terms of quality as its chosen by the employer but either way, free money is free money!