23 and wanting to start a pension

CurryCee

Hi all,

Just wanted to get some thoughts on my situation. Found out today that my employer isn't starting a workplace pension until April 2016, so I was looking to find out a bit more about it all.

I'm hoping to put away £500 a month into two different 6% regular savers (£300 and £200 respectively).

I was also hoping to put £250 (15% of my monthly wage) into my pension.

Does anyone have any recommendations as to the best private pension schemes or anything like that?

Thanks

atush

Do you know what your employer will offer once you start? Ie the min 1% Match? Or more? that could have some bearing here.

And if you dont have any debt, and aren't saving for something big like a mtg deposit ie already own? Then yes a pension is a good idea.

with 250/month and your employer will open one next year, i would not go with an IFA. I'd open an online pension with cavendish online, and i'd choose a lifestyle fund with 80%+ equities, or choose a global tracker.

Then you could decide to transfer it to an employers scheme later, or if your employer offers a small contribution to a NEST plan, i'd keep adding more to the one you pay into now. Basically if you have all your ducks in a row re no debt, an emergency fund, and a place to live you want a min of 12% of your salary in pension in total (this can include your tax relief and any employers contribs later).

but everyone is different, and this is just a rule of thumb?

Jaguar_Skills

Atush would you say Cavendish is the cheapest one? Would Vanguard strategy 80 be the sort of thing you'd be recommending for the OP?

Purplesky_2

As I am a 24 yr old, looking to do the same, do you understand investments, assets, diversification and risk?

You're starting at a fantastic age, able to take on a fair bit of risk and ride out stock market corrections. Ultimately a pension is a way of investing with some nice tax advantages, so you need to understand the basics of investing.

After that, I'll leave it to the more experienced people. We went about finding the fund we want in a quite unconventional way, under unusual circumstances, so I'm not able to say what the ideal way to do that is...

kidmugsy

There's a decent chance that the next government, of whatever colour, will replace the 20%/40% tax relief by 30% or even 33%. In your shoes I'd wait to see. Meantime I'd put my spare investing money into an S&S ISA instead.

Unless of course you're a 40% tax payer, in which case I'd roar ahead with the pension.

jamesd

Wait until after the general election for pension contributions at basic rate. Two of the main parties have said that they would do things to increase the tax relief for basic rate payments into pensions.

For higher rate or salary sacrifice this doesn't apply, both generate higher combined income tax and NI savings than the levels of basic rate relief that have been discussed.

atush

I disagree. Mainly because if you want to put a S&S isa into a pension later you will have to sell and crystalize a loss. And you lose compounded investment returns on the tax rel portion.

Give the size of contribs here, and the fact the pension is not yet going, very little will be invested before the election. I dont think letting the election wag the pension tail is a good idea here. Too many delay and they htink, oh they will change things in nov etc and never get around to saving.

As To Jaguar, Cavendish has a lot of different pensions on their site, some will be better for vanguard than others.

And as Purple says, you should look into learning about investments alongside.

princeofpounds

Most people your age have house deposits to worry about. Are you sorted in that department? Pension is good, but will not be accessible for such purposes and whilst renting in your 20s is not a problem, starting a family in insecure accommodation is not always straightforward.

And even if you are flexible enough to not mind, your future partner may not be.

Either way I'd still save for a pension now, but it might not be the best investment vehicle for all your savings if you have short term savings goals.

CurryCee

I was originally advised on here to put £300 (the monthly limit) in a First Direct regular saver for the 6% interest, then another £200 into a TSB one with the same rate.

Instead, I was thinking about not opening a TSB account and putting the £200 into a S&S ISA with First Direct (whilst still putting £250 into a pension of some form).

I guess so long as the money's being saved and not spent that's half the battle.

atush

As long as you dont put 100% of your money into one thing (ie cash S&S isas or pension) and split it as you propose that is fine.

and the S&S isa could years down the road be used for a deposit along with the cash. the pension bit you cant touch till 55-58 so while I rec doing it, i dont rec putting all your cash there.

Loughton_Monkey

CurryCee wrote: »

........I guess so long as the money's being saved and not spent that's half the battle.

In my view, more than half the battle. As an early retiree, comfortably off, I can personally testify that the main reason I could do this was by controlling my lifestyle [or to be accurate, the cost theorof].

Don't forget, too, a rigorous attention to your career. Sounds obvious, but this will help to increase the 'gross' potential of your income.

Alongside that comes a very rigorous and passionate determination to watch every penny you spend and ensure that you are building up a lifestyle that is sustainable while that gross income arrives, but more importantly maintains it for the following 30-odd years when you are retired and no longer earning.

Finally, but still importantly, there lies all the decisions on how to 'invest' the surplus. I don't think anyone can advise accurately since there are pros and cons with all approaches. But several general rules/observations.......

• Yes, you always need a modicum of 'saved cash' for safety, and for unexpected emergencies.
• The largest share should, however, be invested. Yes, it can be risky but over the long term it produces far better returns.
• Remember that these days, investing in S&S ISA's and Pensions are virtually identical. Only the tax treatment differs slightly. Each have their advantages and disadvantages.
• Investing in your own property is equally (or more) lucrative than investing in (say) equity funds. Some of that investment - the bit that gives you free rent for life after 25 or so years - is undervalued by many, but valued highly by the wise. But remember that the 'excellent' returns on capital valuation (house equity) is only 'paper money' until or unless you can plan either to downsize at some point in retirement, or use some other form of equity release.
• As a more personal (to me) observation, investment 'success' derived primarily from expertise in choosing the right investment vehicles at the right time [example, understanding that the minute I got into higher rate tax, then pension was wildly better than S&S ISA]. The other 'expertise' [such as which particular fund(s) or which particular house] is relatively less important.