Pensions - to start or not to start?

Wayne87

I appreciate every person has different circumstances, but I'd be really grateful to hear people's thoughts on my situation please.

I do not currently have any pension plans and my employer currently does not provide any either. (They will within 2 years I believe). I am a basic rate tax payer. I'm 30 year's old.

I am debt free. I max out my ISA allowance every year and I have a nice array of high interest current accounts and savings accounts. I don't own any property but when I decide to buy, I will probably have enough for a deposit by raiding my ISAs, so even that is not a MAJOR concern really.

I feel like I'm doing everything right for now, but not for the future. And. I feel like if I leave my pension plans much later, I will be ruining some of the benefit I could be gaining in these mortgage free years.

Do you think I am right to be considering starting a pension scheme? If so, what type do you think would be best for me given the (admittedly limited) info I have provided?

Thanks girls and guys

PeacefulWaters

Yes. Start now. Review again when your employer joins in.

Perhaps look at Cavendish Online and consider global equity funds as a starting point.

atush

I agree, start now.

No debt, cash reserves and S&S isas so enough for a house deposit. so you are in a position to start a pension.

As a rule of thumb, starting at 30, look for 15% of salary incl tax relief. but can be smaller for now if saving for upcoming known expenditure like holidays/cars or if you have decided to buy what is stopping you?).

Wayne87

atush wrote: »

As a rule of thumb, starting at 30, look for 15% of salary incl tax relief.

By "inc tax relief", do you mean I factor that into the percentage, rather than me just taking 15% of my salary?

Many thanks for your help folks

xylophone

Suppose you earn £30,000 a year and you decide you want to put 15% of that into a pension. (£4500).

This would only cost you £3600 because that is what you would pay your pension provider who would claim £900 in tax relief on your behalf and credit your pension.

Suppose you earn £45,000 a year (higher rate tax payer) and want to pay 15% into your pension (£6750).

You pay £5400 to your pension provider who claims tax relief of £1350 and adds it to your pension.

You claim an additional £627 through your tax return so your pension contribution has only cost you £4773.

atush

Wayne87 wrote: »

By "inc tax relief", do you mean I factor that into the percentage, rather than me just taking 15% of my salary?

Many thanks for your help folks

Yes,

As explained so well above in post 5

xylophone

If you might want to stop and start, vary contributions etc then a stakeholder might suit.

https://www.moneyadviceservice.org.uk/en/articles/stakeholder-pensions
http://www.cavendishonline.co.uk/pensions/

atush

But dont forget short medium term known expenses too.

Dont want to pay interest for things you need

jamesd

Two of the political parties may choose to increase basic rate tax relief after the general election so rather than starting now, wait a few months until you find out what happens then.

It's also worth waiting if:

1. you think you may be a higher rate tax payer in the future (though at least one party may reduce this tax relief)
2. you think that you may be in a salary sacrifice pension scheme in the future, because this saves you the employee NI and maybe gets you some of the saved employer NI. Employee NI is an extra 12% saved on your pension contributions.

While waiting a suitable alternative is investing in a stocks and shares ISA because that has roughly the same growth properties as a pension.

Jaguar_Skills

with the above jamesd what is the reason you suggest waiting with regards to the pension if HRT payer? I am 29 in the Higher rate bracket and am thinking about my own private pension.

Could you elaborate on the above?

kangoora

Jaguar_Skills wrote: »

with the above jamesd what is the reason you suggest waiting with regards to the pension if HRT payer? I am 29 in the Higher rate bracket and am thinking about my own private pension.

Could you elaborate on the above?

He means if you are currently a basic rate tax payer and expect to become a higher rate tax payer in the near future it may be worth delaying starting to put money into a pension to benefit from the higher rate tax relief in the future.

If you are already a higher rate tax payer then fill your boots whilst it's still available before any of the muppet political parties reduce higher rate tax relief on pensions.