PhD/EngD Stipend Pension Planning

chris1511

Hello. I have recently been accepted to do an EngD with an exceptional London university.
I have managed to get full funding for the study and will be receiving a yearly tax and NI free stipend of £19,000 for the four year project.. I am currently 24 years old, and will be just shy of my 29th birthday when I complete the project.

This stipend would be my first form of steady income and now would be a good time as ever to plan my future financial options. I have not contributed to any previous pension pot, my savings so far are indebted to a career development loan for my MSc (which will be paid in full this September). So I will be essentially starting with a blank slate financially.

I understand, as there would be no employer contribution and because of the nature of the pension, I will not benefit greatly from the tax benefits in a standard pension plan. As a result I am thinking of opening an ISA to direct 1/3 of my monthly stipend to. The rest of the money will be spent on living costs and any remainder (as if London) funnelled into the ISA. Upon completing the doctorate, I will re-evaluate my options (especially if a career avenue opens) and funnel some of the ISA savings into a pension plan.

When the time does come to move money into the pension plan, should I load as much money as the rule of thumb of half your age as a percentage of pre-tax income as if I started now?

dunstonh

When the time does come to move money into the pension plan, should I load as much money as the rule of thumb of half your age as a percentage of pre-tax income as if I started now?

Its is a dirty guide to get you thinking in the right ball park. it is aimed at people who think paying £20pm into a pension is going to be enough. it is not reliable to base your own planning on. That requires a more personalised calculation.

bigadaj

Normal rule with pensions is to contribute enough to get matching employer contributions and then to get out of higher rate tax, both of which won't apply to you currently.

With no taxable income you can contribute £2880 a year into a pension and the government will make this up to £3600.

There's no difference between the investments in an isa or a pension, so starting up a stocks and shares isas will give similar options. Main difference is pension is tax free on the way in, whilst isas are tax free on the way out.