25 - Starting Pension Planning - What's your best advice?

graceygirl

Hi All,

I work for a small company and have just started paying in I think 2% matched by 1% = I know rubbish but not looking to work here long term.

I am 25 and I am worried about the long term declining nature of pensions so keen to start saving extra now even if it is only a small amount each month - around £100 and more when I can.

I am not sure if I should get this extra added into my work pension or really how to even go about this.

What would be your best advice of what I should be doing?

Best,
Grace

atush

First off, do you have emergency saings? Do you own a house or are you saving for one?

In general, you need a bit of emergency cash set aside (or up to 3 months spending for safety) but at least 1K i would think. Then if saving for a home i'd concentrate on that.

But if all is good, look for half you age as a % when you start (and increase each year as your salary does up) so you'd need 12/13%. You've got 3, so add 9-10% more. This can include your TR.

A simple example would be salary of 20K. So you'd want to put in 2K (10%) of extra pension. This would mean putting in 1600, and the TR added would be 400. Split the 1600 into 12 equal payments.

graceygirl

Thanks for a helpful and quick response! So I am currently saving for a house... I have £15k at the moment but I imagine I will be putting this all into a deposit /SDLT ( but will aim to keep £1000 emergency fund aside).

So I may wait until I have the house sorted before ramping this up but at least I know. This is all currently going in to NEST which was the standard one I got put on to with work, is that OK for now? I am not too clued up on this as you can tell.

bigadaj

graceygirl wrote: »

Thanks for a helpful and quick response! So I am currently saving for a house... I have £15k at the moment but I imagine I will be putting this all into a deposit /SDLT ( but will aim to keep £1000 emergency fund aside).

So I may wait until I have the house sorted before ramping this up but at least I know. This is all currently going in to NEST which was the standard one I got put on to with work, is that OK for now? I am not too clued up on this as you can tell.

Keep using the nest scheme to get the maximum employers contribution, but it's not a great option for anything additional.

You will no doubt be concentrating on your house deposit, necessary expenses and rebuilding an emergency fund in the short term, pensions are important but as with most people you have a limited income which can only cover certain things.

Once you have the excess income above the emergency fund and assuming you are a basic rate taxpayer then I'd look at an investment isa. You don't get tax relief But growth is tax free and payments out from it would also be tax free should you draw from it. It's also accessible in an emergency hitch a pension wouldn't be, I'd then start looking at upping pension payments in the next few years.

graceygirl

Thanks for sharing your tips will be doing this

MEM62

graceygirl wrote: »

Hi All,

I work for a small company and have just started paying in I think 2% matched by 1% = I know rubbish but not looking to work here long term. Why should the amount of time you plan to stay in your job affect the amount you pay into your pension?

I am 25 and I am worried about the long term declining nature of pensions so keen to start saving extra now even if it is only a small amount each month - around £100 and more when I can.
What declining nature of pensions would that be? A pension is a tax wrapper, nothing more nothing less. The rules may be changed from time to time but it is still your money - there is no 'decline'
I am not sure if I should get this extra added into my work pension or really how to even go about this. If you are saving extra for retirement, then there is no better tax efficient way to save than a pension. The money goes in tax-free so it is a no-brainer.

What would be your best advice of what I should be doing?
Understanding pensions better would be a start. The internet is full of useful info. May also consider speaking with an IFA.

Best,
Grace

...........................

kidmugsy

graceygirl wrote: »

I am worried about the long term declining nature of pensions ...

Actually, the State Pension went up quite a lot under the Coalition government, and looks set to continue to do so until 2020.

As for your own pension: you are young enough that you needn't fret yet. Always contribute enough to get the maximum employer contribution, and otherwise concentrate on the other money-eaters in your life for a few years. For house purchase in particular, consider a Help to Buy ISA before the end of the tax year (i.e.before April 6th) and also consider opening a Lifetime ISA ("LISA") in the next tax year.

Pop back here every couple of years to see if our favourite suggestions have changed.

graceygirl

Well considering that the age for women has been pushed up at the state retirement age keeps increasing, pensions are declining. I am not going to be working until I am 68 haha.

Thanks for the tips will check out this life time isa as I have read a little about it already

G

Dogbooks

Thank you for this thread- I am also 25 and in the process of buying a house so have looked at this with interest

graceygirl

No worries ! Me too ! Glad to hear there are more anxious people my age haha I just want to get my ducks in order to improve my situation later on . Hope your house purchase goes well - mine is going ok lots of paperwork !

PeacefulWaters

graceygirl wrote: »

Well considering that the age for women has been pushed up at the state retirement age keeps increasing, pensions are declining. I am not going to be working until I am 68 haha.

Thanks for the tips will check out this life time isa as I have read a little about it already

G

Despite state pension age increasing, the average retiree now can expect to draw an income from their pension for longer due to increased life expectancy.

LISA for house purchase. Under current rules a pension contribution will give you more early retirement flexibility than a LISA.