Help! Graduate Pension

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Ok I am a complete neophyte when it comes to pensions, but all the recent press scares me.

I worked in reasonable well-paid job after graduating for three years, obviously paid NI contributions but did not join any pension scheme.

I then took a year to do a Masters degree and am now returning to full time employment, fortunately in another well-paid job.

I am 25 and am hoping to put enough aside to live comfortably and retire at 60ish (definitely not 70!!).

My question is what is the best way to achieve this?
My employers are offering a pension scheme which I could join. But what happens if I were to change jobs later on? Also, should I make more contributions than I need to as to ensure I get a decent pension? What about State pension? Would I be entitled to some?

As I said, I am a neophyte and really dont know where to start in all of this.
Hopefully someone out there can help

Thanks in advance

dunstonh

My employers are offering a pension scheme which I could join. But what happens if I were to change jobs later on?

Depends on the scheme. Not all occ schemes are equal. Some will have benefits that would mean its better leaving it where it is. If its better to transfer it, then its a relatively easy transaction to do. However, the key thing at this stage is "free money". If they are paying into it then you take it.

Also, should I make more contributions than I need to as to ensure I get a decent pension?

A pension is just a savings plan. The more you put in, the more you get out. At your age, you are already at least 5 years behind the ideal starting age and you want to retire early. That means you are going to have to contribute more in a shorter period. One thing going for you is that you seem prepared to do it now and not at 30-40 when many look at it for the first time.

What about State pension? Would I be entitled to some?

In simple terms, the basic state pension is based on your national insurance contributions. If it still exists when you retire then you should get it. It isnt a guaranteed entitlement though. Future legislation may make the state pensions means tested and extend the start date to age 70 or 75. The Second State Pension is owned by you but it accounts for a very small amount on top of the basic state pension. The future of this is currently unsure and there is pressure to change it. However, what you have accrued up to any change, you keep.

EdInvestor

dunstonh wrote:

In simple terms, the basic state pension is based on your national insurance contributions. If it still exists when you retire then you should get it. It isnt a guaranteed entitlement though. Future legislation may make the state pensions means tested and extend the start date to age 70 or 75. The Second State Pension is owned by you but it accounts for a very small amount on top of the basic state pension. The future of this is currently unsure and there is pressure to change it. However, what you have accrued up to any change, you keep.

How much basic state pension you get is based on how many years' NI contributions you have made. You can "catch up" by paying for missed years (eg through studying) and perhaps you should consider this at present as you are currently contracted in to the second state pension (S2P). Contact the Pensions Service for details: you must catch up within 6 years of the missing years IIRC or the right to do so expires.

For people retiring now who have been paying in to the S2P since it started in around 1978, the S2P more or less doubles the size of the basic state pension. This amount will be reduced in future as Gordon has done a bit of "redistribution" so as to enable carers and other people with no pension to get one. But it will not be so small that it should be completely ignored.

Nor do I personally believe that the state pension will disappear. No western country will ever IMHO leave its elderly citzens to starve on the streets, even the US, which sometimes comes close.

Post some more details of the company pension on offer and we can take a more detailed view.

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Thanks for the advice guys. I will post more details about the plan when I get home on the weekend