Absolute beginner on investing- where to start?

MallyGirl

Take a look at the John Edwards DIY series - Pensions, Investing, etc.
Free if you have kindle unlimited

Namnoms

Thank you so much everyone! Have read through everything, collected all the links, wrote notes etc., and am really happy to be set on the right track at last.

Just one question- my work pension. I've looked into this and it's a pension where the company pays in 5% of my salary regardless of what I contribute, or if I contribute at all. By default I wasn't contributing anything so I've just changed that so I match the company's input. It's via salary exchange. Am I going in the right direction?

Thanks once again!

MallyGirl

If you mean salary sacrifice then you also benefit from NI savings as well as tax.

Peelerfart

Right direction?

Yes, i think so, some may say save more for your house deposit,others, pay into your pension.

I'm not qualified to say which is right, but neither is wrong

bostonerimus

Namnoms wrote: »

Just one question- my work pension. I've looked into this and it's a pension where the company pays in 5% of my salary regardless of what I contribute, or if I contribute at all. By default I wasn't contributing anything so I've just changed that so I match the company's input. It's via salary exchange. Am I going in the right direction?

Yes that's the right direction. I would try to put in another 5% and then even another 5%. But before you do that understand where and how you money is being invested and why it's good to get the tax advantage now.

short_butt_sweet

Namnoms wrote: »

Just one question- my work pension. I've looked into this and it's a pension where the company pays in 5% of my salary regardless of what I contribute, or if I contribute at all. By default I wasn't contributing anything so I've just changed that so I match the company's input. It's via salary exchange. Am I going in the right direction?

the advantage of matching doesn't apply to you, since your employer is contributing 5% regardless of what you contribute. in some other workplace pensions, you need to contribute a specific amount to get the maximum employer contribution.

so literally matching the employer contribution doesn't matter.

however, a salary exchange/sacrifice pension is good value, so you may well want to contribute something to it. OTOH, how long do you think it will take you to get together a deposit to buy a home? because it could be worth cutting back (or even not making) pension contributions until you buy a property, but then contributing a much higher amount after you've bought. this may be a tricky call.

about the numbers for a salary sacrifice pension: you save both 20% income tax and 12% national insurance, which means that it effectively costs you only £68 to put £100 inside the pension.

suppose you later move to an employer who doesn't offer salary sacrifice. then you'd only save income tax on pension contributions, so it would cost you £80 to put £100 inside a pension.

OTOH, if you later become a higher rate taxpayer, then it would only cost you £58 or £60 to put £100 in a pension. (£58 is if you still have access to salary sacrifice; £60 is if you don't.)

so some things to ask yourself are whether you're likely to switch employers soon, and whether you're likely to earn enough to pay higher rate tax in the future.

(note that getting the £100 out of the pension again will probably involve paying some tax, so you may never really have the £100. as a rough idea, you may have something between £85 and £100, after paying any tax due. but the above numbers show the relative advantages of pension contributions in different circumstances.)