I'm lost, any help would be massively appreciated

JxY52

Hi all,
Newbie poster (but long time lurker) of the forums here.

My new years resolution was to sort out a pension for myself. A little background about me, I'm 28 and am still in the process of digging myself out of a financial pit I made when I was 18-21. I'm now a PhD student, so I don't get any employer pension scheme and my income is limited.I'm not a homeowner (yet... I have a LISA and contribute regularly). Rent is relatively low, but as always, will probably increase!

I'm looking for a pension I can put a small amount (say £50 a month for now) in that will begin to build a pension pot. I know that anything is better than nothing. My issue is that I'm overly cautious and nearly every pension provider I look at says "you may get back less than you invested".... which to me seems like a pointless endeavour and it scares me off.

So, my questions to you:
1) How likely is the chance of receiving less back? Am I being overly wary?
2) Does anyone have any first hand experience of using a private pension provider that they'd recommend?
3) Is there a provider out there which specialises in pensions for lower incomes (I can look to move it when my PhD finally pays off!)

Thanks, and please be nice, I literally have no idea what I'm doing. :rotfl:

cfw1994

I don’t have any specific advice for “best for small pension amounts”, but I would suggest that over the 30-45 year window you are looking at, you are HIGHLY unlikely to get back less than you pay in!
Trickling money into long term funds is usually a great thing to do.

Don’t worry too much though: paying into your LISA is effectively that: if you read https://www.moneysavingexpert.com/savings/lifetime-isas/, you can see that it can both help buy your first home AND be used towards retirement savings. If you can spare more, perhaps put it there?

In a few years, when you do get a proper income, just try to pop a % equal to half your age away into the pension (including any company amount).

& remember to have some fun: it’s great to plan for the future, but life is for living too

AnotherJoe

I wouldnt bother with a pension at present. Focus on getting a job that pays a decent amount and the £50/month you are fretting about will be peanuts in comparison and made up in a few months savings. If you've got £50/month put it in a LISA. If you plan to buy a hosue once you have a job, then stay in cash for now.

And yes you are being overly wary that your pension contributions plus tax savings plus growth over 30 years wont get you back more than you put in. But at present I'd focus on being 28 unemployed with no apparent plans to buy a house and have a decent paying job.That should be your new years resolution.

Bravepants

Is your PhD in a science or engineering subject?

JxY52

Thanks for your advice so far. My PhD is in Psychology and Public Health, mainly addiction focused. (Lots of statistics work involved too). So hopefully, plenty of avenues to go in to work wise.

I might just increase my contributions to my LISA for now then. I just didn't want to end up starting a pension "too late" so to speak.

ex-pat_scot

Do you have any official salary, or is it a grant (or loan)?
If you have no income, then it might be better to contribute to (L)ISA, as you wont get tax relief on pension contributions if you don't pay tax.


From personal experience, don't bank on the PhD making much of a difference to your earning potential...

p00hsticks

ex-pat_scot wrote: »

If you have no income, then it might be better to contribute to (L)ISA, as you wont get tax relief on pension contributions if you don't pay tax.
.

As has been discussed elsewhere on this board, even non-earners can put £2880 a year into a personal pension/SIPP and recieve tax relief to take it up to £3600.

Alexland

Yup however a proportion of the pension might be later taxed so I suggest focusing on the LISA for now.

Lawcraft

cfw1994 wrote: »

remember to have some fun: it’s great to plan for the future, but life is for living too

Good advice. When I was 28, I didn't bothered about pension too much.

kidmugsy

JxY52 wrote: »

I'm looking for a pension I can put a small amount (say £50 a month for now) in that will begin to build a pension pot.

Don't be daft. A pension has three advantages:

(i) It defers tax: this is an especially good deal if you pay higher rate tax while you are working - you don't.

(ii) It lets you harvest an employer's contribution - you can't.

(iii) If you can do it by salary sacrifice it lets you avoid national insurance contributions - you can't.

Your savings should go into (a) high interest accounts e.g. current accounts and regular savers, and (b) Cash LISAs.

Once you start paid employment re-visit the topic.

atush

Alexland wrote: »

Yup however a proportion of the pension might be later taxed so I suggest focusing on the LISA for now.

Or it might not be taxed at all if drawn under PA.

So don't pooh pooh it