Pension advice for a beginner (24 years old)

bp5678

wjr4 wrote: »

I personally switched from a retirement date fund to their higher risk fund as I have at least 35 years until retirement. What are you short, medium and long term goals? Do you want to own a property? Do you have an emergency fund?

Edited my original post but my main goal is to get on the property ladder at the end of the year. I'll have a £30k deposit on £27k a year job for a house in the region of £170k.

bp5678

kev2009 wrote: »

Does your company pay in different rates depending on what you contribute or do they just pay a fixed amount regardless of what you pay in?

Maybe best to work out your outgoings and see what is left, then pay in what you can, allowing you to also save some money for a emergency fund to cover unexpected things i.e job loss or large bills etc.

Not too sure is the answer to the first question. I'll check with our finances team when I'm back in the office tomorrow.

I have about £1k left at the end of each month (living with parents currently) however I'd like to use this money to go towards getting the best/largest house possible. Maybe it's best that I pay lumpsums at the end of the month once I've bought my first property.

bp5678

kev2009 wrote: »

Does your company pay in different rates depending on what you contribute or do they just pay a fixed amount regardless of what you pay in?

As mentioned, I would at least be trying to pay in 10% yourself + the employer contribution.

Maybe best to work out your outgoings and see what is left, then pay in what you can, allowing you to also save some money for a emergency fund to cover unexpected things i.e job loss or large bills etc.

Also consider if you plan to retire at state pension age or if you want to retire sooner as will mean if sooner, you need to pay more in.

Kev

Spreadsheetman wrote: »

For a long tern investment savings accounts like Marcus are useless - they are losing against inflation every year and you would also be taxed on the interest if you had a significant sum saved.

The Nest target date funds for your age are mostly in shares (equities) which should do considerably better than inflation in the long term. Growth is also tax-free inside the pension wrapper.

Your employer is paying the minimum they can get away with (3% now) as are you (5%). I'd say you want to double your contribution as an absolute minimum - 10% plus 3% from your employer is a respectable start for your age. You will need to increase the proportion as time goes on, but getting started early is the most important thing.

Thanks. I've got money elsewhere too but since I'm looking to buy at the end of the year, I'd like the money to be easily-accessible and not tied up so I think the Marcus account is the best in my situation.

Maybe once I've bought my first house I'lll look to move extra money into my pension.

I'll look to double my pension contributions too.

Spreadsheetman

bp5678 wrote: »

Edited my original post but my main goal is to get on the property ladder at the end of the year. I'll have a £30k deposit on £27k a year job for a house in the region of £170k.

I'm out of touch with mortgages, but 5.2 multiple of earnings looks like a big stretch. Are lenders doing that now?

billy2shots

I’m not advising the following but don’t forget you can opt out of a workplace pension then opt back in.
That may suite your situation temporarily.

Sure that wouldn’t be financially optimal but it would give you a little extra in your monthly pay each month to help you save a deposit for a house.

bp5678

billy2shots wrote: »

I’m not advising the following but don’t forget you can opt out of a workplace pension then opt back in.
That may suite your situation temporarily.

Sure that wouldn’t be financially optimal but it would give you a little extra in your monthly pay each month to help you save a deposit for a house.

Thanks. I was actually considering doing the opposite though and paying more into my pension but that'll leave me shorter on money for the house deposit and therefore potentially paying a higher mortgage. Tough decisions!!

ComicGeek

Are you likely to get significant pay rises in salary or promotion? I found the most helpful thing in my 20s was to make a step change in my pension contributions whenever I had a pay rise - I could then save money before I got used to spending it!

bp5678

ComicGeek wrote: »

Are you likely to get significant pay rises in salary or promotion? I found the most helpful thing in my 20s was to make a step change in my pension contributions whenever I had a pay rise - I could then save money before I got used to spending it!

Won't get a significant pay rise or promotion in my current job.

triplea35

The new minimum contributions only came into effect on the 6th April so the full effect may not yet be apparent.
The minimum employer contribution of 3% is based on your earnings above £6136 and up to £50k.
The contribution shown on the Nest website as from your employer does in fact include your contribution. Tax relief is shown as owed and paid later. If you look at Transaction Details there are two separate allocations of units totalling the contribution figure mentioned above minus a 1.8% contribution charge.
Consider changing your fund selection to Higher Risk or Sharia Funds, both are out performing the Target Retirement Funds and at your age I would think you could accept a little higher risk/volatility.

Snakey

Get your house first. Then worry about the pensions etc (keep them as they are for now). My advice for someone your age wanting a comfortable/early retirement would be to maximise your career earnings, and this is a longer-term plan.

Are you buying alone? Consider letting out a spare room, which is most painlessly done while you are not yet used to having your own space/privacy. Even if it's only for a couple of years, the extra income will alleviate some of the "either/or" from your financial planning and provide a safety net against unexpected job loss.