Should I max out pension before ISA?

[Deleted User]

Hi all,
I am a pension newbie, and very confused by pensions generally. I have been auto-enrolled in a pension plan with my employer, whereby I pay 10% of my gross salary into a pension plan every month. Having just started a new role where my income has increased, I considered maxing out my (stocks and shares) ISA allowance but read somewhere that it is more beneficial to increase your personal pension contribution before investing in an ISA. I just wondered what your thoughts were, and if my employer is likely to match my pension contribution if I go above the standard amount (aware this may vary per company). Thank you in advance!

Marcon

You need to ask your employer whether they'll match, or read the information you've been given about the pension scheme - nobody here can tell you or even make a sensible guess. 

You get tax relief on your pension contributions (within certain limits), which is possibly what you read about pension being 'more beneficial' than an ISA. But tax isn't the only consideration - what's your objective? If you are 30 and saving for a house, paying into a pension which you can't access until you are well into your 50s won't help that objective. If you are 59 and retirement looms, probably no bad idea.

[Deleted User]

Thank you! The pension leaflet doesn't mention this, so I've placed an enquiry about matching, yet to receive a response.
My objective is ultimately to retire early, within the next 20 years. I'd like to buy my own place at some point but happy renting for now. I also have a LISA which I've been paying into for the purpose of retirement as opposed to buying a home, but the 'matching' that an employer offers (if indeed, it does) is an enticing benefit. By the way, I'm 36. 

MallyGirl

Once you get your answer the first goal should be to make sure you are contributing enough to get the max you can as an employer match.
Is it salary sacrifice?

[Deleted User]

MallyGirl said:

Once you get your answer the first goal should be to make sure you are contributing enough to get the max you can as an employer match.
Is it salary sacrifice?

Thanks MallyGirl. No, I don't believe it is salary sacrifice but I am required to manually pay in (or select a %) of my salary into my pension if it is above 10%. They aren't very transparent about money matters so I'm curious to know what the response will be, but given the tax relief and employer match, I definitely want to make the most of my pension.

[Deleted User]

MallyGirl said:

Once you get your answer the first goal should be to make sure you are contributing enough to get the max you can as an employer match.
Is it salary sacrifice?

Just to follow up, I received the following response from the pensions dept:

The company do not match your contribution but they contribute 10% of your pensionable pay regardless of whether you make your own contributions

I think since the company don't match anything above 10%, it's not really worth me contributing more into this fund.

CookieMonster

Deleted_User said:

MallyGirl said:

Once you get your answer the first goal should be to make sure you are contributing enough to get the max you can as an employer match.
Is it salary sacrifice?

Just to follow up, I received the following response from the pensions dept:

The company do not match your contribution but they contribute 10% of your pensionable pay regardless of whether you make your own contributions

I think since the company don't match anything above 10%, it's not really worth me contributing more into this fund.

If your plan is to retire early then bang in as much as you can afford to.
It IS worth you contributing more (so long as the fees aren't too high/if you could get lower fees on a Self Invested Pension Plan, that could be something to consider).
I'd strongly advise lurking on this board and reading a number of the threads over the next few months to educate yourself on pensions and your options (that's what I've done).

[Deleted User]

Thank you CookieMonster. I wondered if an employee pension plan such as mine offers benefits beyond that offered by a private pension (I have one with Nutmeg which only has a few hundred pounds in at the moment). You're right about lurking on these boards, there's a lot of knowledge here!

Albermarle

It is possible that your employer pension has different charges , probably lower than Nutmeg .
However what is much more important is that within the pension (s) that your money is invested in the right type of fund for your circumstances . For example if you are 20 years away from retirement it is generally better to be in higher risk/volatility - potentially high growth funds . 
The pension is not an investment in itself , it is just there to hold investments in a certain tax beneficial way . Have a look at your online account to see how your money is invested . Also often there are some good explanations of how pensions work there( depending on the provider) 
 it's not really worth me contributing more into this fund.
All pensions offer a minimum 6.25% tax benefit on your personal contributions over non pension investments , 
As said it would be worth increasing your knowledge and regularly reading this forum has helped a lot of us to improve our knowledge around personal finance. Also some links :
https://www.moneysavingexpert.com/investments/
https://www.moneyadviceservice.org.uk/en/categories/pensions-and-retirement

MEM62

Deleted_User said:

MallyGirl said:

Once you get your answer the first goal should be to make sure you are contributing enough to get the max you can as an employer match.
Is it salary sacrifice?

I think since the company don't match anything above 10%, it's not really worth me contributing more into this fund.

Really?  You might want to re-think that.
All investments into your pension go in tax free and they grow tax free. You do not need an employer match for this to be worthwhile and pension contributions are, in most cases, the best and most efficient way to provide for your retirement.       

[Deleted User]

Thank you. I'm just not sure whether the employee pension offers benefits beyond my Nutmeg pension, though I definitely intend to continue contributing to one or both of these!