is it a good idea to save extra on top of a pension?

[Deleted User]

I'm just starting in the world of work and i'm confused by isas and pensions. I understand that as we work we can get state pension and when we work for companies we get one there too. But is it worth getting a isa or something and creating an extra account save more money or is that a tad bit extensive is it more likely that having state pension and company pension would be enough. 

Marcon

Deleted_User said:

I'm just starting in the world of work and i'm confused by isas and pensions. I understand that as we work we can get state pension and when we work for companies we get one there too. But is it worth getting a isa or something and creating an extra account save more money or is that a tad bit extensive is it more likely that having state pension and company pension would be enough. 

It's worth having some 'rainy day' savings you can access between now and when you are old enough to access your pension. And yes, it is worth having an ISA as well as a pension, to give you flexibility.

Impressed as I am by your forward thinking and good sense, it is also worth living for today as well, and having some fun as you go along!

R_P_W

Good that you are thinking about this and asking the questions.

You don't say how old you are but if just starting work I'll assume late teens / early 20's.  Below is just my opinion based on my knowledge I've gained from others etc.

State Pension - will be good if it exists when you get to retirement age in 50+ years.  Best to plan it not being there, if it is then that's a bonus for you.

Workplace Pension - assuming you are paying basic rate tax, but as a minimum pay in whatever % you need to maximise the contribution from your employer as this is free money for you and an immediate 100% return.  Whether you choose to pay more in at this stage is one for you to consider alongside other options.  Bear in mind that the absolute earliest you would be able to access these funds will be when you are 57 (likely be higher in future).

Cash Savings - aim to build up 3-6 months worth of committed expenses asap so that you have that as a cushion should you lose your job etc.  You may also have longer term savings goals such as saving for a car or a deposit on a house in future.

Debt - try and stay away from debt as much as you can.  With interest rates increasing compared to the cheap borrowing available in recent years, better to not get into debt (unless it's &S maybe an asset that will appreciate in value).

S&S ISA - would certainly be worth investing monthly into a low cost index tracker covering the global markets.  Getting into the habit of doing this monthly even if its a small amount will pay off for you over time (its the one thing I wish I could go back and tell my younger self to do).

In summary, there isn't one right or wrong answer.  If possible take advantage of all the different savings/investment vehicles available to you.

MX5huggy

You are young, make sure you take all the pension available to you from your company. If you have spare money to save, presuming you don’t own any property my priority would be saving in a Lifetime ISA, up to the £4000 annual limit, the government adds 25% to whatever you put in one so £1000 per year. 

https://www.moneysavingexpert.com/savings/lifetime-isas/

horsewithnoname

Deleted_User said:

I'm just starting in the world of work and i'm confused by isas and pensions. I understand that as we work we can get state pension and when we work for companies we get one there too. But is it worth getting a isa or something and creating an extra account save more money or is that a tad bit extensive is it more likely that having state pension and company pension would be enough. 

Definitely worth saving more if you can because you never know what may happen. I thought I’d be fine to retire at 60, but with the falling value of my pension plus a seven year wait for my state pension, we’ll retirement has been postponed for to 67.
fantastic that you’re thinking about this, it’s very wise to. 

[Deleted User]

R_P_W said:

Good that you are thinking about this and asking the questions.

You don't say how old you are but if just starting work I'll assume late teens / early 20's.  Below is just my opinion based on my knowledge I've gained from others etc.

State Pension - will be good if it exists when you get to retirement age in 50+ years.  Best to plan it not being there, if it is then that's a bonus for you.

Workplace Pension - assuming you are paying basic rate tax, but as a minimum pay in whatever % you need to maximise the contribution from your employer as this is free money for you and an immediate 100% return.  Whether you choose to pay more in at this stage is one for you to consider alongside other options.  Bear in mind that the absolute earliest you would be able to access these funds will be when you are 57 (likely be higher in future).

Cash Savings - aim to build up 3-6 months worth of committed expenses asap so that you have that as a cushion should you lose your job etc.  You may also have longer term savings goals such as saving for a car or a deposit on a house in future.

Debt - try and stay away from debt as much as you can.  With interest rates increasing compared to the cheap borrowing available in recent years, better to not get into debt (unless it's &S maybe an asset that will appreciate in value).

S&S ISA - would certainly be worth investing monthly into a low cost index tracker covering the global markets.  Getting into the habit of doing this monthly even if its a small amount will pay off for you over time (its the one thing I wish I could go back and tell my younger self to do).

In summary, there isn't one right or wrong answer.  If possible take advantage of all the different savings/investment vehicles available to you.

Thank you for this advice its so helpful! Sorry I forgot to add i'm in my early twenties. 

kinger101

I'd say

1. Make sure you're at least getting the maximum employer match within your work pension.
2. Save up at least 3 months' expenditure.
3. The start saving to get yourself onto the housing ladder (e.g. 10% deposit + enough for stamp duty and legal fees)
4. Increase savings to 6 months expenditure
5. Start thinking about contributing more to your pension once you're on the housing ladder and have a reasonable rainy day fund.

A LISA is a good way to save the house deposit.

[Deleted User]

Thank you all for the help!