Fixed savings or investing?

Albermarle

ColdIron said:

Sg28 said:

I wish I'd taken pensions seriously at 25 years old! 

Better than panicking at 40 years old. 

Yes, I remember when I was in my 30s and realising I was spending more on paying off my train season ticket loan than pension

There is a kind of natural order to it though. By your 50s you have a far greater chance of paying higher rate tax and no mortgage (or being within spitting distance of)

In your 20s the mortgage should be the priority

Although of course you should always be opted in to any workplace pension at any age, even if you only pay the minimum. 

pedrodelgado

Pensions are a good way to save. 20% isn't to be sniffed at and if your employer puts in too it's even better. 

eskbanker

pedrodelgado said:

Pensions are a good way to save. 20% isn't to be sniffed at and if your employer puts in too it's even better. 

20% is only half of the equation though, in that 75% of the tax relief is usually effectively reversed when the money's eventually accessed, so the net effect is more like 6.25%.

pedrodelgado

eskbanker said:

pedrodelgado said:

Pensions are a good way to save. 20% isn't to be sniffed at and if your employer puts in too it's even better. 

20% is only half of the equation though, in that 75% of the tax relief is usually effectively reversed when the money's eventually accessed, so the net effect is more like 6.25%.

Depends how big and when you access your pension. You could pay no tax at all on the max tax free lump sum or your pension, which is the position I'll be in in a few yrs. Untill I get my state pension, then I'll be paying some tax but not massively. In the meantime, dividends in my stocks ISA pay me tax free also. 

jaypers

You’ll thank us for advising you to put extra in your pension, which is definitely the right thing to do if you’re thinking long term. I obviously don’t know details of the scheme you are in but remember that contributions come out of gross pay plus your employer will also contribute a percentage too. Have you considered winding up your pension, perhaps putting the cash in the best Easy Access account and drawing on it to supplement your reduced income as the result of increased pension contributions? By the time it runs out, your income will hopefully have increased so you no longer need to top it up and you will then be in the much better position of the already extra money invested into your pension fund. Sometimes things like this are well worth thinking about and I’m pretty sure you won’t be able to find a better investment for your money. 

eskbanker

pedrodelgado said:

eskbanker said:

pedrodelgado said:

Pensions are a good way to save. 20% isn't to be sniffed at and if your employer puts in too it's even better. 

20% is only half of the equation though, in that 75% of the tax relief is usually effectively reversed when the money's eventually accessed, so the net effect is more like 6.25%.

Depends how big and when you access your pension. You could pay no tax at all on the max tax free lump sum or your pension, which is the position I'll be in in a few yrs. Untill I get my state pension, then I'll be paying some tax but not massively. In the meantime, dividends in my stocks ISA pay me tax free also. 

Yes, hence 'usually' - as you say there are scenarios where pension money can be accessed without tax, such as using up personal tax allowance in between employment and state pension age, but I'd argue that these are the exception rather than the rule, so it's misleading to imply that using a pension equates to 20% as a generalisation.