Start a pension?

tomprice

Hi,

I'm concerned by friends all have company pensions and at the moment i don't and need to give it some more thought. Every year i think i'll look in to it but i never get around to it so wan't to get something sorted out this year.

Here are my details.

Age: 23 (24 this year)
Salary: 20K (No benefits or anything on top).
Not a homeowner, no debts, uni graduated, no real big outgoings.
Plan to attempt to get on the housing ladder realistically within the next 5 years.
Been in current job a year and a half. Company don't pay any pension contributions until 3 years (5%) - and i don't honestly see myself being there till then to take the benefit.


I've got savings (6k in an ISA filled up this year and 6 k in standard internet saver) - but i feel these will be blown to pieces for a house which i accept.


So i'm quite concerned all my friends have been paying £100+ for the past few years inc employers paying as well and feel they are getting ahead aready.


So what are my options?

Is something like this a decent place to be currently putting my money in until i join a company where they will contribute?
http://www.natwest.com/personal02.asp?id=PERSONAL/SAVE_AND_INVEST/STAKEHOLDER_SAVINGS/STAKEHOLDER_PENSION

I can afford to stash away about £100 a month.


Look forward to some ideas etc - hopefully given enough information?
Thanks
Tom.

NinaSwiss

hi tom,
I reckon your best better off looking for a job straightaway that includes pension benefits. because they would usually double your contribution. i.e. you put in 5% of your imcome before tax and they put in 10%. If you can find a new job in the next 10 months i dont see the point in opening a pension investment account. I 'm 24 and currently 6months into my new job after contracting for for a while. I dont currently contribute towards my pension but plan to start in april next year once I have sorted out a few things with the tax office.

NinaSwiss

.... you should not feel the need to do something just because others are doing it but assess your own situation to determine what suits you best.

EdInvestor

Basic rate taxpayers with no employer pension contribution are better to max out their investment ISA ( not the same as the cash ISA).

Use a discount broker such as www.h-l.co.uk

This is a much more flexible way to save for retirement

Pensions are better for higher rate taxpayers with employer conts.If you become one of those later, you can convert the ISA to a pension to take advantage.Meanwhile if you need the money sooner (eg for a property), it's available.With a pension, it isn't.

dunstonh

Is something like this a decent place to be currently putting my money in until i join a company where they will contribute?
http://www.natwest.com/personal02.as...HOLDER_PENSION

Its a basic stakeholder pension. However, you should avoid tied agents.

Use a discount broker such as www.h-l.co.uk
This is a much more flexible way to save for retirement

There is no point an inexperienced individual using a more expensive option from HL. It is no more flexible than a personal pension or a stakeholder with the exception of a wider range of investment options. Ideal for the experienced investor who would utilise the features but not an inexperienced investor.

Use of a stakeholder pension, albeit a better one that a banks offering, is a good idea. age 24NB is not too late but already the monthly cost is going to be higher than it was a 18 or 20. It is worth getting into the habit of paying a fixed bill like this because as soon as you get a house you will get a lot more. If you dont start now, you will keep putting it off because something else will take the money and before you realise it you are in your 50s with a basic state pension of £4500 a year to look forward to.

EdInvestor

I am suggesting he starts as he means to go on, by investing in the type of top quality funds available in an HL ISA.

Not a bog standard insurance company stakeholder which will only offer second rate fund options..

dunstonh

I am suggesting he starts as he means to go on, by investing in the type of top quality funds available in an HL ISA.

Funds that will cost as much as 50%-150% more than a stakeholder pension. An inexperienced investor wouldnt know quality funds from the dog funds and would probably end up looking at past performance and picking high risk funds which have had the highest gains.

Not a bog standard insurance company stakeholder which will only offer second rate fund options..

Natwest is a naff option. Cannot disagree with you there. However, a good stakeholder is a better option for an inexperienced investor than a SIPP where the person doesnt have a clue about investments.

tomprice

Ok Thanks for the advice.

It's a shame my workplace does not contribute - maybe i could raise it with them at some point.

MrMicawber_2

Given the choice of top quality funds in H-L would this not still be a good idea and either for Tom to do some reading around or pay for an hour or so's advice specifically on the subject. A significant initial expense admittedly in the latter case but surely a long term decent plan. Are there stakeholders around which offer quality funds only? The ones I seem to come across seem a bit of a mixed bag.

dunstonh

They will have no choice from 2012. It becomes compulsory to get employer contributions then. On the ball employers are already working to it by setting up pensions now with a stepped up increase each year to meet the minimum. Many though will leave it until last minute and then whine like hell about costs.

Given the choice of top quality funds in H-L would this not still be a good idea and either for Tom to do some reading around or pay for an hour or so's advice specifically on the subject.

An hour isnt enough.

Are there stakeholders around which offer quality funds only? The ones I seem to come across seem a bit of a mixed bag.

There are enough stakeholder funds available to do a good job. A personal pension may be the next best option as you can utilise the stakeholder funds and external funds on the same plan. However, you are starting to increase the amount of research and reviewing you need to do as you increase the investment options.

btloptingout

tomprice wrote: »

Here are my details.

Age: 23 (24 this year)
Salary: 20K (No benefits or anything on top).
.....uni graduated, .....
Been in current job a year and a half. Company don't pay any pension contributions until 3 years (5%)

Ouch that sucks.
On that package you've done pretty well to make the ISA savings you have.....you may find that your friends with their pension contributions haven't done quite as well as you assume.

Take the others advice and:
1) Don't bother making pension contributions until you are HRT and/or employer contributes.
2) Seriously consider job/career change to provide for your future.