Should i pay extra into my private pension?

Marcon

Aretnap said:

kimwp said:

If your pension payments are salary sacrifice, you also save on national insurance. 

Is it definitely that your company matches a percentage of your contribution or is it that they will match up to a percentage of your salary?

14% is employer's national insurance contribution, so presumably this is a salary sacrifice arrangement where the employer pays it's own national insurance savings into the employers pension. 

In which case the OP's sums are wrong. He actually gets £114 in his pension for every £72 off his take home pay, as he also saves his own national insurance. 

So it makes sense to pay in whatever you can afford, while leaving yourself a reasonable standard of living and some savings for the short and medium term of course.

Employer's NI was 13.8% until April this year, and is now 15% - OP, you might double check your figures, because you might be getting a bit more than you think!

DRS1

Andy566 said:

DRS1 said:

Can I perhaps suggest that you steer clear of a buy to let.

Also at what point does your employer stop adding an extra 14% to your contributions?  Can you get there without feeling the pinch?  If so do it.

I have no idea what a medium/high volatility ETF is but you are young enough to go for one of those global equity tracker things people on here so love (VWRP/HMWO or the like).

I do want to diversify a bit and not rely on a single income. Buy to lets can provide a good income whilst also giving me a physical asset that usually appreciates in value. 

The main drawback is interest but the reason I plan on buying one in around 5 years is to save a large deposit (around 30%) so the rent covers not only the monthly mortgage payments but also 10% yearly overpayments on the property. 

I live in the north east where properties are currently cheap (not for long) so my plan is to buy a cheap townhouse for around £90K and put down a £30K deposit. The monthly repayment would be around £350 a month. If I rent to 3 students room by room I could make at least £1000 a month profit, this would cover the mortgage and 10% overpayments from the first year of the mortgage. 

The 14% employer contribution stops at £60,000 which is well above my current salary. 

Medium/High volatility ETFs are trading funds that trade stocks. Medium/High volatility ETFs are better for young people as we have time on our side to ride out the volatility and in the long run they usually give much better returns. They’re not recommended if you don’t plan to keep the investment in place for at least 5-10 years. 

This is the pensions board so not really the place to debate buy to let.  What you write sounds great but I think reality will prove to be more problematic.  Landlords are selling up right now.  And letting to students has its own issues - like summer holidays when the place will be empty.  Of course you may need that time to repair any damage the last lot left behind.

But those are my prejudices and not really why you were posting.

Simon11

I own a B2L and have done for over a decade. Right now, after all my costs including paying tax, mortgage costs my return on investment in the B2L is 1.5% per year....! Only takes a gap in rent, a repair bill and it has blown. As for increase in value, the property has gone down in value over the last few years. It isn't really worth it with the current set-up and taxes.

If I were you, I would focus my efforts on increasing your salary before making increases to pension contributions. That will make a far bigger differences over the years than putting in an extra small percentages of a small salary.

Albermarle

Andy566 said:

kimwp said:

If your pension payments are salary sacrifice, you also save on national insurance. 

Is it definitely that your company matches a percentage of your contribution or is it that they will match up to a percentage of your salary?

The company gives me 12% of my salary without me contributing a penny. If I contribute anything they will match 14% of what I contribute and yes it is salary sacrifice. 

Be aware that if ever changing employer, that 12% being added by an employer is very much on the high/generous side in the private sector.
Many only add 3% and even some very big employers will only add around 6 or 7%. Even then they will often restrict what they add if the employee does not contribute.