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At 24, should I worry about a pension?
Comments
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Fortunately for the OP and all others, pensions today are nothing like the pensions you entered into all that time ago.
Withprofits is entirely different, and doesn't get compounding in t he same way. AS some years there are no 'profits' to compound as they hoilld back for other years.
We have one WP pension (taken out back int he 90's as the company pension), which actually did quite well during the crash a few years back when all the other pensions were going down.0 -
I'm 24, and started my first job post-graduation a few months ago. I've opted out of my pension. It's probably a silly idea, and I may regret it in 40 years, but for now, every penny I get is being thrown at debt (hopefully all gone in 6 months), then I'll get an emergency fund, before re-enrolling in my pension.
Pay any high interest debt by all means, but join the pension alongside saving for emergencies. AS you are throwing away your employers contribution. Read the link to the article on compounding I put up? What % are your debts?
If you dont you will regret it far earlier than 40 years from now?
Also, have you MSE'd your outgoings? Done a savings diary? Many in debt who have not are actually wasting their hard earned money on silly things like poncy coffees and buying sandwiches at lunchtime etc? You could get out of debt, raise savings and join the pension even earlier?0 -
Apologies for the very late reply. Unfortunately I do not have a lot of time to spend on this forum.I am not sure how you cannot consider it as free money. Thats what it is. Yes there are strings, but it still free money.
Last night I had a dream. I have £10 on me. Now somebody walks up to me and say: "If you pay £10 into this magic account, I will put £10 in as well and we will magically add a tax credit as well. And by the time you come to retire, this money will magically grow into a big enough pot for you to enjoy your remaining days sitting by the fireplace".
I ask him how can I get the money out. He says that I should be able to get it out by the time I am 55 (but when I press him, he cannot be sure that it will not be be changed in the future). After a bit of poking, he tells me that I will have to pay tax on the way out (he assures me that tax will not be much higher by then, but again when I press him, he cannot give me any guarantees). I press him on whether the rules of this magic account will stay the same until I retire, but again he explains that the rules can be magically changed by somebody sitting in the clouds.
I tell the about being uneasy with his assertion that the £10 (which he is offering to put into the magic account) is free money. It will only become my money after x years, and the free money he puts in may be taken back by changes in the magical rules. You see, the magic account works in such a mysterious way, or at least it seems to me.
I tell him I only have £10 - what am I going to do my shopping with after I put it into his magic account? He sidesteps my question and bangs on about how much the money will grow to when I retire. Then he annoys me further by waving the £10 right in front of my face, as if to taunt me for turning it down.
Finally I lose my patience and tell the man to stuff his £10 somewhere where the sun does not shine.
Then I wake up.
(This dream may just be my imagination. I am not sure
)
If somebody walks up to me and say: "If you pay £10 into this instant access account, I will put £10 in as well", then yes then I think it is free money.
Please do not abuse the term "free money".
When Cyprus went under last year and wanted to charge all the savers 6.75%, did anybody realise the EU deposit guarantee which says that the first 100k euros is protected?There is the FSCS which is very useful.
When Hungary nationalised all pensions, did any regulators complain?
You are extremely naive if you believe that normal rules apply in times of financial meltdown.
I am afraid you got the wrong impression. As far as I am aware, everything I wrote is factually correct.Your post is very much anti pensions (in tax wrapper sense). You should consider that pensions are good for some, and not so great for others. However a person should consider all financial information in their lives, such as property, emergency savings, longer term savings and retirement savings.
On the contrary, some of the posters assertion that OP should not turn down "free money" is downright biased and irresponsible advice.
For somebody at 24, starting out on a career, with debt, paying rent and saving to buy a house. He would be much better clearing debt, getting deposit together and buy house so he stops lining the pocket of lender/landlord.
As I said, I have a pension. But it was only started after I got on the housing ladder and built up an emergency fund. Also, it is a small proportion of my assets so if it gets confiscated by the government tomorrow, I would not be in serious trouble when I come to retire.
I am willing to take this political risk because my contributions are getting good employer contribution and tax relief on top. If these advantages are taken away, I will stop contributing.
This is my last take on this subject. I am out of this thread.0 -
Good, because I dont agree it isn't free money. Money that you would not have had and at no cost to you is free.
And to compare a pension to an easy access savings acct is just silly. A pension is NEVER intended to be a savings account that you have free access to. Unless you are are already of an age to draw a pension
How old are you? If you are 55 you could open a pension today with 8K, and then withdraw 10K the next day as a BRT payer?0 -
Prayer-in-C wrote: »I was enrolled into one of the largest UK (DB) final salary schemes when I was 17, scheme rules mean that I cannot pay in for more than 40 years, which means when I'm 57, if the funds keep performing the way they are, I will be retiring much sooner than most! Especially as I'm also paying an additional £20/week into an AVC (in house scheme, BRASS), which is also tax efficient in the way it is deducted from my salary.
I've only really joined the forum to encourage the OP to get a grip and start paying into a pension scheme NOW! Free money is free money, and it may well be a case of short term pain, long term gain!
Incidentally, in my case, I pay in £41.37/week, and my employer pays in £62.06/week.
I then pay in an additional £20/week, (so total £123.43/week).
If my thinking is correct, I'm also saving £12.27/week in tax (£638 a year), (20% £61.37)
So whilst I may be paying in £3191 year, it's only costing me £2553.
However you will pay tax when claiming your pension.
Nevertheless you're still in a better position than most lol!0 -
Your pension pots didn't grow for ten years because of what you invested them in. Mine have always grown, incl the last ten years.
And no house prices dont always grow. My house was worth abt 1.2M some years back. Now if I put it on the market I estimate 800K.
True, though I assume you aren't a Londoner!0 -
No i am not,but our housing market has different strains and gains than the rest of the UK.
There is more movement in the lower end than in the higher end here, and mine is higher end. Given I built it, even 800K will see a fine profit so not too worried. And it seems that prices may be on the up.0 -
OP - If you are still around, i think the message on whether to join has been well and truly hammered home here.... (i also hold a similar view but hopefully the info below is closer to what you're looking for):
When you join another company, your new employers scheme may give you the option to transfer in the old pension scheme. If thats what you want to do, you'd give them the details and they do the leg work for you.
If you keep the scheme seperate you can choose to transfer it into another pension scheme at a later date, providing they allow transfers in. Once the new pension provider has the details of the old scheme and the right signatures (standard paperwork) they'll do it for you.
My current employer dosent allow transfers in. From two previous companies pensions i joined them by transferring into the older pension scheme as the fund options and fees were better. It took a few months to go through but the pension guys did the legwork and sent the forms over to me after i explained what i wanted to do.
Check whether transfer in and out fees are applicable and make moving it worth while.
In my experience, financial institutes love sending paperwork so keep your address with them current and you'll get a nice wad of paper at least annually to keep track of older pensions. If you do lose track, keep a note of the pension provider (or ask your old company) and they should be able to find it when you call up with your details.
The time to worry about your pension is when you dont have enough money to retire. The time to do something about it to stop that worry is now.
Good luck.0
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