Help with Pensions

homeOwner

I dont have a pension but will be starting one with work next month. Is it a good idea to put in more money than the min amount (which is 4% of salary I think, employer adds 6%)?

Do pensions really make money over say 20 years or are people finding that they are just breaking even with the charges etc.....

Hitchhiker's Guide to...

there is a simple answer - yes, you can always do better by putting more in. Essentially because of the tax advantages of pension savings.

Investments tend to return about 4-5% over inflation and costs per year of their investment, so they do much better than just break-even. Although obviously the future performance may not be the same as the past performance.

While it is a good investment, you need to make the choice about whether you personally would prefer to have the money now or (a larger amount) in the future.

shoegirl

If it is just spare money that is going to be blown by all means yes, its good to save it and the tax.

However if you are struggling to survive on a low wage then you need that cash now.

I read on Motley Fool an excellent suggestion that you also purchase your home before embarking on a pension. I think thats sound advice since if you are still renting at retirement much of your hard saved cash will be eaten up by rents that will continue to escalate in price, whereas if you've bought your home you will be better placed to survive on a lower income.

sofireland

If your company has a pension scheme thats even better, its taken out of your wages before you can miss it! Plus sounds like you've got a sweet deal there if they add on 6% on top of the 4% you're putting in, 10% of salary per year every year is a great way to put a few quid by for the golden years of retirement.

jimmycrackcorm

I wonder is is better contributing the pension money on your mortgaage instead? given that you could save so much on interest payments - have better security (private sector) and conrtibute higher amounts at a later age (up to 30% when older).