Meet the Other Phone. Only the apps you allow.

Meet the Other Phone.
Only the apps you allow.

Buy now

Please or to access all these features

Investments

Discuss investments with other users on our Investment forum. For more advice read our tips for saving for your child's future.

What advice would you give to a 25 year old? Pensions / Investment & general finance.

3 replies

namechangedforanon · 25/10/2018 17:54

Has a mortgage on tiny London flat. BF has mortgage on tiny none London btl.

Will have £10k emergency fund saved by March.

Not made many waves into pension and investments yet. The company currently only pay 3%.

Earning £45k plus bonuses. BF 48k plus bonus.

What advice would you give? Would love to know your tips as very worried on the pension side of things.

OP posts:
namechangedforanon · 25/10/2018 17:54

*non-London

OP posts:
nannynick · 25/10/2018 19:05

Is £10k emergency fund enough? If you feel your job is very secure, then around 3 months of monthly expenses is sufficient. If you feel your job is not very secure then I would do 6 months of monthly expenses. £10k may be right for you or might not... so firstly I would review that.

Any debts other than the mortgage? If so then I would pay those off over the next year as the priority.

Company pension - is it a defined contribution scheme (auto-enrolment) or a defined benefit scheme? Defined benefit schemes are not that common now, so for the following I will assume it is a defined contribution scheme.

With a defined contribution scheme the money you pay in is yours, even if you leave the company. The pension follows you, future employers can contribute to it, or may have different scheme so you end up with several.

You say the company pays in 3%. If you are paying in nothing and the company are paying in 3% regardless, then that's a start. You should look at making contributions yourself - your company may be doing a salary sacrifice scheme which takes contributions you make directly from your pay, this can be worth doing but do read about it carefully as salary sacrifice can affect other things as it lowers you pay.

As a higher rate tax payer it is worth you paying into your pension, as you can claim 40% tax relief on all that you put in. Your pension scheme provider will claim 20% automatically, you will need to complete a tax return to claim the remaining 20%.

I would read as much as you can about how pensions work and also about other tax efficient savings such as Stocks&Shares ISA. You can contribute up to £40,000 a year (or max of your income if lower, which in your case the £40k is the lower figure) to your pension and up to £20,000 to an ISA.

Useful resources:
Meaningful Money Podcast... currently at the end of a series about pensions, so start with the first in that series: meaningfulmoney.tv/2018/08/08/what-is-a-pension-pensions-masterclass-1/
Pete the financial planner who does the podcast has also got a book out, which you may fancy having your Christmas Book list. The third section of the book is about investing which will give you a starting point for getting to know your risk tolerance and about stocks vs funds.
The Meaningful Money Handbook - www.petesbook.com

Money To The Masses Podcast - another podcast that is useful to listen to.
Pension calculator: calculators.moneytothemasses.com/pension
Article about how much to pay into a pension: moneytothemasses.com/saving-for-your-future/pensions/how-much-should-i-pay-into-a-pension-each-month

Pensions Advisory Service - has articles about pensions, for example this one about salary sacrifice: www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/salary-sacrifice

Starting young is great... you have many years ahead of you for investments to grow. Well done for getting this far, wish I had been in your position when I was 25.

namechangedforanon · 01/11/2018 11:50

Hi NannyNick, thanks so much for your really helpful post. Sorry on the delayed reply wanted to take some time to go through it carefully.

Is £10k emergency fund enough? - This gives me 3.7 months living at my current outgoings ( which includes saving £660+ a month ). If I was to forgo the saving and live on just my needs and current spending level it would give me nearly 5 months living costs... thats whilst having the same dispoable income as I do now which I could significantly reduce.

Any debts other than the mortgage? No debts other than some intrest free dental work spread over a 10 monthly payment and student loan contribution from salary ( plan 1)

Company pension - is it a defined contribution scheme (auto-enrolment) or a defined benefit scheme? It is a DC scheme (sadly!)

  • Will look into salary sacrifice , been aware of it for a while but haven't pushed to look into it.

Your pension scheme provider will claim 20% automatically, you will need to complete a tax return to claim the remaining 20%. - I asked about this and my pension is done pre tax so no need to claim as far as I am aware.

I would read as much as you can about how pensions work and also about other tax efficient savings such as Stocks&Shares ISA.

  • I have a S&S ISA however just got started with it early this year and only invested in one fund atm . ( Fundsmith) so will look to broaden my investments.

Thanks so much for the resources I will get started.

I think I am super motivated as I am not from a super well-off background - both parents were very sensible with money and taught me well about budgeting & living within my means but not informed regarding investing so keen to make sure I am informing myself and helping to become financially comfortable for the future.

OP posts:
New posts on this thread. Refresh page