Prioritising deposit over pension?

Prioritising deposit over pension?

Author
Discussion

IrateNinja

Original Poster:

767 posts

177 months

Wednesday 23rd July 2014
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I’m currently savings towards a deposit for a house and making reasonable progress, being able to save a not insignificant (for me) chunk each month.

What I’d like some advice on is I’m also currently paying into my employers pension scheme (as I have done since I started my apprenticeship) at a rate of just over £200 per month. What would peoples opinions be on taking a ‘holiday’ from paying into my pension (I’m not sure if this is even possible at the moment!) and instead putting the amount into the House Deposit pot instead?

It would be for a period of hopefully less than 12 months but potentially up to 18 months, and for what it's worth I'm low 20s in age.

Ginge R

4,761 posts

218 months

Wednesday 23rd July 2014
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There is no right and wrong, the world won't stop revolving if you stop paying into your pension for a bit (make sure that you can rejoin later without penalty though and that there are no financial penalties for stopping payments).

Pensions are a means to an end - they exist to make your life better later. But if your life is going to be made better sooner by having a home as well as retirement money later, then the issue isn't one that can be just quantified, but there's an element of qualification as well.

If your quality of life is going to be improved, if you are aware that your pension fund might be less later but you value having a home sooner, then don't look on financial planning as a sacred cow that has to be worshipped 24/7. All things in moderation, it isn't an either/or.

That's my general view, it isn't financial advice mind!

timbo999

1,287 posts

254 months

Wednesday 23rd July 2014
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Remember that the £200 is pre-tax, so, if you stop putting it in your pension, you won't get an extra £200 a month to put in your deposit fund if you pay tax - more like £160...

Shaoxter

4,048 posts

123 months

Wednesday 23rd July 2014
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Depends on if you're in the 20% or 40% tax band.

Also does your company match any pension contributions?

anonymous-user

53 months

Wednesday 23rd July 2014
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I would continue to pay into a pension up to the highest amount my employer would match. Seems silly to turn down free money.

Depends on your personal circumstances though.




IrateNinja

Original Poster:

767 posts

177 months

Wednesday 23rd July 2014
quotequote all
Thanks for the responses all, I'm not actually sure what my employers contributions is as I've not considered it since the start of my career at 16!

I'm on the verge of 40% tax so I'm fairly sure it doesn't make sense, but as it takes so long to obtain a deposit I'm making sure I'm not missing any opportunities to minimise the time!!

Simpo Two

85,147 posts

264 months

Thursday 24th July 2014
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It will be interesting to see which asset grows faster over the years, the pension fund or the property.

gibbon

2,182 posts

206 months

Thursday 24th July 2014
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Simpo Two said:
It will be interesting to see which asset grows faster over the years, the pension fund or the property.
The major advantage of the pension is two fold, tax relief, and employer contributions.

In terms of actual growth performance, efficiency, value and flexibility of use, im not convinced.

I have a pension for the above reasons, I also have some investment in property as i still believe the long term trends in uk property will be upwards.

IrateNinja

Original Poster:

767 posts

177 months

Thursday 24th July 2014
quotequote all
Simpo Two said:
It will be interesting to see which asset grows faster over the years, the pension fund or the property.
And that's the crux of the matter... On the face of it it would be stupid to turn down the free money of employer contributions, but I can't help but think having my investment in property would be bring more tangible benefits to me. Especially as I'm still relatively early in my career.

Shaoxter

4,048 posts

123 months

Thursday 24th July 2014
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IrateNinja said:
And that's the crux of the matter... On the face of it it would be stupid to turn down the free money of employer contributions, but I can't help but think having my investment in property would be bring more tangible benefits to me. Especially as I'm still relatively early in my career.
You really need to find out how much your employer matches, turning that down is very silly indeed. In the 20% tax band (and after factoring in NI), for every £100 of contributions it's the difference between £68 take home and £200 in a pension pot. You're not going to triple your money on property.

HumbleJim

26,954 posts

182 months

Thursday 24th July 2014
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You need to live so buy a house, try to make up the pension payments sooner rather than later though. The sooner you buy the sooner you finish your mortgage. Renting is dead money.