work pension or savings?

[jeanette1976]

I've just been accepted on a perm contract at work and have been offered a pension scheme in 3 months. Problem is that some people say that i'm best putting the money in a high interest ICA account as i get taxed on my pension... I'm 30 and a late graduate so i haven't had a pension set up!

I nkow the company matches whatever we put it every month but i can only afford the minimum rate 3-5%

What are the pros and cons and what shall i do?! No jargon would be appreciated, if possible!

Thanks!

[WendyS]

Am not sure what you mean when you say you will get taxed on your pension. Yes, you will get taxed on your pension when you draw it in 35 years time, but in the meantime, while you're contributing, you get tax relief on all your pension contributions. The fact that your company is matching your contributions seems too good an opportunity to miss. Gordon Brown certainly won't be matching your savings into an ISA.
I assume you mean an ISA account (not ICA) as an alternative? There's no guarantee that ISA's will be around after the 2009/10 tax year so they may be a short term investment for you and there's always the temptation that you will want to cash it in before you retire. In your age group I think a good pension fund pot is going to be absolutely essential to living a comfortable retirement. At 30 you may well feel that 65 is so far away in the distant future that it's not worth worrying about. Believe me, it will creep up on you faster than you imagined, and as you grow older, knowing that you have the backing of a good pension scheme will make your ageing years feel a lot more comfortable.

[jeanette1976]

Thanks Wendy, I a colleague of mine is dead against them and said to put it in a high interest account!

[Dassie]

Definitely take out the pension. You will benefit in the long term especially with the Company's contributions being added to yours no matter how small. In all likelyhood as you progress and earn more you will be able to up your contribution. You cannot draw on a pension for cash so it also prevents you from raiding your savings!

[WendyS]

Jeanette - ask your colleague what he/she is going to live on when they're 65. Perhaps they're fortunate enough to have a rich family from whom he/she is going to inherit a lot of money just as they hit retirement age.! The rest of us have to plan ahead for ourselves. I agree that some pension schemes have not done terribly well for their members but that is no reason for putting your head in the sand and not asking yourself the hard question "What am I going to live on when I retire?". Pension schemes invest in the stock market and in almost every case over the long term will turn out to be a far better investment that cash tucked away in a savings account.

[kwicky]

My brother-in-law saved into a pension. At 64 he died. He was due to take the pension at 65. His wife received nothing! Look round at the rest of your relatives. What is the common age at death. Unless they were over 75 think only carefully at a pension. You may be providing for the octogenarians amongst us.