How much of earnings to put towards pension/savings/holidays

BilboBagOfCans

Hello all,
I'm 25, and have just gained employment with a private company in the UK.
I worked in the public sector here for 2 years however I am a bit scared about the pension situation now that I'll be private. I keep hearing about how we're all going to starve when we get to pension age and I suppose I just want to try to start off on the right foot now.

My employer provides double matched pension contribution of up to 12% employer contribution. How much percentage-wise should I put in? I could put in around 8% comfortably but would that be enough?

I've heard that you should save 20% of your income automatically also. I suppose at 25 I'm looking at hopefully starting to save for a deposit down the road, but I also like to travel, so I was wondering how others go about ensuring they have enough of serious savings and also enough for fun.
I have around 2000 in savings at the moment, and no debt.
When I tot up the figures, I reckon I'll have around 100 pounds per week for discretionary drinks/clothes/meals out etc. Is it best to save for holidays out of this?

catrionanic

As a general guide, in your 20s it’s good to put 10% of your earnings away for a pension. If your employer matches that, it’ll be a great wee pot that builds up quickly. I would probably be tempted to put away the 12%, to make the most of the employer contribution. Remember that this will come out of your pay cheque before you are taxed, so it won’t actually result in you losing 12% of what you’re taking home after tax at the moment.

As for savings, I would put away as much as I can comfortably afford. If you can put away 10%, that’s great. If you can put away more than that, even better!

It’s great that you’re thinking seriously about pensions at such a young age.

BilboBagOfCans

Thanks for your response.
Do you take it from that statement that I would have to put in 12% to get the full benefit?
I thought since they are double matched contribution that if I put in 6% monthly they would give 12, but if I put in 10% they would still only give 12%, is that incorrect?
Sorry as I said this is all so new to me!

BilboBagOfCans

Thanks for your response.
Do you take it from that statement that I would have to put in 12% to get the full benefit?
I thought since they are double matched contribution that if I put in 6% monthly they would give 12, but if I put in 10% they would still only give 12%, is that incorrect?
Sorry as I said this is all so new to me!

catrionanic

You should check with your employer, but the employer-contribution schemes that I’ve come across usually match your own contribution up to a certain percentage. So if you put in 6%, they’ll also put in 6%. If you put in 12%, they’ll put in 12%. But if you put in 20%, they’ll still only put in 12%.

If they double your contribution, up to a max of 12%, that’s really awesome!

Merowig

The way you described it, indicates for me that 12% is the maximum the employer is contributing. So with you contributing 6% a whooping 18% is saved for the pension which is very good for someone in your age. If you contribute more you can avail as well of additional tax savings so no hurt in to that but the emloyer won't put in more.

Also you should have an emergency fund of roughly 6 months your expenses, and then you should consider to start saving for a deposit for a house.

Personally in your situation I would be happy for now to just put in 6% into the pension (plus the 12% from the company) and save the rest for further expending your emergency fund and then savings for holidays/deposit.

Squozen

Look at saving 12% a month at the minimum (which isn't as high as it sounds as it's pre-tax). Go for a fund with low fees, and the rest will sort itself out. And remember, spend what you don't save, not the other way around. Good luck!