30yo with co for a year, considering joining pension scheme? How "safe" are these?

[Sunset V]

Hi,

I'm 30 and I've been with my current employers for almost a year now and they're trying to get to me to join a pension scheme. I've never been in one and have no clue at all about it. I have a family farm and I was half thinking of having that as my pension down the road.

How safe is a "safe pension" these days? heard a lot of crap and apologies for such an open-ended question!

Thanks,

SV

 

[gbh2930]

I think this US guide is a very good general guideline to money priorities
http://www.daveramsey.com/new/baby-steps/

i.e. Step 1 is to use whatever savings you have to set up a €1000 emergency fund in the highest earning instant access account you can find.
step 2: Eliminate all debt, apart from your mortgage
step 3: Build your Emergency Fund to 3 to 6 months of expenses in savings
step 4: Pensions. Only when you've completed the above 3 steps, should you get into pensions (just to be clear: "Roth IRAs" in the above link are the american version of pensions)

His book "The Total Money Makeover" is very good & will give you an overall plan

But apart from dealing with higher priorities first, I think pensions are an excellent savings\investing tool and will always come right in the long run. Tax benefits/savings alone make them very worthwhile. A properly run pension will alter the % of investment between "risky" stocks/equities (which statistically make more money in long run but take a beating in recessions) and safer options such as bonds (lower returns but much safer) as you get older. The closer you get to retirement age, the higher the % of safe options(bonds) should be in your pension. You can either have the pension company do this for you (called "lifestyling") or take more control of the investments and do it yourself. But as long as this basic principle of keeping the right % of stocks vs bonds for your age is followed, you can't go wrong really.

 

[huskerdu]

Its a good idea at your age to learn more about pensions in general and think about your own position.
Have you analysed your current pension plan and worked out how the farm is going to pay you a salary from retirement age until you die, which hopefully will be 20 years ?


You ask about whether company pension plans are "safe". Do you mean safe form collapsing and everyone losing everynhting, or safe from losing some value over time ?

You should read up on the company pension plan you have been offered, it is probably a good idea.

Are your employers going to pay into the pension plan for you, as well as you paying a contribution. you need to read the documentation to find this out.

This is a complete guess, just to illustrate to you the advantages of a company pension,

Lets say that you earn 30k and the pension plan is employees contibutions is 4% and the employers is 6%. This is a guess, but fairly typical of a lot of schemes.

Out of your €2500 gross monthly salary, you pay €100 into pension and your employer will pay €150. If you did not make this contribution, you would get approx €50 extra in your pay packet. Instead you get €250 invested in a pension. Company pension plans are at risk of the stock market falling, but it will be invested for 30 years and the stock market will go up and down over that time.

 

[Sunset V]

Thanks a million for those replies, really appreciate it. Good to get independent views on it.

Since your replies, I have started the ball rolling on my pension so thanks a million for that!