Right Time to Start a Pension?

By Rebecca Scaife

Published on: October 6, 2022

Financial Advice

Most articles of this nature, around the world, will talk about starting your pension early and the benefits of compound interest.

Whilst that’s mathematically true, it’s not the right answer for everyone. I think we need to say that the number one priority for everyone should be to buy a house.

Those on lower salaries should always prioritise buying a house over saving in a pension. Interfamily loans to facilitate this, if they are a possibility, make perfect sense for both generations.

The reason being that rent is paid from post-tax income. Therefore, not having to pay rent is ‘earning a return’ at your top rate of income tax, your own house is free from capital gains tax and you can rent a room tax free.

So logically, young people should borrow, or be gifted the house deposit from their parents, as soon as possible and buy a house as soon as possible.

They should buy a two-bed property, at least, and rent out the second room. This income will help to pay off the mortgage or pay back the family loan if one was received.

The goal should be to save in the property by overpaying the mortgage, this reduces the loan to value.

Further Insights on Retirement Planning

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