67 years old....is it too late to get serious about future?

dboswell

hello, I am 67 year old and plan to retire in 3-years.

I am mortgage free and have about £40,000 in savings; in fixed and current accounts. Boring I know, but I have never know any other way!

I am still employed and hope to continue until 70. I am in receipt of the state pension. I have no company or private pension provision. Never had an employer that offered a company pension.

my current income is about £20,000, but when I retire this is likely to drop to just the state pension.

I am happy to invest for 5 to 10 years, but need a combination of income and growth.

I was considering a SIPP and buying a range of funds for income and growth. I can put approx £1,000 pcm away.

Can someone be kind enough to sum up the advantages and disadvantages of doing this in a SIPPs and are there alternatives?

margaretclare

The advantages of putting money into a SIPP is that you get basic tax relief on it, which increases the total amount to be invested, and you can leave it to grow until you're 75.

If you think that you might need more money in your later years rather than now, it could be a good move.

dboswell

thanks. are there restrictions on when I can take the money out? is there a reliable source of reading. I have read mse martin's article, but I was thinking something more indepth.

sorry if this seems so basic.

dunstonh

are there restrictions on when I can take the money out?

Yes. between ages 55 and 75.

SIPPs are the experienced investor option. Mainly as they are the most expensive way to purchase funds and are designed to be used with investments that are not typically available in stakeholder pensions and personal pensions. Any reason why you have jumped in at looking at the expensive option?

dboswell

SIPPs is the term that I have come across most lately. I was sent some information from Hargreaves Lansdown re sipps and isa and it stuck in my mind. it seems you have more control over what is purchased and when and there is a greater choice of investments. this may be illusory.

dunstonh, can you recommend where can I read about the merits re sipps, stakeholder pensions and personal pensions without the fluff?

thank you

dunstonh

SIPPs is the term that I have come across most lately. I was sent some information from Hargreaves Lansdown re sipps and isa and it stuck in my mind. it seems you have more control over what is purchased and when and there is a greater choice of investments. this may be illusory.

You do have a greater choice of investments with SIPP. However, it will cost more. A lot of people go into SIPPs and end up in HLs multi manager funds or other basic funds which offer no improvement over stakeholder or PPP funds and cost more. SIPPs are the current fashion as they have been heavily promoted by a number of companies, HL included. Stakeholders are basic and whilst the concept failed in the objective to improve pension provision, they did help bring charges down. PPPs are the middle ground where they offer the funds of a stakeholder pension but also a range of external funds allowing you the best of both worlds.

dunstonh, can you recommend where can I read about the merits re sipps, stakeholder pensions and personal pensions without the fluff?

I dont know of any consumer sites that would be objective.

sleepless_saver

The Pensions Advisory Service site has a lot of useful info quite clearly presented. It doesn't have an axe to grind in that it has no financial interest in the info it provides.

It probably doesn't mention, though, that for some people increasing their pension provision - if it is very low - could stop them getting means tested benefits e.g. pension credit which they would have got otherwise. You can check out whether this would apply to you by using https://www.entitledto.com and trying out different scenarios.

sindy9001

I don't think it is too late to get serious about future.

SnowMan

Sleepless saver you make an excellent point about pension credit. And I think the OP needs to step back a bit.

The first question to be answered is whether it is a good idea to invest in a pension at all because of the pension credit issue and to plan exactly how he is going to fund her retirement. It is impossible to give an answer at present because we don’t know enough about the OP’s circumstances, amongst other things the amount of the OP’s state pension including any SERPS.

But there is a potential scenario where if (just for the purposes of argument) the OP placed all his savings into a pension, that the resulting annuity would simply end up topping up her income to the guaranteed pension credit threshold. If he had no savings the income would have been topped up to this level anyway, so ignoring a few complications such as savings pension credit the option looks a poor one.

On the other hand leaving the savings as capital might mean he didn’t initially qualify for guaranteed pension credit at 70, because her capital would be treated as giving her a notional income of £2 pw per £1,000 of capital in excess of 6K. But he could use his capital to top up income and as his capital reduced he would reach a point where guaranteed pension credit kicked in. When this happened his council tax would be paid through council tax benefit and he could live off the state pension and pension credit topped up by the remaining savings.

But I can’t give an answer of any kind. The point I am making is to illustrate that there are a lot of complications here. It may turn out that a pension is a good idea (and there may be tax advantages if her resulting income is below his personal allowance) but depending on individual circumstances it could equally be a very poor decision indeed.

I would caution the OP against just simply jumping into buying a pension without understanding the full implications and planning exactly how he funds her retirement.

Also if state pension (and pension credits) and his savings are not enough to live on she might need to consider making use of the capital in her house. Again impossible to say without knowing the full circumstances.

The OP might want to work out his monthly expenditure to see what she needs to maintain her current lifestyle. This can be compared against the OP's likely income in retirement. There is a good annuity tool on the FSA website at http://www.fsa.gov.uk/tables/bespoke/Annuities where you can type in your details and it will tell you what level of pension you can buy from a specific amount of fund - useful if going the pension route.

Speaking to an organisation like TPAS would definitely be a good first step. Checking pension credit entitlement in different scenarios with an organisation like the CAB might be worth doing also.

dboswell

sleepless_saver wrote: »

You can check out whether this would apply to you by using www.entitledto.com and trying out different scenarios.

I dont think I would qualify. I started work in march 1961 and have worked continuously since, apart from a few weeks off for children. So full set of stamps.

I think even without my earnings my pension is above the pension credit limit, by about £15 pw.


I will follow through the the link and other comments.

thanks

squidge60

you might find this site useful http://www.fool.co.uk/search/index.aspx?site=UKBoards&filter=p&q=sipp&commandSearch.x=14&commandSearch.y=16