Help! is it too late to start a pension at 58?

pwakley

I am 58,female, confused about pensions and due to retire at 60. I have the full state pension and two local government pensions, one is frozen and will pay out feb 2008 value about £11,000 lump sum and £3500 a year, the other is ongoing and will be about £1700 lump sum and £600 a year.
My question is should I open a third pension like a stakeholder paying in as much as I am allowed (not sure how to work this out) over the next 2 years to take advantage of the tax allowance. I have £25000 in premium bonds I could cash in for this purpose. Also would it be worth working after 60 to pay the lump sum from the frozen pension into the new pension. I will also have about 13,000 paying out from an endowment in oct 2008 which could be used.

dunstonh

It's upto you. Stakeholders can be useful to bump up income in retirment giving you a net return of around 10% which you cannot get close to with any other guaranteed product. However, you lose the bulk of the capital in the process.

pwakley

Thanks for replying, by 'lose the bulk of the capital' do you mean I lose control over the capital? and how do I work out how much I could pay in each year

Andy_L

You may be able to purchase extra years, although with only 2 years to go it will be expensive - though arguably a better return than putting the same amount into a stakeholder

pwakley

I did ask about extra years but but was told I could only buy 281 days! not much use

EdInvestor

First of all, don't panic

Looks to me like you're already optimally equipped with pensions.Remember, pension income is taxed. Your state pension will already eat up most of your personal allowance and the other ones will use up your age allowance when it arrives at age 65 ( before then you will pay tax on them). Any new pensions would also be taxable.

It would seem to me you should be looking at the ISA tax shelter from now on. ISA income is not taxable and you can access the capital any time .

It seems you will end up with around 66,000 in capital, which should produce an income of 3,300 a year @5%.

So you need to start opening an annual 7k investment ISA and feeding the money in, so that the 3,300 income top up is tax-free.

I would suggest that you open your ISA account at a discount broker which will rebate all the charges on your investments to you, a big saving.

dunstonh

pwakley wrote:

Thanks for replying, by 'lose the bulk of the capital' do you mean I lose control over the capital? and how do I work out how much I could pay in each year

With a pension you are giving up the capital in exchange for an income.

A pension would beat an ISA from an income point of view but added years may still be the best option. That would depend on whether you intend to crystallise the pensions at 60 or leave them until later in retirement.

Andy_L

pwakley wrote:

I did ask about extra years but but was told I could only buy 281 days! not much use

That'll be worth just under 1% of your final salary as annual pension and 3x that as a lump sum.

margaretclare

Hi

You could of course cash in all those useless Premium Bonds, stick the proceeds in a new stakeholder, thereby gaining 22% from the nice taxman, and leave the stakeholder to grow! You can do this at any age. I've been doing it from retirement income only. Or you could start a SIPP using the Premium Bonds money adding the 22% to it in the process - that way you have other options than an annuity. You don't HAVE to take any of your funds at any specific age (well, age 75 is still under discussion) but apart from that, you don't have to take them at 60, 65 or any other time.

Not an expert, by the way!

Margaret

dunstonh

The stakeholder pension rules were a brilliant move for those already in retirement or coming very close to it. Its an irony that that stakeholder pension now has more benefits for those already retirement than for those younger looking to invest for retirement.

pwakley

EdInvestor wrote:

First of all, don't panic

Looks to me like you're already optimally equipped with pensions.Remember, pension income is taxed. Your state pension will already eat up most of your personal allowance and the other ones will use up your age allowance when it arrives at age 65 ( before then you will pay tax on them). Any new pensions would also be taxable.

It would seem to me you should be looking at the ISA tax shelter from now on. ISA income is not taxable and you can access the capital any time .

It seems you will end up with around 66,000 in capital, which should produce an income of 3,300 a year @5%.

So you need to start opening an annual 7k investment ISA and feeding the money in, so that the 3,300 income top up is tax-free.

I would suggest that you open your ISA account at a discount broker which will rebate all the charges on your investments to you, a big saving.

I like this idea but probably only because I still really don't understand pensions. Thanks for your help