am I too late?

howie1975

when I started work at 18 a pension never crossed my mind so I never took one! now I'm 35 with a family and mortgage and am still without one! yes stupid I know but I've always been more aware if having every penny in my pocket for now!
I really want to get a pension sorted but is it worth it and what is the best way to go for me?

dunstonh

I really want to get a pension sorted but is it worth it and what is the best way to go for me?

It is still worth it but you have to be aware that you are starting late and will have to pay more than you would have done had you started in your 20s. There is a rough guide that states that you should aim to have £35k in your pension by age 35. Its more of a guide to encourage you to save or to see if you are on track but in your case, you can see how far you are behind.

The basic state pension is £5000 a year. Your state pension age is 67. Do you fancy living on m just that a year? If yes, then you dont need a pension. If no, then you need one.

Which is best will depend on a range of circumstances which we cant tell here. Doing something is better than nothing but doing it right would mean you seeing a local IFA if you dont know how to do it yourself.

bendix

Of course it's worth it. You've likely got thirty years to build up a pension stake, thirty years of beautiful tax breaks, thirty years of the magic of compounding returns, and thirty years to do something which could make the difference between enjoying your retirement or just existing in it.

modelreject

Sorry to butt in, but how much would an IFA cost? Say I want to invest £200 each month and want reports on progress each year, would that just be a one off meeting to start the pension and then kepp tabs on it myself?

jamesd

howie1975, it's not too late. Ten years later also isn't too late, though it requires much higher pension payments. It looks as though I'll make it to my minimum target from a zero start in seven years but that took more than 60% of income to achieve. The earlier you start, the lower that percentage of your total income is.

I suggest that you use the Hargreaves Lansdown pension calculator to work out how much you should be contributing after tax relief. That suggests that starting now, every £33 a month that you put in after tax relief, 26 before tax relief, may get you £1,000 a year in income in retirement.

Take your desired income, subtract £7,000 to allow for the state pensions (£5,000 if self-employed). Divide that by 1,000 and multiply by 26 to get your target monthly pension contribution.

Say your target was £15,000. That's £8,000 after allowing for the state pensions. 8,000 / 1,000 = 8 so 8 * 26 = 208 a month is your target before tax relief. Increase with inflation each year.

dunstonh

how much would an IFA cost?

Every IFA is different.

Say I want to invest £200 each month and want reports on progress each year, would that just be a one off meeting to start the pension and then kepp tabs on it myself?

Starting at £200pm from a nil balance would not be cost effective to have a servicing agreement in place. You are better off going transactional (one off advice) and then reviewing it ad hoc until it builds up to a value where servicing can provide a benefit.

Modern personal pensions can take the fee within the pension (therefore giving you tax relief on the fee). There would be no VAT to pay and given your age and amount, it would easily end up cheaper than a stakeholder pension. Indeed, it would typically end up cheaper than a nil commission stakeholder pension let alone one arranged direct with commission factored in.

howie1975

thanks for the advice. I knew it would cost me a fair bit doing it this late on but I have to take the plunge. i'll look at some options including my company pension scheme. thanks!

jamesd

A company pension scheme? Does your employer pay any contributions? Is it a salary sacrifice scheme? Either of those two things can get you the same pension for even less money - or more pension for the same amount. Final salary or one where you choose which investments to use?

Batchy

get on board mate, my employer pays 15% er's contribution... dont be scared to ask if they dont.
I had a discussion and got them up from 5% to 15% when they never give me a payrise (corporate policy)... effectively going from 5% to 15% they did, this was good, and a good way of getting a payrise when it was politically impossible, I just never get to see it, but keep watching my pension rise nicely... then other months it falls... lol... hey ho.