I am 53. Is a pension worth it?

poppy52

Hi - have never been on this forum before, I am a regular on the debt one, however. I have recently become employed, after 12 years of self employment which got me deep into debt. Debt is being handled via a debt management plan which has another 5 years to run. I am 53, job is very good with excellent salary and they want me to start a pension. Before self employment I worked abroad, so no NI payments except in last 12-13 years. My contribution to this pension would be £147. Employer's would be £395 and they say total of £677 would be invested monthly once the tax relief, employer contribution and the employer's "bonus" contribution has been added. Pension is on 'better than stakeholder terms' - think this means I can take it with me if I change jobs. My question - I am 53 and will retire at 65. Is a pension worth it? £147 is not a large sum in terms of my salary but it is when you take my debt managment plan into account because I will have to reduce payments to creditors by that amount - I have lots of creditors so each would get a few quid less per month as a result. Also, they said something about opting out of Serps and about a scheme that reduces my salary by the amount of pension I am paying so that I pay a bit less tax.

ReportInvestor

This is lots of free money for you in the future. I'm also guessing that you are also getting 40% tax relief on your £147 net contribution?

When you take your pension, under current legislation, you would be entitled to take 25% as a tax free lum sum.

So you are going to get more than your money back ( 25% of £677 is more than £147 ) and that's before any investment growth . In other words, you are likely to get your actual pension for free :eek: - if you can tie up the £147pm for the next 12 years.

Unless it's going to result in you not managing your debt plan, it looks worth doing to me.

Your employer is one of the more generous contributors. Congratulations on finding them and your new job.

poppy52

Thanks. Employer is generous, but partly because they wrote our contract letters with the wrong employer contribution and couldn't easily get out of it! Debt plan is due to finish in 5 years, and then I will quite a bit of spare money - hopefully I will be able to save a lot then since I will have had 6 years of living fairly frugally and will be used to it! I

EdInvestor

poppy52 wrote:

Pension is on 'better than stakeholder terms' - think this means I can take it with me if I change jobs.

It should also mean that the annual charges are lower than 1%.

My question - I am 53 and will retire at 65. Is a pension worth it?

It's a decent sum of money going in,no doubt. The eventual outcome will also depend on what funds the pension will be invested in and how they perform over the period, plus the charges.Do you have any information about the provider and the fund choice?

Also, they said something about opting out of Serps

There is a thread at the top of the forum about the pros and cons of doing that.In your case I would suggest not, because of your state pension shortfall.The Serps will help make this up and the state pension is guaranteed, inflation proofed money,not to be sniffed at.

.. and about a scheme that reduces my salary by the amount of pension I am paying so that I pay a bit less tax.

This sounds like "salary sacrifice", there's another thread at the top about that too.Again I would suggest not,as it will affect your state pension.

dunstonh

It should also mean that the annual charges are lower than 1%.

Just a slight tweak on that. Better than stakeholder could mean over the term and not an annual basis. For example, Scot Eq have a plan that has higher than 1% pa. AMC but pays a bonus back in from year 10 onwards. Short term its higher than stakeholder but after around 20 years, it becomes cheaper than stakeholder. It is possible to have a similar style of short term more expensive/long term cheaper with plans from Scottish Life, Skandia and one or two others.

emu

Hi all. re poppy52's post: I too am 53 but with prospect of basic state pension and sm amount from teaching in my 20s. have just discovered immediate vesting pensions (2 companies let you invest the minimum £2808 rather than large portion of saved pension so could do this from savings in building soc or premium bonds).
My questions are
1] does amyone have any general info/comments on these? [have read the site guides but don't understand why the option is not better known]
2]can i put £2808 into this every year from now until i'm 66 (i know about restrictions re opening stakeholder in same year) and is this sensible or is it worth saving the cash for 2 /3 years and having one bigger pot?

emu

ps why would someone over 50 choose this instead of stakeholder?