44 no pension, what should we do?

beach_3

Hello,
I am new to this board. I normally hang around in the DFW board as I have debt I am in the process of chipping away at. I have a NHS pension so fmy concerns are not major for myself however I am concerned for my partner. He is 44 and does not have a pension. What should I advise him to do. He works full time. His employer he has just told me does have a pension scheme which he does not pay into. He has been with the same employer for 10 years. There have been some redundancies recently so we are not sure how much longer he will be with them. He works in the media industry.
Is it worth him joining the work pension, what do we look for within this pension scheme or should he take out a private pension?

Thanks

ReportInvestor

Hi beach,

It rather depends on the terms of the pension.

If it's a final salary pension (unlikely) it's gold dust.
If it's a defined contribution scheme - investments go into a pot that is used to buy an annuity - but where the employer also contributes then that would almost certainly be better than a private pension as it's free money .

Another factor is whether your OH is a higher rate taxpayer as that loads the scales in favour of a pension since he woulld get 40% tax relief (i.e. 60p buys £1 of pension).

dunstonh

If the employer scheme offers free money, then he should be in it. Think of all that free money that has been thrown away over the years.

At age 44, he has left it late to look at retirement. To build up a fund with an ideal value of around £250,000, he needs to be looking to pay in around £500pm now.

beach_3

Thanks for that, yes he is in the 40% tax bracket. His salary is 55,000 pa. I will get him to bring me the details of his work pension to look at. Alternatively is it worth me paying more into my pension to help support both of us at retirement. As I said earlier mine is NHS I have paid in for 21 years and will be 40 next year so still have a good few more years to contirbute. Can I do this does anyone know?

dunstonh

Alternatively is it worth me paying more into my pension to help support both of us at retirement.

No. You both have a £7280 tax free allowance at age 65 (increases annually). If the income is all in your name then he may not fully utilise his tax free allowance and then 10% band. Whereas you will be paying 22% on all of yours. Plus on your death, the income would drop 50%. With split planning, yours will still drop 50% but his will continue (and vice versa).

EdInvestor

Maxing out his ISA @ 7k a year would also do the trick and provide tax free retirement income.

Presumably he has always been contracted IN to the state pension?This may give him a pension of up to around 10k a year, index linked.He can get a state pension forecast to find out how much he is in line for.

robellett

dunstonh wrote:

If the employer scheme offers free money, then he should be in it. Think of all that free money that has been thrown away over the years.

At age 44, he has left it late to look at retirement. To build up a fund with an ideal value of around £250,000, he needs to be looking to pay in around £500pm now.

I'm 44 and unemployed following a severe injury in my 30's. I get credits toward state pension NI contributions so am set on this path.

Does this £250,000 fund need to be already in the pension pot or is this a rough figure about what a male needs to have in total when I/he retires?

Thanks for any clarification.

EdInvestor

250k would pay out (rule of thumb) 12.5k a year. It doesn't have to be in a pension. It might be in the form of a letting property generating a 5% income yield from rent, a mixture of cash and shares or funds inside or outside ISAs, an inheritance, - or even your own home these days, which can provide an income through equity release.Note that income from ISAs is not taxed and income from share dividends (inc equity income funds) is tax paid to those on basic rate.Pension income is taxed.

dunstonh

The £250k fund is just a ball park figure to provide 12.5k net income per year as Ed confirms.

It doesnt matter if the lump is in a pension, ISA or whatever (well, savings accounts would need a bit more to make up for tax and lower return).

Pension income is taxable above personal allowances (£7280 currently at age 65) but a single life annuity combined with tax relief on contributions still makes pensions the best option when it comes to providing an income, even after tax. Note the careful wording there emphasing income. Most people will need income and capital in retirement and the current and a pension is no good for capital building.