New Pension aged 58

SaxonManFinland

I cannot find much information about starting a new pension aged 58. My employer will pay 10% of my salary per year for the next 8 years, around 30k.

But is seems a complete waste of time, there must be a better legal way. Any advice or ideas.

I cannot add it to my old pension fund, which is closed. I would love to find a way to be able to take as much as possible to pay off my outstanding mortgage in 8 years.

noh

Why does free money for the next 8 years seem a waste of time?

McKneff

Hardly a waste of time, your company is offering you free money and you are hesitating, grab it with both hands man.

dunstonh

But is seems a complete waste of time, there must be a better legal way. Any advice or ideas.

Free money never seems a waste of time.

Age is irrelevent. Indeed, pensions are extremely popular with those coming up to retirement or even already retired as a way to utilise the tax efficiency of the pension wrapper (which can either be to have a pension pot to make up shortfalls on earlier lack-of-planning or to have a pot which can give a boost in income later into retirement or to estate plan to get some money outside of your estate).

SaxonManFinland

Well of course I am not going to say no, but I was hoping there may be a special system to allow me greater access to the money. I guess I was hoping HMG had thought to help those a bit older to save and have access at retirement. Buying a annuity pays out about £100 per month before tax.

Is there no other way to utilise this gift of 10% of salary. No point in taking it as salary as I will lose 40% ish. Is there no way to get the pension benefits (tax free) yet access the fund by more than 25%.

At the end of the day, I guess most people like me took out pensions and just trusted the rest to our company or an advisor. Now it seems we have to be a bit more involved.

moonrakerz

SaxonManFinland wrote: »

Is there no other way to utilise this gift of 10% of salary.

It is NOT a "gift of salary" - it a Pension contribution !

When will people realise that Pensions are just that - NOT instant access saving schemes, which they get tax relief on and their employer pays in lots of free money for them !!!!

dunstonh

I guess I was hoping HMG had thought to help those a bit older to save and have access at retirement.

No. It has to help those save for retirement which is the point of a pension.

Buying a annuity pays out about £100 per month before tax.

With annuity rates that are typically better than savings account interest rates. Or you can utilise income drawdown if you prefer to be invested.

Is there no other way to utilise this gift of 10% of salary.

Its not a gift. Its part of the package.

No point in taking it as salary as I will lose 40% ish.

So, even more reason to pay into the pension on top of the employer contribution.

At the end of the day, I guess most people like me took out pensions and just trusted the rest to our company or an advisor. Now it seems we have to be a bit more involved.

Is that a bad thing?

jamesd

Your employer may let you transfer the money to another pension from time to time, perhaps once every year or four. If so you could transfer and take benefits from the pension in stages. That would let you take the lump sum and perhaps ongoing income from income drawdown instead of buying an annuity. You could either contribute that higher income to a pension pot to get the tax relief and another lump sum later, put it into a S&S ISA or use it for something else.

Whatever you do with it, try to find something more productive than clearing low interest rate debt when you can make more from investments than the mortgage interest rate.

If you want the most efficient way to get rid of some mortgage amount, that would be the take it and pay into a pension pot again method, which would get you a double chunk of tax relief. Then you'd clear the mortgage only at the end, having left the money invested somewhere for the whole time.

It's puzzling that you aren't looking to make more use of pensions if you're paying 40% tax. It's far more efficient to make pension contributions and pay off a mortgage with the lump sum and ongoing pension income than it is to make mortgage payments out of after 40% tax income.

hugheskevi

I guess I was hoping HMG had thought to help those a bit older to save and have access at retirement.

Is there no way to get the pension benefits (tax free) yet access the fund by more than 25%.

If you have pension rights worth less than £18,000 then from age 60 there is Trivial Commutation for small pension pots.

If you have £20,000 or more of secured pension (annuity, Defined Benefit pension or State Pension) in payment then you can take a remaining pension pot as a (taxed) lump sum.

If you are like most, in between those two limits then the usual rules apply - HMRC gives you a tax break if you commit to a pension, a lesser tax break if you commit to an ISA (plus various other less common tax breaks).

Being 58 you do have greater access, as you can commence the pension at any time and take a Pension Commencement Lump Sum.

Therefore, for every 60p that goes into the pension, it is made up to £1 with tax relief and you can take 25p at any time, so it is only 35p that is tied-up in providing an income, and in return that gives 60p of future income taking account of 20% income tax so it is pretty good value.

At 33, I wish I had access to pension benefits should I need/want them - every contribution I make I won't see for over 20 years at least, regardless of what might happen in the meantime