Starting a new pension at 60

anabana

Hello - could some very kind person give me some advice please.

I got made redundant last year and thinking I wouldn't get another job because of my age and the recession, I took my pension, which was a final salary scheme. My pension's not great but I thought at least I would have some income until I reach state pension age at 62. The fantastic news is that I've been offered a permanent job and they have a pension scheme (not final salary) but they do match employee contributions up 6+1/2%.

The salary's not great but combined with my pension, makes my yearly income about £18K.

Can anyone tell me if it would be worth my while joining the company pension scheme? I reckon I'll probably keep working until I'm 65.

Thanks a lot
Kindest regards
Ana

Thrugelmir

If can afford the maximum contributions it would be money for nothing.

There's no enforced retirement at 65 either any longer.

TrickyDicky101

Do triviality rules also come into play here if say at 65 the OP has less than £18k in her pot (even though she is already in receipt of a final salary pension)? This would make it even better to pay max into the pension while she still can...

Dominic9

Do triviality rules also come into play here if say at 65 the OP has less than £18k in her pot (even though she is already in receipt of a final salary pension)? This would make it even better to pay max into the pension while she still can...

Assuming the final salary scheme pays more than £900 per year, then no.

Unless the new pension scheme is an occupational scheme and the OP doesn't build up more than £2,000 in it, in which case it could be trivially commuted.

Oldernotwiser

Does your new pension have death in service cover? That can be worth having, particularly when you're older.

dunstonh

Do triviality rules also come into play here if say at 65 the OP has less than £18k in her pot (even though she is already in receipt of a final salary pension)?

Only if they have less than 1% of the lifetime allowance left (possible but unlikely)

A lot of people who are retired pay into pensions as they can be very tax efficient ways to boost income in retirement or to balance poor retirement provisions for spouse. To get "free money" from the employer to do this means it is an absolute no brainer as nothing beats free money.

You pay 5.2% net and you get 13% paid in total. On 18k that equates to £936 a year from you to get £2340 in the pension. Can you think of anything else that will turn £936 to £2340 overnight?

anabana

Hi everyone and thanks for responding, though to be honest I don't understand a lot of what's been said, eg triviality rules?

I suppose what I'm trying to find out is would it be better to keep the contribution and save it or to put it into the pension. If I was to say pay into the pension £100 per month and my employer contributed £78 per month, what would my return be at 65?

I get life insurance cover from the company - the pension only pays out my contributions if I die.

Thanks again
Kindest regard
Ana

dunstonh

I suppose what I'm trying to find out is would it be better to keep the contribution and save it or to put it into the pension.

Would your savings account turn £936 into £2340 overnight?

If I was to say pay into the pension £100 per month and my employer contributed £78 per month, what would my return be at 65?

That isnt what you are saying they are going to do though. You said it was matched contributions of 6.5%. So, 18k equates to the employer paying £97.50pm and you paying £78 and the Govt adding £19.50. So, your cost is £78 but £195 will be the total paid in.

Ignoring growth, your cost would be £2808 (36 months of £78) and the fund value would be £7020. It wont make you rich but it wipes the floor with a savings account.

the pension only pays out my contributions if I die.

That would be unusual. Most schemes pay the fund value which is built up from your contribution, the tax relief, tax free growth and the employer contribution. i.e. if the pension is worth £10k at point of death then your beneficiary is paid £10k

anabana

Hi Dunstonh - thanks so much for your reply. I think I've not explained properly - my salary is only £12K per year but with my pension on top it comes to £18K, therefore, the contributions from me and my employer will 6.5% of £12K. I understand what you're saying when you mention free money, however, what I'm wondering is how do I get this back from the pension company. Is it as a lump sum and/or a pension and if it's just a pension how much would it be worth a month when I retire?

Hope this makes sense - I realise I'm not very bright when it comes to pensions as after reading posts on here I now know I would have been better leaving my pension sitting until I retire. But as the old saying goes needs must...

Thanks again
Regards
Ana

dunstonh

I'm wondering is how do I get this back from the pension company. Is it as a lump sum and/or a pension and if it's just a pension how much would it be worth a month when I retire?

You can take back 25% of its value in three years as a lump sum. The other 75% can be taken as an income. Or you can leave it invested up to age 75 and take it later in life.

It wont be much as you only have a few years. However, purely from a money point of view, it will beat a savings account if you were to pay the money into that.

anabana

I don't know how you work these things out Dunstonh - I've been reading other posts you've made - you must be a genius!!

I think I'm starting to understand.

I'm having to sign off now but will post again when I get a chance to really think through:rotfl:what you've said. I really hope you'll answer as I already feel that I can rely on your advice!

Thanks so much
Kindest regards
Ana