too old for a pension at 53?

joolsbfd

have been paying into a company pension for one year, with employers contribution it amounts to £200 month. not got any other pension whatsoever. am i wasting my time? should i be investing money elsewhere?

dunstonh

a pension is just a tax wrapper. It isnt an investment.

If you pay £1,000 into a pension, then £1,000 is the value. If you pay £1,000 into an ISA, then £1,000 is the value. So, if you think its pointless paying into a pension, then you may as well think its pointless paying into anything else.

Your employer is giving free money to put into your pension. What other type of investment has returns that are going to make up for that free money you wouldnt be getting if you pulled out?

jamesd

You're not wasting your time by investing 200 a month towards your retirement income. That's enough to make you significantly better off if it's well invested. Being very cautious about investment returns it could produce an extra 30 a week in today's money in pension income but more is possible with good investment choices.

It's best to take the matching funds from your employer. If you can, up to the maximum they will match. Not really worth looking elsewhere until you have taken all of the free extra money from them.

How is the pension money being invested? Which funds?

cheerfulcat

joolsbfd wrote:

have been paying into a company pension for one year, with employers contribution it amounts to £200 month. not got any other pension whatsoever. am i wasting my time? should i be investing money elsewhere?

The contributions from your employer are quite valuable. And yes, I think that you would be wise to invest elsewhere as well, preferably in an ISA. This should give you additional income in retirement.

Whether or not you are wasting your time depends partly on what other income you expect to have in retirement, and whether your pension income will take you over whatever means-tested thresholds exist when you retire.

EdInvestor

Whether or not you are wasting your time depends partly on what other income you expect to have in retirement, and whether your pension income will take you over whatever means-tested thresholds exist when you retire.

Indeed so.First you should check what you'r state pensions entitlement is:

https://www.thepensionservice.gov.uk

If it is below the level at which you will be eleigible for pension credit you may be paying for pension benefits that you will get anyway.

Do you have a mortgage?

joolsbfd

i suspect that this might be the case. it's my friend who i'm asking for, cus i was recently advised to think carefully even at 40 in case i start paying in for benefit that i would get anyway. at 53 i suspect he's even more likely to be in this situation, paying in for a pension, and this not taking him beyond the threshold he would get anyway. his job isn't particularly over and above the average salary, won't rise to mega bucks and is in the voluntary sector.

he owns a home and has paid off the mortgage, no other income or money coming in or invested anywhere.

any advice about where he could get good advice?

the threshold issue was the one i was telling him about, but i'm not particularly financially astute either, and have only just started a pension at 40. hey ho!
thanks for suggestions so far!

jamesd

The people who may end up not gaining from pension contributions are those who are in the poorest part of society, those in the bottom 10% of earnings, with decreasing chance up to about the bottom 30% in some cases. By the time you get to average income the chance of it being a bad idea is pretty much gone.

Your friend should get the government pension forecast, that will tell him that he's going to have an income above benefit levels and that will confirm to him that he should accept the pension offer.

EdInvestor

Since your friend has no other pension, he should be up for the full amount of both state pensions - the basic, plus the S2P.

He could thus find that he rather better provided for than he realises

Check the forecast.

dunstonh

unless of course the Govt abolish pension credits or reduce it down or he has savings in other accounts/investments.