Is it worth having a pension?

EdInvestor

Desperate_Housewife wrote:

It looks like we will both qualify for the basic and serps (as well as about 80k lump sum invested in OH's pension)I have a small pension (pay £100 pm) but paid into NHS superannuation scheme for the last 20 years (no longer emplyed by them hence the private pension)

No savings as all the money we earn goes on the mortgage in an attempt to pay it all off (owe 43k)We both pay tax at 22%

What you need to do is to get *specific* forecasts of how much pension income you are going to be getting in retirement from all sources, state (Serps can vary between practically nothing and 7k a year), company and private.

Pension income is taxable at your highest rate after you retire. So the optimal amount of income from pensions in retirement is around 10k pa, which is covered by your age allowance and the 10% tax band. If the income is within this, you can receive it almost tax free.Any income coming from an investment ISA is also paid out tax free.

So if you have an in come of 20k of which 10k is from pensions and 10k from an ISA, you'll pay virtually no tax.But if your 20k came entirely from pensions, you would paytax of around 2,500 pounds a year.

This would be a waste, and it's quite avoidable with a bit of forward planning.

So get a proper forecast on the state pensions for both of you, and from the NHS and from the private pensions so you can see how much pension income you've both clocked up already. Then we can see if it's better to divert the money into the ISA.

The other thing to be aware of is that *both of you* should use up the 10k band, not just one.Often you'll find one person has over 20k in pension income and is losing his age allowance (which gets clawed back from this point) while his wife has only a partial state pension and her allowance is thus totally wasted. Thousands go down the drain every year in unnecessary tax.

margaretclare

Hi

Hang on to your NHS pension - this could be one of the most important parts of your pension planning. You no longer pay into it, but it will have been growing in the meantime.

Best wishes

Margaret

Desperate_Housewife_2-2

wotsthat wrote:

I'm not a miser but I do find that a candle has the advantage of providing both light and heat.

---

-Not MISER but MSER! (Money Saving Expert!)

novice-saver

wotsthat wrote:

I'm not a miser but I do find that a candle has the advantage of providing both light and heat.

Ordinary light bulbs are less than 5% efficient, so you get (mostly) heat from them too

Even the "energy efficient" ones are only 20% efficient

Still, 20, 60 or even 100 Watts doesn't get you very warm as the only heat source in a room.