42!! And i do not have a pension

net6

Hello

I am 42 years of age and quite ashamed that i do not have a pension! I work for a major telecom company, and when i joined this company 7 years ago i did join the company pension scheme.

However i fell on finanicial difficulties & withdraw my money after 18 months. I need to think long and hard about my future, and would be grateful, if anyone could advise me about setting up a new pension.

What would be my best option.

Kindest regards

wannasave_2

net6 wrote:

However i fell on finanicial difficulties & withdraw my money after 18 months.

I didn't think you could do that with a pension

EdInvestor

First of all I suggest you find out how much pension you are due in retirement from the two state pensions, the basic plus S2P (formerly Serps), which you have been paying into all along. Get a forecast here:

https://www.thepensionservice.gov.uk

You may be quite surprised at the amount

Assuming you are a basic rate taxpayer, the best way to accumulate more retirement funds is to open a maxi stocks and shares ISA (7k a year) and invest it in funds, the same as you would with a personal pension.

The difference is that the ISA income will be tax free in retirement and you will be able to keep the capital .Pensions are taxed and you lose the capital. It's bests to keep pension income down to 10k if you can and have the rest in ISAs.

As a rule of thumb when investing for retirement, assume that a pot of money will pay 5% in income. So if you need an extra 5k a year to live on, you'll need to save 100k.

dunstonh

You may be quite surprised at the amount

Yes, it may be £7000 a year instead of the basic pension alone which is just £4381.

You should find out what your state pension entitlements are but you do have to remember that £7000 a year doesnt exactly go far now. Self employed individuals would only get £4381.

Unless you fancy living on that amount a year then some retirement planning is required. You should investigate whether you can rejoin the occ scheme as there is probably free money in there which nothing else could come close to matching.

EdInvestor

Yes, it may be £7000 a year instead of the basic pension alone which is just £4381.

It can be as high as 12k a year for people with a full NI record and a good salary throughout their career and no contracting out into other pensions, though that is probably fairly rare, with 7-8k more common.

Nevertheless that's almost double the basic.You'd have to save up 250k to buy an equivalent annuity these days.

dunstonh

Of course, you wouldnt want to rely on the second state pension because it can be abolished over night and has been reduced four times since it was introduced despite contributions indicating it would be more.

Most people do not make enough provision for their retirement and it can be more sensible from a planning point of view to disregard SERPS/S2P in your calculations. Anything you get on that front can then be extra rather than relied on.

EdInvestor

We can't disregard this income.

You would have to save up 140,000 quid to purchase an annuity to the value of just the basic state pension.These pensions are now very valuable.

The OP should find out how much he's in line to get.

wotsthat

Of course, you wouldnt want to rely on the second state pension because it can be abolished over night and has been reduced four times since it was introduced despite contributions indicating it would be more.

The state second pension won't be abolished overnight but someone who is 42 now will probably find, in my opinion, that the SSP will be a distant memory by the time they retire.

dunstonh

We can't disregard this income.

I didn't say disregard it full stop. I said it shouldn't be included in your planning as most people do not plan sufficiently and it has been reduced in the past and can be reduced again in the future. Its better not to rely on is and have it as extra.

jamesd

net6, in addition to the state pension estimate, ask your work pension scheme if you can still join it and on what terms.

As well as those things, work out what your attitude to risk in investments is, roughly speaking, what amount of short term loss would you be able to accept without losing sleep. Markets go up and down and some investments go up or down more than others. The ones that go up and down most tend to grow more long term but can give some uncomfortable years along the way. This will help to decide what form of personal pension would be appropriate, if any. Most appropriate might well be a stocks and shares ISA rather than pension contributions if you're going to do well from the state pensions.

net6

Folks many thanks for all the advise, still confused though!! I am awaiting an activation code then i can check my state pension.I will also seek out advice from my employer.

The company offer a sharesave scheme,so it may be worth while investing in this! Once again thank you so much for all your help