Only 10-12 years to retirement and only basic pension. What to do?

emu

I am 54. I plan to retire at 65 (70 if I find that this is possible). Therefore, I have only between 10 and 15 years until retirement. I am self-employed. I will have a full state pension but I have only another £1000 a year on top of this from a teaching pension left over from contributions made at the start of my working life.

My question is: Rather unexpectedly, I find I have £100 a month more than before. Is there any point in investing this as a regular sum of money into a stakeholder or a stocks and shares ISA at this late stage? If so, which is best given that it may be only 10/12 years until I retire? (I do invest in stocks and shares so I am not frightened by the prospect of self-investment).

Lastly, some time ago, I read about 'immediate vesting pensions' (I think that was the name). HL reimbursed a certain amount of the initial sum, I seem to remember. Would this be any sort of alternative given that I could re-invest the few hundreds returned rather than using it to live on?

dunstonh

I am self-employed. I will have a full state pension

Depends on what you mean by full. Self employed individuals do not qualify for SERPS/S2P (for the years of self employment) which leaves you only with the basic state state pension of £4132 a year. (teachers pension is contracted out so nothing qualified for that period either)

immediate vesting personal pensions are an option when you get there but if you are going to do that then, you may as well put the money in now as the only difference is the period you pay in and draw benefits. That said, I see absolutely no benefit to you based on the information you have posted.

You are likely to be on benefits in retirement (pension credit) which will bring you income up to £5930 a year. Any provision for income that you do will reduce the pension credit. You are allowed a small amount of capital and an ISA will be the best option for that. Stocks and shares do go towards that limit.

You may have to consider equity release if that is an option available to you as I dont think anyone could find it easy to live on £5930 a year.

EdInvestor

emu wrote:

I will have a full state pension

Do you mean the full basic, or is there S2P as well?

My question is: Rather unexpectedly, I find I have £100 a month more than before. Is there any point in investing this as a regular sum of money into a stakeholder or a stocks and shares ISA at this late stage?

Over 12 years @ 7% growth it would make 22,272, which might well mean that you have simply saved money which you would get anyway from benefits.

Go and see the CAB to work out the exact situation.

jamesd

You say that you do invest in stocks and shares. Please say more about this, wher ethey are currently held (inside or outside ISA) and the total value of these investments. If their value is substantial - many thousands or more - that may affect the suggestions given by ruling out benefits.

margaretclare

I would have thought that it's always worthwhile saving rather than not! £100 a month over 15 years up to £15000, and if you were to start a stakeholder or a SIPP now, you'd have the 22% from the taxman added on to it. Your £100 a month immediately becomes £122 to be invested, and over 15 years that becomes £21,960, not taking into account any growth in the meantime.

I really don't like a lot of defeatist talk which you hear around 'Oh, I haven't saved enough, it's too late, I'll have to live on benefits...' Who the heck wants to live on benefits if they have £100 a month spare and 10 or 15 years to go?

I'm 71 and still saving. You retire at 65 or 70 and you can easily live another 15 or 20 years. Why plan to live in poverty for those years???

Margaret

Techno

Can I ask, do premium bonds count as savings in the pension credit situation?

exil

Difficult to say without an idea of your income. Advice for someone on 10k a year will be different from 100k.

wotsthat

My question is: Rather unexpectedly, I find I have £100 a month more than before. Is there any point in investing this as a regular sum of money into a stakeholder or a stocks and shares ISA at this late stage?

Why wouldn't it be? I'm with Margaretclare - 10-15 years of saving £100/month could make a huge difference to your quality of life. Of course there's a chance it might not - but I'd rather gamble on the positive outcome.

emu

Thank you all for the comments and suggestions so far. In response to the questions: I have only the basic state pension and I have about £6000 in shares (not in an Isa). I deal actively so can have anything from 3-10,000 in the stock market at any one time.

I'm still not sure whether to put £100 a month into the stakeholder or the stocks and shares Isa.

margaretclare

Hi emu

The only difference that I can suggest between the stakeholder and the stocks and shares ISA is that with the stakeholder (or a SIPP for that matter) you get 22% added by the taxman, with the ISA you don't. It's possible to save in a stakeholder or SIPP up to age 75 and all that time you get the 22% added on. It seems a no-brainer to me, but then, it's very much a matter of individual choice.

Re saving, if everyone took Andrew Carnegie's dictum on board then no one would ever need to retire into poverty. (Andrew Carnegie, the 19th century US entrepreneur). He said you should save a 'dime in every dollar' - 10% in other words, or in our money, 10p in every pound. This is the simplest and most sensible advice I've ever heard, and I wish I'd always done it! However, the words 'too late' do not figure in my vocabulary.

Margaret

dunstonh

Can I ask, do premium bonds count as savings in the pension credit situation?

Yes. Every savings and investments value is taken into account with the pension credit means test except investment bonds. They are excluded due to a technicality that means that they are classed as life assurance. A technicality which can be useful for some.

I would have thought that it's always worthwhile saving rather than not! £100 a month over 15 years up to £15000, and if you were to start a stakeholder or a SIPP now, you'd have the 22% from the taxman added on to it. Your £100 a month immediately becomes £122 to be invested, and over 15 years that becomes £21,960, not taking into account any growth in the meantime.

I really don't like a lot of defeatist talk which you hear around 'Oh, I haven't saved enough, it's too late, I'll have to live on benefits...' Who the heck wants to live on benefits if they have £100 a month spare and 10 or 15 years to go?

If I was to do that for someone, it would be a mis-sale complaint waiting to be upheld. There is a lot of discussion on this going on at this time regarding the NPSS and how all that is going to do is force people to put 4% to one side only to find they get no real value from it as it reduces their pension credit.

Its a real tough one because there is no ideal answer and of course a lot of the areas regarding advice WILL change meaning what is best now wont be best in the future. So, how do you plan round that?

I agree that people should save and invest for themselves and the state is currently to generous to those that choose to do nothing. However, I have to balance that with some no win no fee claims company coming along saying that he shouldn't have done a pension as his small level of contribution has wiped out pension credits (and all the associated things that go with that) and done nothing else. It is also in the FSA guidelines that the effect on benefits should be considered.

The only difference that I can suggest between the stakeholder and the stocks and shares ISA is that with the stakeholder (or a SIPP for that matter) you get 22% added by the taxman, with the ISA you don't. It's possible to save in a stakeholder or SIPP up to age 75 and all that time you get the 22% added on. It seems a no-brainer to me, but then, it's very much a matter of individual choice.

The pension would increase his income and impact on the income side of the means test. The ISA would increase his capital and impact on that side of the means test. The means test can also take into account non crystallised pensions. So delaying them whilst on benefits is costing you money.