Best way to increase my pension

tessieb

Thanks for all your replies and advice.

atush wrote: »

Other ways to help your retirement would be saving into ISAs as these can help when you retire early before all your pensions start as well as paying off your mtg.

I have considered a S&S ISA as a way of boosting my pension, however as a single parent I currently receive some child tax credit. If I build up a large amount in an ISA then I would lose this, however funds in a pension don't affect the tax credit payment.

Thanks for the links to the NASUWT pension information. There's some very useful information on there.

jamesd

If you're not a skilled investor it'll probably be best for you to use the option to buy additional pension. For the test calculation I did you can buy £250 a year of additional pension for a lump sum of £3,370 at age 45 as a woman, with no dependent benefits. While you can spread payments over more than one year, the option for the cost to go up if you pay by installments seems to make it better to buy individual smaller chunks quickly and then buy more chunks later. The costs goes up anyway as you get older, but the higher cost I'm referring to is the one where the actuary for the scheme decides it'll be more expensive to provide benefits.

It's a very poor deal to take a lump sum out of any additional pension you buy in this way, so plan on not doing that.

tessieb

jamesd wrote: »

If you're not a skilled investor it'll probably be best for you to use the option to buy additional pension. For the test calculation I did you can buy £250 a year of additional pension for a lump sum of £3,370 at age 45 as a woman, with no dependent benefits. While you can spread payments over more than one year, the option for the cost to go up if you pay by installments seems to make it better to buy individual smaller chunks quickly and then buy more chunks later. The costs goes up anyway as you get older, but the higher cost I'm referring to is the one where the actuary for the scheme decides it'll be more expensive to provide benefits.

It's a very poor deal to take a lump sum out of any additional pension you buy in this way, so plan on not doing that.

Yes, that's another option! Thanks for all the research. There's so much to think about.

So £3,370 invested over 15 years would give me additional pension of £250 a year. Is that a good return on the investment?

jamesd

tessieb wrote: »

So £3,370 invested over 15 years would give me additional pension of £250 a year. Is that a good return on the investment?

It's a good return on investment.

If you invested the money and it grew by 3% over inflation it would be equivalent to getting a single person's annuity that increase by RPI inflation at 4.7% of the amount accumulated. The real rates for those annuities today are more like 3%. So it's maybe 4.7/3 times as good a deal as that investment and buy an annuity comparison.

This makes an assumption of quite low investment returns, really getting 5% or so plus inflation is possible. Maybe more. That makes the comparable annuity cost about 3.5%. That's still a good deal considering the benefits. The high certainty of getting it and lack of investment risk helps significantly in making it a good deal. You will get paid, whatever happens to stock markets.

It's possible for skilled and fortunate investors to do better than that but the work pension offer you're getting looks like a good deal for most people of your age.

tessieb

jamesd wrote: »

It's a good return on investment.

If you invested the money and it grew by 3% over inflation it would be equivalent to getting a single person's annuity that increase by RPI inflation at 4.7% of the amount accumulated. The real rates for those annuities today are more like 3%. So it's maybe 4.7/3 times as good a deal as that investment and buy an annuity comparison.

This makes an assumption of quite low investment returns, really getting 5% or so plus inflation is possible. Maybe more. That makes the comparable annuity cost about 3.5%. That's still a good deal considering the benefits. The high certainty of getting it and lack of investment risk helps significantly in making it a good deal. You will get paid, whatever happens to stock markets.

It's possible for skilled and fortunate investors to do better than that but the work pension offer you're getting looks like a good deal for most people of your age.

Thank you so much for taking the time to give me all that information. It's given me a lot to think about.