should I increase pension contributions?

luvchocolate

I am female reaching state retirement age in September 2014 at 62yrs 3 months. I work full time on a low salary and am considering deferring sp until I retire at 65 hopefully, as I will be under the tax threshold at that time, my query is when I stop paying N.I next year would it be better to increase my works pension by this amount or save in an I.S.A money will be tight and need the best income at 65,
Any advice would be very helpful thank you

luvchocolate

further information, I pay approx £78 per month into works pension and the N.I amount after tax to invest about £50 thank you

xylophone

https://docs.google.com/viewer?a=v&q=cache:dDO5CfwQtVcJ:www.thepensionservice.gov.uk/resourcecentre/br19/home.asp+state+pension+forecast+form&hl=en&gl=uk&pid=bl&srcid=ADGEESjBGAKUsUZHG9aVdGTztuD7L_c88FiX4sfrkPma5jVxgv3sX5UKiBKQ4q055EGYEfN2Dh7jRF7xvmkNiQzrF77ZUelkPAcsLNNI8gib3rr9qOaiez5VjG8r4dWZ8OZ7AREXwa5z&sig=AHIEtbRDxLPQTNcx0QvehTMjghwFD-cByw

Get a state pension forecast. http://www.dwp.gov.uk/docs/br19int.pdf
https://www.gov.uk/deferring-state-pension/what-you-may-get

This would be £50 a month into ISA or pension for three years?

My inclination would be to pay it into the pension to benefit from the tax relief.

luvchocolate

thank you I have a state pension forecast which shows how much I would get by deferring for 3 yrs.
my feeling was the pension too as interest rates are so low, thank you for your reply

kidmugsy

Is it possible for you to be reasonably certain whether you'll be an income tax payer at age 65? That is to say, will your State Pension (including the extra pension you'll earn by deferring) plus your Works Pension (including the extra pension you'll earn by contributing extra) take your income above £10,000 per year (plus an increase for inflation)? If not, putting extra into the pension might be very attractive. If, on the contrary, you expect to be a taxpayer then, perhaps the ISA is a better idea.

There's one other detail worth checking. Some employers let you contribute to a pension using Salary Sacrifice. That way you save on National Insurance Contribution - which won't matter to you. But some employers also add some or all of their own savings in National Insurance contributions to the employee's contribution. If your employer should happen to do that, it would make the pension contribution method an excellent way of saving.

luvchocolate

thank you for your reply, my income will be below £10,000 which is why its so important to make every penny count!!