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Starting a pension and confused?

Hello,

I am a bit late to the game but want to start paying into a pension, however, I'm shortly going on maternity leave and may not be returning. All the information I am reading on pensions concerns pre-taxed payments via payroll, which of course, if I don't return to work is not an option, and we will be paying in 'face value' sums from my husband's income into a personal pension for me, until I return to work in a few years' time once the children are all at school.

I'm also struggling to find any clear guides as to determine what level of payment into the fund I would need to make to generate a certain level of pensionable return when NOT paying via payroll.

I would like to achieve a pension circa either a) £500 or b)£750 pcm after tax upon retirement; ideally retiring at 55 but more realistically 60.

Can anyone offer me a simple (!) breakdown, or point me in the right direction, to understand what level of contributions we need to make to achieve this?? I have a very nominal amount, about £2000 from previous pension contributions in earlier employment, to transfer into a new fund when we know what to do.

Also, any guidance on the best types of pensions for this sort of position would be great.

Many thanks in advance for your assistance.

Sarah
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Comments

  • How old are you?
  • A very good question! Simple info I should have added! I'm 33 (just!)
  • Lokolo
    Lokolo Posts: 20,861 Forumite
    Part of the Furniture 10,000 Posts
    So you are 33, very little in pension, and you want to retire at 55 at around £12k a year?

    For this, you would need approximately £300k in pension. To do this in 22 years you would need to deposit around £750 (gross) a month.

    https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator
  • Yep, that's correct; Okay, great. Thanks - just need to find a provider that suits. I'd best get reading!
  • xylophone
    xylophone Posts: 45,426 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    if I don't return to work

    http://www.hmrc.gov.uk/incometax/relief-pension.htm

    "What happens if I don't pay tax".
  • dunstonh
    dunstonh Posts: 118,574 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    I would like to achieve a pension circa either a) £500 or b)£750 pcm after tax upon retirement; ideally retiring at 55 but more realistically 60.

    Thats going to be expensive. What budget have you got to fund that?
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    If you have no earnings you can contribute £2880 net p.a. to a pension (= £3600 gross). You can also save approx £12k p.a. into ISAs. If not earning means that you are not a taxpayer, you can also save tax-efficiently without any need for tax-shelters and the expense they entail. On the other hand, you might like to fill tax-shelters against the eventuality of returning to work.
    Free the dunston one next time too.
  • dunstonh wrote: »
    Thats going to be expensive. What budget have you got to fund that?

    At the moment, the thought is we would be making contributions from my husbands income, his pension contributions are salary sacrificed, and then our savings and my pension would come out after tax from his take home. That is the plan anyway if I am not longer working but that it off the top of our heads, we are starting to research our options. I didn't realize however that contributions up to £2880 would be tax relieved; that's good to know.

    We have savings invested in funds and ISAs maxed each tax year and we have an investment property we are hoping to keep for additional retirement income, along with our current home which we hope to also keep for investment when we move to another home in the next 5-10 years.....

    I don't know how any of the above affects our options or would determine what the best plan forward is for us. Perhaps we should see an IFA?

    Appreciating I sound a total novice. It's because I am.....;)
  • kidmugsy
    kidmugsy Posts: 12,709 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Combo Breaker
    sarah3891 wrote: »
    I'm shortly going on maternity leave and may not be returning.

    If you have been earning in this tax year you can bung all your earnings (less any other pension contributions) into a pension, subject only to an upper limit of £50k (or more if you have unused limits from earlier years), or your earnings, or the aforementioned £3600 gross, whichever is least. You'd actually "bung" 80% of the amount - that's called the "net" amount - and the provider claims the other 20% for you from the taxman and adds it to your pot.

    Report the figures (suitably amended for privacy) and someone will do the sums for you.

    As for the type of pension, our esteemed chum dunstonh might commend Personal Pensions. Many of us like SIPPs: for anything below about £40k, Hargreaves Lansdown can be decent value and they offer a good service. But if you don't like the sound of the "SI" bit of SIPPs (= self invested), i.e. if you'd rather not learn about investing, then they may not be for you.
    Free the dunston one next time too.
  • ss53
    ss53 Posts: 90 Forumite
    If you husband is a higher rate tax payer and is making the pension contributions from his net pay would it not be better to have the pension in his name? This will allow him to a) gross up the pension contribution by 20% and claim an additional 25% back via self-assessment - which he could them perhaps re-cycle as additional pension contributions?. I'm no expert either but is would be worth checking this out (assuming he does not breach either annual or lifetime contribution levels)
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