Was Mortgage Free until 52!!!

A_Frayed_Knot

Suffolk_lass wrote: »

Make sure you relax as well as all those chores - living the dream...? :rotfl:

:rotfl:I will be . . . once my hours are reduced

Have been going over pensions :mad: I have no idea, what, How much, when, etc, etc. I did use the link you kindly supplied, but the more I read, the more confused I am.

I have 41 years :eek: fully paid NI, which leaves me another 6 to go (so they say). I received papers yesterday saying how much is in my pot, and since the age I gave was 60 for retiring (good old days !!!) as now only 8 months to go, I wondered if there was any benefit leaving the 25% tax free alone until it matures at 60 or maybe it wouldn't make any difference (thinking about the bonus). I did ask but they can't say/don't know Wt* if experts don't know, what chance do I have.

Can anybody recommend any good reading explaining - well let's start with the basics, then gallop onto the maturity.

StripeyTightsSpottySocks

Hi A Frayed Knot

Thank you for posting on my thread x Will start to read yours now - looks like there's lots to catch up on :rotfl:

Sorry, I can't help with pension query x

StripeyTights

Moneyfordreams

what sector do you work? I always imagine NHs

Suffolk_lass

It IS complicated and quite confusing to begin with. My reading started on the internet and in the money sections of a couple of newspapers - normally The Times on Saturday and Sunday (separate supplement on Sunday)and the Telegraph weekend but The Mail [spitting emoji] had a couple of good articles - it used to be on a Wednesday but I just pick up under subject searches on-line.

I started with getting it straight what the difference is between DB (Defined Benefit), DC (Defined Contribution) and a SIPP.

DB is based on what the benefit (ie the pension they pay you) will be occupational (like civil service, NHS or Teachers, former public sector (BT, PO, railways, utility companies) plus some big companies) and based on final salary (can be FS, or could be best of last 3 or 5 years and increasingly, career average) - normally these are best because the guarantee what you will get within their rules, and many included the age for normal retirement (NRA) in their terms so people can still get them earlier than their state pension. Some of these schemes include a TFLS (Tax Free Lump Sum), which is often calculated to be less than 25% but can be increased to 25% before they attract tax. Spouse (partner in some cases) benefits (when the pensioner dies) are often included , often half, sometimes better - some even pay children

DC can also be occupational (ie your employer makes a contribution to this, as well as you) or they can be personal or private pensions - paid into a managed fund or funds, looked after by a company such as Scottish Widows (lots of others). The basis for these is the size of the pot. Before George Osbourne (then Chancellor) changed the rules, the pot was used to buy an income; an annuity (sometimes including annual increases based on a set figure (rarely) or inflation in a particular month) - Many annuities do not include increases so what you get when you buy it, stays the same and erodes in value over time. Annuities are still available for a DC pot but the freedoms George introduced, means that people can draw down (remove) cash from this pot. 25% of this can be tax free. Beyond 25% and it is taxable at whatever rate of tax you pay. If you buy an annuity, it dies when you do (but may include spouse benefits, as above). If the pot has not been spent on the annuity, it can be inherited.

A SIPP is a self-invested personal pension. Normally this is just your contributions and held in an account that an on-line provider looks after (Hargreaves Lansdowne, Charles Stanley Direct are just 2) - basically you choose what you do with the money in your account in terms of investments (and returns) - like the others, your contributions are tax relieved up to certain limits. 55 lowest age you can access without 100% of your withdrawal being taxable, including adding the tax you were originally relieved of.

So your first step is to be clear what your pension pot is, and what the rules of your scheme are (there is a difference between what they tell you as the default and what you can do within their rules.

Big things to know are the normal retirement age of your scheme(s) be aware that you might have more than one, so look at all your occupations over the years - example is my fiend who taught for four years at the start of her career - now she has £1800 a year due - not enough to live on but a nice little bonus she forgot about that has been increasing with inflation for over thirty years after it was frozen when she left.

State Pension
Great news you have done your pension forecast. Having 41 years is great - the remaining thing to know is whether you were opted out of SERPS (State earnings related pension scheme) for much of this. If you were in a public sector or DB scheme you probably were. This option ended in 2016 so everyone has been earning years towards the New State Pension (NSP) since April 2016. Opted out records qualify only for the Basic State Pension because we (I am one) paid a lower contribution rate, along with our employers.

Also be aware that the forecast of the amount you will get presumes you will continue paying NI contributions for the next five years, whereas your accrued pension is based on the number of years you have already paid in (41 for you). If you went into that part of the web-site you will be able to see where you had gaps (mine were my Uni days because I did not go straight from school). You do need to know if you were opted out and whether that impacts on what you have already earned. For me, I cannot get to a full NSP, even if I pay for the next four years, but each year I pay a voluntary contribution for (currently £780) I get back over £4.50 a week, so it will pay for itself within 5 years, assuming I live that long. I might wait a bit as you can pay for up to the last 6 years, but whereas that is £780 this year, it would increase if the contribution level increases (announced with the budget).

That is probably enough to get you looking at the scheme(s) you are/were in. Do ask if anything is unclear

shangaijimmy

Fantastic briefing Suffolk! As with most things it seems huge and daunting at first when you look at it as a whole. But once you break it down into smaller chunks it gets easier!

A_Frayed_Knot

Moneyfordreams wrote: »

what sector do you work? I always imagine NHs

Not allowed one icon for an answer.

A_Frayed_Knot

SL - that's a great start to me understanding it all, but admit , your second paragraph when I read it, made me think I was reading another language and made me laugh, however I will get to grips with it, I just needed to read a few times over first, and i'm getting there.

I need to thank you for the time it took you to explain all that to me, so A Big Thanks :beer:

Suffolk_lass

Sorry if it reads quite hard - I tried to make it simple as poss but covering lots of the variables - just try without the bits in brackets!

Watty1

Brillinat post from Suffolk Lass. Looks like a few of us are thinking about our futures

A_Frayed_Knot

Suffolk_lass wrote: »

Sorry if it reads quite hard - I tried to make it simple as poss but covering lots of the variables - just try without the bits in brackets!

Not hard at all, just took a few reads for my brain to follow and digest after a long day. Wonderful the way you broke it down into parts for me :T :beer: