Pension. Begin one at 40??

AnotherJoe

RedfordML wrote: »

Better to save independently?


If I was to put £50 into a work placed one, what could I expect to get when I hit 65?


Thanks for any help or advice - I am clueless - If anyone has any links that would be helpful?

Nowhere near enough to retire on. Maybe 10x would do it.

atush

But it is better than nothing, and over 28 years, if the contributions increase with pay rises/inflation it will bring far more than described

AnotherJoe

atush wrote: »

But it is better than nothing, and over 28 years, if the contributions increase with pay rises/inflation it will bring far more than described

It is marginally better than nothing in one respect, yes he'll get some returns.

In another respect, its worse than nothing because it fools the OP into thinking he's building up a decent pension.

OP, you need to put much more in. That is the bottom line.

TBagpuss

To answer a few of your questions:

- Yes, any private pension you build up is in addition to your entitlement to state pension. (what will happen in 28 years time is, of course, anyone's guess)

- No, if you pay into a private (as opposed to workplace) pension, no-one doubles your money or adds to it. The (basic rate) tax you've paid is reclaimed b the pension company so if you pay £50 into your pension this is grossed up to £62.50.

- If you are an employee, and earning more than £10,000 then your employer has to offer a workplace pension (exactly when this starts depends on the size of the employer, larger employers started first). The employer has to contribute to this. They don't automatically match what you pay in - they only *have* to pay a set % of your applicable salary (earnings between £5,824 and £42,385), but they *may* offer to match higher payments.
The % they have to pay will increase to 3% by 2018.

So, suppose that you earn £30,000 p.a, your employer would have to pay in a minimum of £20 per month (1% of the applicable earnings). They may chose to pay 1% of your total income, in which case they would pay in £25. Or they might match what you pay (up to a cap)

If you chose to pay £50, then you get the tax added back in so the total being paid in (if the employer pays the minimum they are required to) would be £20 + £50 + £12.50 = £82.50
If they match your payment, the figures would be £50 + £50 +£12.50 = £112.50

If you pay into a private pension they you would pay in £50 and get the tax relief of £12.50 so a total of £62.50 would go into the fund.

This https://www.moneyadviceservice.org.uk/en/tools/workplace-pension-contribution-calculator will let you see what contributions you and your employer might make in a workplace pension scheme, and this one https://www.moneyadviceservice.org.uk/en/tools/pension-calculator may give some idea of what the pension may be worth when you retire.

kidmugsy

RedfordML wrote: »

Do private ones work the same, the provider doubles the amount you save or would I need to do more research?

No; with private ones you get only your own contribution plus the tax relief going into your pot.

RedfordML wrote: »

What is the state pension worth? Does everybody qualify? (this highlights my lack of understanding and knowledge around pensions!)

The new-style State Pension will pay most people about £8k p.a. if they have a 35 year National Insurance contribution record.

RedfordML wrote: »

If I have a personal pension, I get both this and the state one?

Yes. Consider someone retiring on April 6th: suppose they get £8k p.a. state pension. The Personal Allowance against income tax will be £11k p.a. That means that from their occupational or personal pension they can withdraw (i) 25% of the pot as a tax-free lump sum, plus (ii) the first £3k p.a. of income they draw from the remainder will be tax-free. Given that their contributions will have carried tax relief and, presumably, will have been matched by their employer, this adds up to a wonderful financial opportunity.