Pension Muppet

Simon_not_a_Pieman

Hello all,

I've always considered myself reasonably financially aware but as my 52 birthday dawns I've become acutely aware my retirement planning is at best an embarrassment, and at worst non-existent. My employment history is a bit flaky so I haven't made contributions all my working life and I made none at all after I got married, had four children and saved for a deposit on a house, bla bla bla.

I've got an old private pension with about £12k in it, another private pension (which I believe was from when I contracted out of serps in about 1987) with about £18k it and a 1/60th final salary scheme with about 8 years of contributions in it. They are all closed.

I'm currently contributing into a money purchase scheme at my existing employer at 6% of my salary but I've only been with them for the last 3 years so it's clear I won't get much of a pension the way things are.

Should l (can I) lump everything together. Would the charges to do this be excessive?
Also, I'm about to sell my trusty old camper van and I'm not sure if I should put the money from that into my work's scheme or pay off a bit of the mortgage.

Any thoughts you lovely people?

bigadaj

The defined benefit is probably best left alone, I'd contact them and get an update on what it is worth.

The main problem with pensions for many problem is that they can't be accessed until you are 55, but this becomes less of a problem teh closer you are.

I'd review the Dc pensions you have and see what the charges are, whether there are penalties for transferring or whether there are any guarantees that might be valuable.

Putting money in now will get an immediate uplift from tax relief, if you put money into the pension you can get 25% out tax free which has already been subject to tax relief, so often best to use that to pay off teh mortgage in the future.

lisyloo

With the existing pensions, you need to find out what the transfer terms are. FWIW I have found my old ones have penalties, whereas newer ones are transferable, but it varies so we can't give blanket advice.
Final salary schemes are generally very good.

What does your current employer offer? Is it salary sacrifice (thst can mean getting 20% tax relief plus 12% NI, plus sometimes 13.8% employers NI). Some of these scenes can be really good.
What tax rate do you pay?
If you pay higher rate tax, have salary sacrifice on offer of employer contributions on offer then these are well worth taking advantage of.
What is your mortgage rate?
Sorry for all the Qs but more info is needed.
6% is pretty paltry (no offence but it's better to face up to it).
I put in 30% and hope to be comfortable but not rich.

bigfreddiel

My 1/60th db pension from the mid 1980's that I forgot about, and only paid in for about 3 years, a total of £1500 contributions from me, is now paying me £3,500/year index linked. Pays my council tax plus a bit more. So just get Ian update on yours and leave it, it will still be growing.

Cheers fj

AnotherJoe

Lumping all the pensions together won't magically create money. It will just make admin easier.
Don't touch the DB pension
Pay more into your current pension.
Use the money from the camper van to either pay more into your employers scheme* or pay it as a lump sum into a new SIPP.

* you probably can't pay in a lump sum into your employers pension scheme but if say you get £12k from the van sale then you can afford to increase your contribution by £1k a month for the next year.

PeacefulWaters

There can be benefits in retaining different pots of pension and the timing of taking the pension. What are the annual charges on each pot?

Here's some initial thoughts:

1) make sure you are getting the maximum match from your employer for you current pension contributions. If not, increase them. Then pay more in anyway. Try increasing further when you get a pay rise each year.

2) utilise any Sharesave or other share schemes at work to their maximum benefit. Just because they aren't called "pension" doesn't mean they can't be used to fund retirement or create pots of cash that can be invested into a pension scheme. Ignore if your company doesn't have such things. Prepare to throw significant amounts at them if they do.

3) work out how much your state pension is likely to be and when it is likely to be paid. Remember the first £11k a year will be tax free and there won't be any national insurance.

4) work out what your bills will be in retirement and whether (3) plus your final salary income will provide enough to cover them, feed you, run and replace a car if needed, enjoy a holiday etc. A big question is around when your mortgage finishes and how much this will free up to increase retirement provision.

5) identify what your long forgotten final salary scheme will pay out and when.

6) assuming nil inflation and nil investment growth work out what the lump some values of your direct contrbution pensions will be each year between now and state retirement (you might want to ensure these funds are gradually moved to lower risk investments too).

7) If (4) is covered by your state pension provision then work out how many years you can retire earlier by dividing (3) into (6). If not, you can use the pot in (6) and (2) to provide lump sums or an additional pension via annuity at state pension age.

8) if (5) pays out before you retire earlier, utilise this extra income to generate additional pension contributions or other investments.

Get it down on paper or a spreadsheet. It will become clearer. It's not too late to plan it and improve it.

This might not be a perfect guide, but I found it very useful. If you're going to end up with no mortgage and £8k a year from the state you might find life is surprisingly affordable. Just not luxurious.

Simon_not_a_Pieman

Thank you so much everyone. That's very kind of you all and much appreciated.

So many questions, many of which I can't answer off the top of my head so I'll come back to this when I'm better prepared.

"The 6% contribution being paltry" comment is particularly welcome! That's a wake up call for me, thank you again.

atush

Basically, it doesnt matter how many old pensions you have, just what they and the current one are worth together. Ie in your case you have 30K for 2 old pensions, plus whatever your new once is currently worth- plus your DB.

But do check the costs, performance, and investments in each. And leave the DB well alone. Make sure you get an up to date pension forecast from your DB pension people, and check the scheme age of retirement.

In the mean time, put as much into your current pension as a min to get the highest amt your employer will put in, then more on top if you can.

If you have sufficient cash savings, using your S&S isa allowance could be a good idea as well.

princeofpounds

"The 6% contribution being paltry" comment is particularly welcome! That's a wake up call for me, thank you again.

Basically, that amount of contribution is not going to be enough to give you a sensible income. If you plan to retire at 67, and contribute 6% of your salary per year, you will have saved about one year's salary by that stage.


Now that will likely grow a bit if properly invested, but you are talking about 15 years of growth, not 40 like someone starting out. If we assume your investments get a real rate of return of 4%, then your pot will have grown by roughly 48% by retirement. It helps, but does not transform the situation.


Don't panic however - you do have a state pension, you do have a small DB pension, you do have a 30k pot. So you are not starting from zero.


But you probably should be thinking about putting much more of your salary into a pension (or other investment products, but probably the tax relief on pensions mean it makes most sense for you).


Playing around with a good online pensions calculator should help give you a feel for what is achievable. And if you are in good health and happy to do part time work that is also an option that can massively help as well.