Pension Direction

WizB

Hi All,
Sorry if this was asked already, I cant seem to find the info anywhere.
Basically my wife an I have no pension, we are almost 40 and decided its maybe time to start putting money aside.
My query is, are we better off paying a bit more into our workplace pension (currently 1% is being paid our employers and ourselves) or would taking out a separate/private pension be a better way to go (as well as keeping the 1% workplace one going)?
Thank you

saver861

WizB wrote: »

Hi All,
Sorry if this was asked already, I cant seem to find the info anywhere.
Basically my wife an I have no pension, we are almost 40 and decided its maybe time to start putting money aside.
My query is, are we better off paying a bit more into our workplace pension (currently 1% is being paid our employers and ourselves) or would taking out a separate/private pension be a better way to go (as well as keeping the 1% workplace one going)?
Thank you

The first thing you might do is get further detail on the new LISA and then compare that with the advantages/disadvantages of other options.

Having no pension is the worst of all options.

Brightspark87

Hi

Best way forward to most likely to be through your employer scheme at this point as the charges on these plans are capped. However, once you have started to build up more of a fund value you may wish to look at moving it away.

WizB

I'm happy to pay an extra £100 a month into my work pension (the auto enrolment one) and my wife can possibly pay half of that into hers.
I guess thats more in way of catching up and paying as much as we can when we can afford to.

Brightspark87

Hi Sounds very sensible - dont forget there are some new plans that were talked about during the budget which might be worth thinking about.... Lifetime ISAs? Similar to pensions but more flexible.

WizB

That looks great too, thanks for the heads up. My wife turns 40 this year so she will miss out on it, I can (and likely will) take advantage of that as i'm not 40 until July 2017.

kidmugsy

Always pay enough into pensions to harvest the maximum employer's contribution. Probably pay more if salary sacrifice is available.

A LISA for you sounds attractive: be sure to open one before you are forty, even if just with £1. That ensures your ability to add to it until you are fifty.

dunstonh

I guess thats more in way of catching up and paying as much as we can when we can afford to.

How far behind are you?

WizB

dunstonh wrote: »

How far behind are you?

Neither my wife or I have a pension :eek:

LXdaddy

WizB wrote: »

Neither my wife or I have a pension :eek:

It sounds like you are a long way behind.


You do mention that you have a work place pension and that you and your employer contribute 1% each. So how long has that been in place.


I'm no expert in working out what is the right level of contribution for you. You would have to do some calculation of what you would need as income to have the lifestyle you want when you retire (bear in mind that you probably will have finished paying a mortgage by then and some of your current expenditure will not be relevant) Take away what you would have in State Pension and then work out the size of the pension fund you will need to be able to fund that. Some suggest you can safely draw 4% per year from a pension and expect it to last for your lifetime,so a pot 25 times your annual expenditure less SP is a target. Then how much do you need to contribute to be able to build up a pot of that size in the years between now and when you want to retire.


I don't want to scare you but quite some time back I read that when you start contributing to a pension you should be using (edit to correct) HALF your age as the % of your income to save (so 40% (edit 20%) in your case) - I stress this was from quite a while ago and I can't quote the source but it was something that stuck in my memory.

EDIT - my memory is faulty the broad brush calculation is half age

greenglide

Lifetime ISAs? Similar to pensions but more flexible.

But you cannot access it and retain the benefits until 60 unless you use it to buy a house.

Pensions, currently, can be accessed at 55.