Setting up a pension in your 50's...

ronaldadio

Hi all.

My Wife is 51 this year and I'll be 54.

We don't have a pension set up yet.

We have both started work after about 10 years of being self employed.

The Company we both work for - very well know and reputable - offers pension schemes.

I've got 2 questions...
1) Any point at our age setting up a pension
2) Based on the way things work now, would we not simply lose more than we gain by having a pension?

Fire any questions at me you want, other than "why have you not done it earlier" - unless the response is going to help add to the advice.

Many thanks

bigfreddiel

What's your alternative to a pension?

How much can you afford to put into the company scheme?

How much does the company contribute?

I'm sure there are more

Cheers fj

xylophone

The company contributes to the pension - opt out and you are effectively accepting a lower salary.

Have you both obtained New State Pension Statements?

https://www.gov.uk/government/publications/application-for-a-state-pension-statement

ex-pat_scot

Today is day zero of the rest of your life.
No point in dwelling.


YES. Join. Today. Immediately.
Free money from whatever the company contributes. Possibly up to 8-12% of your base.
Try and get it done under Salary Sacrifice. This means that you will also save employee NICs and possibly Employer NICs (if they are nice to you).


You will also gain from the virtuous effects of tax relief at source.
If you never had it to spend out of your bank account, then you will not miss it each month.


OK so you are late to the party.
OK you are not terribly young.
However you will still age at the same rate as the rest of us, and arrive at a time when you can / want to no longer work.
Your alternatives are stark: doing nothing means you will either retire on a pittance or be forced to continue until such time as you accrue sufficient to support yourself, or keel over.


Taking responsibility today, whilst late to the game, means that you are gifting your future self more options at that date down the line. Even if both of you manage to accrue £10,000 pa from now and for the next 15 years or so, which might seem like a tall order for you, would mean you arrive at that point with £300,000 in contributions plus whatever compound investment growth you manage to accrue. (eg if you manage to gain 4% net growth pa above inflation, then the pot will be equivalent to £450,000 in today's money.)


That sounds like big potatoes, but a lot of sacrifice involved.
But is it really such a sacrifice?


Well - look at the numbers in a bit of detail.
£10,000 each seems a lot to be contributing.


If you are on a middling income of £30,000 with employer contribution of 10%. That would mean the employer puts in £3,000 and you the £7,000 remainder. Under salary sacrifice, that £7,000 would equate to £4,760 of foregone salary (ie the amount you would have otherwise had in your bank account). Thus for a little under £400 per month that you divert away from your pay packet and into your pension, then you end up with £10,000 pa in your pension pot. You've immediately more than doubled your money. (OK there will be a little tax on it once it comes out as pension, but it's still a killer deal).
The good news is that if you are a higher -rate taxpayer, then its even more of a deal.


OK.
Lots of numbers and evangelising.
Clearly there are lots of assumptions here. Even managing half that amount would be a huge step in the right direction.


You note that you both work for a large company. I have no idea about your personal monthly finances (incomes, costs, children etc), but at your age I would hope that the most expensive years are behind you (housing, children) or soon to be so. Even at entry level in a large company, you should be earning at least £15,000 each and I'd hope you would see the priority in trying to make up for some of the lost time.




But the biggest thing is that you have taken control.


You are planning for your future.


You are not coasting to 67ish and then expecting someone to somehow look after you if you can no longer work.

sandsy

1. Absolutely still point in doing it. Something is always better than nothing. And turning down employer contributions is akin to turning down part of your salary. Not to mention just rearranging your income between now and retirement to maximise the tax advantages.

2. You should not lose more than you have to gain due to 1.

atush

Based on the way things work now, would we not simply lose more than we gain by having a pension?

How do you figure that? When every 8 you put in becomes 10 by Tax relief? Then your employer might add another 10 on top?

Join the pension. and put in as much as you can.

Starting this late, you probably wont be able to retire earlier than state pension age. But at least with more than a decade each of contributions- you will be able to afford to retire. And have some comfort in your old age.

As opposed to working til you drop.

ronaldadio

bigfreddiel wrote: »

What's your alternative to a pension?

How much can you afford to put into the company scheme?

How much does the company contribute?

I'm sure there are more

Cheers fj

Give me an example of what you mean by an alternative?

ronaldadio

atush wrote: »

How do you figure that? When every 8 you put in becomes 10 by Tax relief? Then your employer might add another 10 on top?

Join the pension. and put in as much as you can.

Starting this late, you probably wont be able to retire earlier than state pension age. But at least with more than a decade each of contributions- you will be able to afford to retire. And have some comfort in your old age.

As opposed to working til you drop.

I was meaning that will I lose state pension if I have my own.
I'm just not really sure how it all works

xylophone

I was meaning that will I lose state pension if I have my own.
I'm just not really sure how it all works

https://www.gov.uk/new-state-pension/overview

"You can still get a State Pension if you have other income like a personal pension or a workplace pension."

And you and your wife can obtain new state pension statements.

See post 3.

AnotherJoe

ronaldadio wrote: »

Give me an example of what you mean by an alternative?

well that's for you to say, since doing nothing is an alternative.

So if you don't take out a pension, whats your plan?
Just put your head in the sand, do nothing and work till you drop? That would be an alternative.
Save money out of taxed income turning down about a 100% contribution for free? That would be another alternative.

geelamch

Anything is better than nothing, I am in no way educated to advise anyone about there set up plan. I think you should do something now and as you work for " corporate " you must have heard " Bothy rumblings" about pensions etc.
Try and get all you can in to a pension ( employer) still time to get a boost to your retirement.