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

p00hsticks

ronaldadio wrote: »

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

Continuiing to work until you died
Investing in BTL property
Stocks & shares ISA
Fingers crossed for an inheritance
etc...

ronaldadio wrote: »

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

State Pension isn't means tested - any provate pension is on top.

jamesd

Under the current rules all pensions just add to each other. So you get state pensions and all work and personal pensions.

For those reaching state pension under current rules the main exception is if they have so little income that they are eligible for means tested benefits. In that case the higher pension income can reduced the means tested benefit amounts. This is unlikely in your case because you have plenty of time to get to a decent income level well above state pension level.

Each person in a couple with a sufficiently full National Insurance record will get the full flat rate state pension, about £8,000 a year, increasing with RPI inflation. So that's a basic potential starting point of £16,000 a year. At the moment the median average income for a pensioner couple is about £21,000 so the flat rate pension alone will get you fairly close to that while you're both alive, though of course not after one eventually dies.

So the first thing to do is check on each of your state pension statements to see how far you are towards having the roughly 35 years it takes to get the full flat rate amount. It's only approximate because there is a long transition period and people like you will probably have acquired some earnings-related increase that means it'll take less than 35 years paying in to get to the full level.

Once you know where each of you stands that'll help to decide if more years need to be bought. for example if one of you is neither working nor signing on as looking for work and also not receiving child benefit in their name.

State pension statements are one of the many services available using the online personal tax account that we almost all have because it's issued to all with a National Insurance number.

maximumgardener

you need to think about what money you will live off when you both retire?

you should definitely both invest into work based pensions (esp as your employer puts money in)....thats a no brainer.

do you have savings?

isa's ?

these should be part of your plan

atush

ronaldadio wrote: »

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

You dont lose your state pension if working? Or getting a private/work pension? You might pay BRTax though.

What is your State pension age? 66 or 67?

Malthusian

ronaldadio wrote: »

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

Only very very low earners need to worry about losing means tested pension benefits, and it doesn't sound like this applies to you and your wife. You should be thinking about the amount of income in retirement that you want to provide for yourselves, not what the government is going to provide. Every penny you save now will mean a more comfortable life in retirement (the more and the earlier the better), and if your employer will contribute to the scheme then by not joining you are turning down free money.

bigfreddiel

ronaldadio wrote: »

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

Alternative? Well I mean when you retire how are you going to replace your income you currently get by working?

You will get a state pension, but that will only just pay for your basics, if that. So where is the rest coming from?

If you have no pension I guess you could have savings, use that till its exhausted. Or a buy to let maybe, hard work tho' and income not guaranteed.

Just a few alternatives, and I forgot one, just keep on working! Good luck fj

bigfreddiel

jamesd wrote: »

At the moment the average income for a pensioner couple is about £18,000 so the flat rate pension alone will get you pretty close to that while you're both alive, though of course not after one eventually dies.

I didn't think it was that low! I was basing my minimum retirement income on about £1k each, or £24k per year after tax. Luckily this has worked out nearer to £30k after tax.

And that's because we paid into our pensions.

I did consider buy to let but it's just too much hassle, too risky, and to difficult to liquidate if you need the cash. So it was always pensions for us.

Cheers fj

ex-pat_scot

bigfreddiel wrote: »

I didn't think it was that low! I was basing my minimum retirement income on about £1k each, or £24k per year after tax. Luckily this has worked out nearer to £30k after tax.

And that's because we paid into our pensions.

I did consider buy to let but it's just too much hassle, too risky, and to difficult to liquidate if you need the cash. So it was always pensions for us.

Cheers fj

and I didn't realise it was so high!
I guess 2 people on full SP gets you £16,000 pa.
Then you would have to have £50,000 savings to generate the £2,000 additional top up to get to the mean £18,000.


I don't think that's too bad really, as a starting point. That's £1,500 per month, with no tax to pay.


Getting to the £2,000 or £2,500 per month net (per the above poster) does give you a lot of difference though. Much of the basic £1,500 pm will be on living costs, whereas upping it by £500 or £1,000 pm would make a big difference to disposable income and thus the quality of your retired lifestyle.


So - looking at things another way then. Let's say that £2,000 pm net is a nice figure to have, ie an additional £500 pm above the "basic".
How to build that £500pm income?
Well - that's £6000 pa.
[Remember that this is a net figure: you'll need £7,500pa gross]
To generate a pot that pays out that amount: you'd need £187,500 invested (@4% Safe Withdrawal Rate).
How to build that pot?
You'd need to invest £33,000 pa over 5 yrs OR £15,000 pa over 10 years OR £9,000 pa over 15 years. (at 4% net return).




[please don't think I am suggesting you need tons of cash for a "retirement lifestyle" - but if you recognise that there is a "bare minimum" figure and a "fun budget" above that, then this shapes the thinking for what you are aiming to do and thus planning the pension for].

adindas

Thank you for writing this.. It is a very straight forward and easy to follow assessment.

ex-pat_scot wrote: »

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.

jamesd

bigfreddiel wrote: »

I didn't think it was that low!

Just for clarity, around 18k was the median rather than the mean. However the ONS is now reporting that it's £21,100 so I'll have to update my memory to use a more recent number. There's more information and trends in Pensioners' incomes series. Given that I've updated my post to say 21k rather than 18k