62, started work, nest pension scheme...advice please.

mamabuddah

My OH after being at home for a few years has decided there's still life in her yet....lol....at the age of 62 ( next birthday is February) she decided she fancied working again.

So she got a 16hr a week job....which may increase to 20 or possibly even to 39 hrs a week (full time).

Her employer has a "nest pension scheme" which her and her employer would contribute to.

I had a company works pension which I am now in receipt of, but this is type of pension is new to me. Basically I have a few questions and hopefully the experts on here may have some answers.

1) is there any point in this scheme, financially speaking in the future
2) can she opt out,
3) is there any benefit if she's only to work for another 3 or 4 years
4) my company pension had things like benefits/payouts if I died while in employment do these schemes have additional benefits?
5) does this type of pension have any benefits? I'll health retirement?

Sorry for being so long winded....and merry Christmas everyone 🎅🏻🎄🎅🏻

xylophone

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/members/contents/retirement.html

http://www.nestpensions.org.uk/schemeweb/NestWeb/public/members/contents/understanding-your-options.html

https://www.moneyadviceservice.org.uk/en/articles/nest-pensions

The employer will contribute, she will have tax relief added - what's not to like?

atush

1 yes
2 yes, but it would be stupid
3 yes
4 dunno
5 dunno

Basically, if the emplooyer pays in, this is free money. So she sould do it. Treat it as fun money or treat/holiday money once she really retires.

Another thing to think about, is if she is getting her SP already, and if by working she doesnt need it, she could defer it. and get an uplift of 5.4% a year for doing so. If you are of good health it does pay off.

Alter_ego

atush wrote: »

if she is getting her SP already,

I doubt she is at 62yrs. although I believe it might be just possible.

Edit= missed the birthdate in OP she is not drawing SP

colsten

atush wrote: »

if she is getting her SP already

If she will be 63 next February, she will be entitled to state pensions sometime in 2019, subject to having at least 10 years of NI contributions.

OP, she should definitely take enrol in that NEST pension. Otherwise she'd essentially leave free money from her employer unclaimed. Depending on her overall pension arrangements, it might make sense to cash the lot in when she retires, rather than drawing tiny amounts of money each month.

xylophone

And has she obtained a new state pension statement?

https://www.gov.uk/yourstatepension?utm_source=Mail-Online&utm_medium=Partnership&utm_campaign=GTKY

PensionTech

atush has it spot on - just to expand on the last two questions though:

4. Yes, if she dies, whatever had accumulated in her pension pot will be paid out to her beneficiaries (probably you). There might be some additional life insurance element funded by the employer which may or may not be linked to membership of the pension scheme, but I would guess that if it does exist it'll probably be independent of NEST membership. You'd have to ask the employer to be sure.
5. Not to speak of. NEST is a "defined contribution" type of scheme where the benefits payable are determined solely by how much is in the pot and how you choose to draw it. There's no augmentation of any sort for ill-health retirement in these schemes. The only difference is that if you're expected to live for less than 12 months, you can take the benefits before age 55, which is the usual minimum age limit - but your wife's 62 anyway so it makes no difference.

Thrugelmir

mamabuddah wrote: »

3) is there any benefit if she's only to work for another 3 or 4 years
🎄🎅🏻

If she increases her contributions to the scheme will the employer match them. Money is money.

Elijah_Bailey

Item 4. You can nominate beneficiaries with a NEST pension in case of death before retirement but they will only receive the pension pot currently accumulated. There are no other benefits as it is a pretty basic scheme.

Item 5. No health benefits but you may be able to take your money out of a NEST pension before you're aged 55 if you're ill. If you're seriously ill, you may be able to take your entire pot as tax-free cash.

It may be basic but it gets tax relief from the government and free money from the employer. Win and win.

neilvw

Just to add, that her minimum contribution is 1% on a band of earnings, at the moment, so it's a very small outlay. This will increase over the next few years.

jamesd

mamabuddah wrote: »

My OH after being at home for a few years has decided there's still life in her yet....lol....at the age of 62 ( next birthday is February) she decided she fancied working again.

Given her age - 55 or older - she's wonderfully placed to make pension contributions because she can pay in without being unable to take money out until she's 55, except for cases like serious illness that allow earlier access.

The time to stop making pension contributions is when you reach age 75 - no longer entitled to tax relief - or when you're so wealthy that it just isn't worth the bother because it won't make a worthwhile difference any more. Or if affected by the Lifetime Allowance or some other issue. Which is a way of saying that if you're not making pension contributions yourself still you're also missing a trick.

Assuming you're within the age ranges and not affected by the odd exceptions both of you should be making pension contributions because there's "free" money to be had courtesy of the kind-hearted folk at HMRC and the Treasury and other tax payers.

From age 55 a person can take out 25% of pension pots of this type as a tax free lump sum. The remaining 75% can also be taken as taxable income but if any of that is taken the annual allowance for contributions to this type of pension is reduced from £40k (or earned income if lower, but at least 2800 net/3600 gross) to £10k this tax year and 4k next tax year onwards.

Which means that there's easy money to be had by paying in as much as is earned gross less 20% for basic rate tax then taking out the 25% and waiting a bit for the rest or accepting the reduced cap if really necessary because the finances don't allow any delay. So if you have the money, both of you should get on with doing it.

NEST won't directly allow you to take out the 25% tax free lump sum without taking the 75% so a transfer is one way to do that. Or she/you could pay into say the Hargreaves Lansdown one which does it and makes it easy to do. She should use the NEST one at work for the minimum required bit, just somewhere else for convenience and easy of access to the rest.

If money is tight, one of you could pay in then take out and the other could then do it using that money. You need to allow at least a moth, better three, between the first and second in case of delays getting the money and because of the time it takes HMRC to pay the tax relief.