Out of my depth, getting sorted for retirement.

enthusiasticsaver

I think if your options are limited at the moment as to what you can invest and you are likely to be a non tax payer in retirement then paying extra to the pension is the best idea from a tax point of view as you get the extra government contribution by way of tax relief.

I don't know much about NEST but I guess it depends which fund you are invested in as to how well it does performance wise. Do you get forecasts and performance tables? You can compare charges with SIPPS to see if they are cheaper (unlikely). With a small pension pot though I would be inclined to keep it in one place as it will probably be more expensive to have 2 separate pension pots going. The only advantage to doing an Stocks and Shares isa rather than a pension is that you can choose when to cash out rather than waiting until 55 (minimum age for most pensions now) and the gain will be free of tax. No tax relief though as there is for pensions and from the sound of it you will be a non tax payer in retirement if relying heavily on the state pension.

To prepare for retirement I monitored expenses for a few years (I retire this year at 57). I think the biggest gain you could have is to pay off the mortgage before retirement so you don't have to worry about housing costs. If it is a very low interest rate though you may be better off paying more into the pension but of course there is no guarantee on performance. For the ten years prior to retirement for us after we had paid off the mortgage we aimed for three separate pots, pensions for both me and my husband (2 occupational ones for me (current and 1 deferred) and 1 sipp and 1 DB and 1 DC pension for husband). Stocks and shares isas are our second pot to help bridge the early retirement gap of 8 years we have as we retire(d) at 58 and a substantial cash buffer held in current accounts and regular savers. So I would advise don't put all your eggs in one basket and aim for a mix of pensions, stocks and shares isas (I did not start investing in them until I was 52 so you have time) and cash in high interest current accounts.

steampowered

tori.k wrote: »

Ideally would be looking to try to make a minimum 3k pension on top

I plugged your numbers into a pensions calculator. Try the calculator yourself at https://www.moneyadviceservice.org.uk/en/tools/pension-calculator/info.

Starting from a pot of £0 - starting from zero at the age of 44 - you need to be contributing £2,600 a year (£216 a month) to achieve an income of £3,000 a year in retirement. This assumes retirement at age 67.

Is the employer matching the £100 a month contributions?

If not, your pension contributions are far short of the £216 you need to be contributing to achieve your goal of £3,000 a year above the basic state pension.

dunstonh

Nothing wrong with NEST for the purpose it is set up for. I wouldnt use it for anything else though. Its purpose was to be available for very small employers who couldnt get a proper group scheme via the insurance companies as they were too small. Its a very basic scheme typically handling very small values and is cost effective for those.

No bells and whistles attached. Very little choice. I have some issues with the way it handles administration and is borrowing money from the taxpayer. However, for its purpose, it is fine.

tori.k

I am already running most on my annual outgoings through a regular savers, plan on switching accounts as soon as house is sorted ( issues with the titles) incase we need to reapply for the mortgage as the offer expires in 3 months.
Nest charge me 1.8% on each contribution and a 0.3% total annual management charge. Which seems a lot to me, but I know nothing about these things.

tori.k

steampowered wrote: »

I plugged your numbers into a pensions calculator. Try the calculator yourself at https://www.moneyadviceservice.org.uk/en/tools/pension-calculator/info.

Starting from a pot of £0 - starting from zero at the age of 44 - you need to be contributing £2,600 a year (£216 a month) to achieve an income of £3,000 a year in retirement. This assumes retirement at age 67.

Is the employer matching the £100 a month contributions?

If not, your pension contributions are far short of the £216 you need to be contributing to achieve your goal of £3,000 a year above the basic state pension.

No they are not matched but I will still have 14years+ of working life to make up the shortfall with no mortgage payments, so still seems reasonable and achievable to me.

dunstonh

Nest charge me 1.8% on each contribution and a 0.3% total annual management charge. Which seems a lot to me, but I know nothing about these things.

Its not a lot. Its very cheap relative to your values.

Most providers have no initial charges but you are dealing with a company that does not benefit from having large investors.

£100 costs £1.80 to pay in.
If you have £1000 on the balance, they charge £3 a year. A statement will eat up a third of that.

tori.k

As I said I no nothing of these things

justme111

So you spend 14 k per year while working. If you have 2 state pensions it would be the same 14 k. Without mortgage payments ! Plus whatever you got from your nest pension. Why do you intend to make provisions for further pensions?.

steampowered

tori.k wrote: »

No they are not matched but I will still have 14years+ of working life to make up the shortfall with no mortgage payments, so still seems reasonable and achievable to me.

Yes, so long as you accept that your later contributions would need to make up for the contributions you don't make now PLUS the investment returns you would have made on that £100.

It is worth running the figures on the calculator so that you understand this, and do not end up with a big shock when you try to retire.

For example, if you started with an empty pot and didn't start paying into your pension until age 56, you would need to contribute about £4,000 a year to achieve your target of £3,000 income a year retiring at 68. Perhaps it would be more like £2,000 a year if you keep contributing your £100 a month from now until you are age 56.

tori.k

It's because we are so reliant on the state pension, today I can retire at 68 with an expected 8k a year pension due to current and expected NI contribution's, a month ago I could retire at 67, who knows what it will be the time we actually get there. It's just trying to put ourselves in the best position we can be, we lose some outgoings when we finally get to retire but we will gain some also.