I'm an idiot.

Kmh120

Morning all

Some advice would be very gratefully received.

I'm (just) 57 years old and I'd like to retire at around 65.

Sadly, because of childcare and divorce and being an idiot (!!) I've not planned well for retirement.

I'll obviously receive the SRP and I'm fully up to date on payments for that.

I also have a small pension of £2700.00 per annum payable in 2021 and a projected Auto Enrolment lump sum of £18,000.00 payable at 65.

I have a small amount of savings and no mortgage or rent to pay.

What should I do?

Take out a new pension?

Pay more into savings?

Pay more into my AE pension?

All advice gratefully received.

Many thanks

Sophie

System

How much money do you need to live on?

Assuming you have an emergency fund of 3-6 months living costs....

You could if you have an existing pension with decent performance pay in everything you earn above the personal income tax allowance. If you don't you could open up a SIPP and if you're a basic rate taxpayer pay in 80% of everything you earn above the personal income tax allowance - the pension provider will automatically apply for the tax relief from the government, hence 80%, not 100% above personal allowance so they have taxable income to offset. Either option would basically mean for every £80 you reduced your take home pay by you'd be adding £100 to your pension pot.

So what would this mean? Numbers for simplicity to some extent.

Assume income of £20k a year for 7 years, assume personal allowance is £12,000. Assume a SIPP.

Each year you pay in £6400, government add another £1600 so £8000 a year added. Your take home would go from £1419 to £886 a month - the £533 difference being added to your pension monthly.

At 3% growth you'd have a pension pot of £49,800
At 4% growth you'd have a pension pot of £51,700
At 5% growth you'd have a pension pot of £53,700

If you contribute all your taxable pay to a pension out of your pre-tax wages the take home pay and the figures above are the same.

OldMusicGuy

The first thing to do is to make a financial plan for how much you will need to live on when you retire. Without that "number", you won't be able to make sensible plans.

Once you have that number, look at the difference between the combination of your SP and pension income, because that's the gap you will have to make up (if there is one). You then need to decide the best way to do that by using savings and other pension money you can access. You also need to work out how long your savings might last if you have a shortfall between your projected expenditure and your SP + pension income.

Once you have that information, you might have a better sense of what you need to do now before you retire. Do you need to just do a bit of "sensible" saving, or do you need to be more aggressive in putting money away (and maybe invest it rather than save it).

Also, do you own your own home? Could you consider downsizing at some point?

Finally, have you obtained a state pension forecast? You may not be eligible for the full flat rate SP based on your past NI contribution record (as you may have been contracted out at some point).

Dox

Not an idiot at all - join the 85% of so of the population who are in the same boat, or believe they are.

What do you want to achieve? If the answer is long term savings for your retirement, in a tax efficient manner, then yes, pay more into your pension. I assume the AE lump sum is NEST?

As the helpful post above points out, make sure you have enough 'emergency money' before tying up any cash long term if you might need it before then.

System

In regard to OldMusicGuy's post, the Aviva Retirement Planner is excellent for doing what he posted. You can enter how much a year you want total income to be. Unlike most other calculators you can set it to include the state pension in that, three different rates of growth (poor, average, good) and whether or not you take a lump sum - unless you need to don't, it massively increases how much you need to pay in a month for a given income if you take it. For me the difference I need to contribute per month between taking the lump sum and not to give me the standard of living I have on my current £20k salary is £100 a month, £350 a month without the 25% lump sum, £450 a month if I take it.

https://www.aviva.co.uk/retirement/tools/my-retirement-planner/

jonnygee2

Definitely not an 'idiot', it's a normal situation to be in.

Generally the best way to save is into a workplace pension because of the tax benefits. If you share more details about your income and employment status, people here might be able to give more specific advice, but there are not many situations where a pension scheme would not be the best place to save.

The biggest problem for you will be that you want to retire two years before you will be eligible for State Pension. You may have to face the reality that this won't be an option for you.

Nullboris

The current state pension will get you less than 5 hours jetski hire on Necker Island , as Richard Branson will tell you ....
You're statement that you have no rent or mrtgage to pay ?, will that continue, forever.
There is nothing obvious that you will get the full state pension,, many, nay most, do not get it. 35 years of NI contribs is needed.

I would say pay as much as you can into a private pension, as if necessary, being over 55 you could withdraw some.
I am similar situation , decided to hire pedalo instead

Dazed_and_confused

35 years of NI contribs is needed.

But the op is 57 so the new rules don't apply in full.

Might already have more than the new State Pension.

Might need 40 years to get it.

They need to go on gov.uk and check their forecast to be certain about their own personal situation.

LHW99

Also check if your employer will pay more into your pension if you do - some will, and that's "free money"

Kmh120

Thank you all so much. I am feeling such a pratt atm and I'm really grateful for your kind words and support. My Dad has been saying to me for years that I need to sort my pension but I've been on a partcularly low income until recently, and then I figured that with Auto Enrolment all would be ok. What an idiot I am !

To answer some of your questions

1. SRP - I've gone into the government's website and it says I'll have £164.35 a week from 15.12.2028 as long as I pay into it for 3 more years. So you're right. I won't retire at 65, it'll be when I'm 67. So that gives me an extra 2 years from my original (yet again) eroneous calculations, to save up/pay into a pension!!

2. Auto Enrolment. I currently pay in 5% of my earnings - I earn £24,000.00 a year. My employer pays in 3% ( this is not going to increase) Its paid into a SIPP. Would I be best off upping my contribution rather than paying into another yet to be set up pension? And paying in as much as I can? As I said it tells me that at 65 I'll get a lump sum of £18,000.00 which it works out will give me an annual annuity of £555.00 :rotfl::mad::eek:

3. I own my own home. No mortgage. Freehold.

4. I have 6 months emergency fund saved up - I havent yet done the 'how much do i need to live on in 2028' calculation - that scares me

5. Oh and i'm assuming that my Council Pension from years ago ( which will pay me £2,700.00 per year) is closed now...is that how it works?

Thank you all again for your support. Any help I can get, will be good. I don't feel so alone now!

Sophie

Mnd

You've made a good start getting to understand this.

It is probably a good idea to increase you works pension contributions.

Then start to work out your number as suggested by posters above