Needing a place to start

trynsave

Hi all,

Before I start, I know I need proper pension advice. I will seek that out, but just hoping for some basic guidance as not too proud Ito admit that I am totally ignorant about pensions. I can switch bank accounts, utility providers, claim mobile cashback and overpay my mortgage etc etc, but with pensions I'm lost. Don't even understand the help pages I read.

Basic story is that I'm 50 later this year, female and have no pension except State one. I will qualify for nearly full entitlement as have been claiming child benefit since 2000. Apart from 3 years at uni I worked full time since 18.

Thing is, after nearly two decades of being a stay at home mum, I returned to work this time last year on a part time basis and opted out of local authority pension scheme. Job was only contracted for a year, so I decided that on the £8k salary it wasn't really worth bothering about.

Situation has now changed. Have been offered full time position with a more long term outlook. Salary still not great though Circa £16.5k. Have now decided to opt in.

Looking for advice about increasing contributions to max, whatever they may be. Don't really need the cash every month. Was just going to overpay mtge even more, but pension idea seems more sensible. Agreed???

However, at my age is it a bit late really? I know the true answer is yes, but is it ever too late? Think current contribution rate for my wage is 5.8%. Think mthly take home will be about £1200 ish. What are my options please? I am happy to research once I have a few pointers to set me off. Read somewhere that said halve your age, is 25 and pay that amount into pension every month. A quarter of my take home would be £300. I was thinking about doubling that. Is that even an option?

Help please. I will phone pension dept next week, but just don't want to sound like a complete moron!

xylophone

Start here

https://www.lgpsmember.org/thinking-joining.php

xylophone

And have you checked your state pension statement?

https://www.gov.uk/check-state-pension

Dazed_and_confused

You haven't told us when you want to use the pension as a source of income but I'm assuming you will have at least 10 years before then so you have a reasonable amount of time to contribute and build up a fund.

Ignoring any investment return (or loss) £600/month into a DC pot would be £90k in 10 years (including the basic rate tax relief). Not enough to live on by itself but useful when coupled with your State Pension and whatever you accrue over the next few years from joining your employers scheme now.

There is a lot to think about but a starting point would be to consider the two basic possibilities, what benefit would you get by contributing extra into your employer's scheme - there may be matched contributions from your employer (free money!) or a guaranteed (defined benefit) amount you can rely on.

And would you consider starting your own pension separately from your employer scheme. This might add flexibility with regard to when you can start to take money out but there would be no guarantees of the end fund as it would be subject to what you chose to invest in (you could leave the contributions in cash and just see the tax relief as the return but then you effectively lose money to inflation and that would be a risk in itself, especially over 10+ years).

And are you certain about your State Pension entitlement. There is a lot of misunderstanding about the new State Pension with people believing they will get the full amount with 35 qualifying NI years but that doesn't apply to someone your age. You are in a transitional period and may well get more, or less, than than the new standard amount. Best to check your forecast and be certain (ignore the top line figure, check what you have earned to date). If you work and add a qualifying year each year for the next 17 years you will probably be ok but best to check now and know exactly what your entitlement is and should be based on your future work plans rather than get a nasty surprise.

JoeCrystal

I think you would find that LGPS would be very helpful in establishing the foundation of your retirement. The fact you decided to opt-in is probably the best decision ever toward your retirement. You have to bear in mind that LGPS is a defined benefit scheme in which you build up a pension based on what you earn in each year.

Assuming you are working until your SPA (at 67) on £16,500 and assuming that your payrise matched the inflation and revaluation of living cost, you can expect an LGPS pension of £5,700 at 67 index-linked which will pay itself back in few years. You can expect a state pension of £8,500 if you got full years (although that may be less or more depending on what you got). So at 67, providing you are staying in LGPS until then, you may get an income of £14,200 per year.

There is also an option of paying for Added Pension up to £6822 per year. I put your figures in Added Pension calculator on the website; it would cost you £579.87 per month (or a one-off lump sum of £76,870.30) on top for next sixteen years to get another £6,822 on top. But that is only an option.

As I said, joining LGPS or any public/private defined benefit schemes can go a long way in retirement provision.

planteria

it's never too late to improve things. some good advice here already.. Understanding and benefiting from you lgps is certainly important. but i also like Dazed's thought..

Dazed_and_confused wrote: »

And would you consider starting your own pension separately from your employer scheme. This might add flexibility with regard to when you can start to take money out but there would be no guarantees of the end fund...

having your own pension pot alongside would be a nice position to be in, and provide you with some options.

atush

I returned to work this time last year on a part time basis and opted out of local authority pension scheme.

HUGE mistake. Join it on monday when you go to work.

Mnd

Better late than never, and if you can sort all those transactions out you mentioned, you will get to understand your pension.

Any questions you have, ask here..everyone will be happy to help.

Opt in on Monday as you have been advised, that will be a good start

trynsave

Hi all,
Thanks to all who have posted to help me out.

Have finally got into my Gateway account and it says that my forecast is £158.84pw with 32 full years, 1 not enough and 2 more years needed. Am confused by COPE though. It says that I was contracted out, but doesn't say which years, although in some years I only paid in £280 odd, whereas in others over £600. I've only not got a Full Year for 1 year, but that 96/97 so can't make that up. Am hoping that getting a few more Full years added won't be an issue though as still getting child benefit for youngest and I'm now working full time.

I have also emailed my work pension dept to request an opt back in. Haven't broached paying additional in yet though. Will need to find out more about APCs and AVCs.

I am a bit confused though. If I get full State pension of £160 odd a week, I think I'd struggle to spend it all esp if mortgage has been cleared and OH has his and work pension too. I don't want to go without now, only to have too much cash in our 70s. Is that naive? Thinking that a private pension which I could access earlier that 67 might be the way forward. Will have to see if employer adds extra with additional contributions.

Spreadsheetman

trynsave wrote: »

Hi all,
....
I am a bit confused though. If I get full State pension of £160 odd a week, I think I'd struggle to spend it all esp if mortgage has been cleared and OH has his and work pension too. I don't want to go without now, only to have too much cash in our 70s. ...

It is important to cover off the case of your OH dying first - SP stops completely and DB pensions usually only pay 50% survivor benefits. Could turn a comfortable retirement into something much more difficult financially.

xylophone

At 6/4/16 two calculations were done

Old Scheme

NI years/30 x £119.30 + (Additional State Pension - Deduction for contracting out)

New Scheme

(NI years/35 x £155.65) - Contracted Out Pension Equivalent.

Your "starting amount" was the higher of the two.

As you are now working full time and will be paying NI you will be able to qualify for full NSP when you are 67/68.

You said in your first post that you have no pension other than state pension yet you seem to be saying that a COPE is shown on your forecast.


You were working full time until you were 28 and then took twenty years out of the workplace?

Where were you employed during those seven years? It seems that you may have a pension relating to that employment?

The LGPS is an excellent pension scheme and in my opinion you should join as soon as possible.

It provides you with a pension and protects your spouse and dependent children.

You do not have to work until state retirement age - you could defer the pension, take it early with actuarial reduction or look into a transfer out at some stage.

I don't think you will have difficulty in spending your pension, particularly if you have grandchildren by that time.....