Nest contributions

Fergyfox

Hi. Age 65, still working part time. Took small nhs pension at 62. Auto enrolled in nest when returned to work temp with nhs bank at 62.
Plan on working for another few years part time. Earning approx £800 a month after tax.
Nhs pension paying me £450 a month. Government pension not yet claimed but can next month (approx £140 a week). (Should I claim it or wait?)
Is it worth me putting an extra contribution £k to the next fund?
Or where should I put £10/15 k. Of capital?
Thanks

Should add,
Husband retired, has pension,
Mortgage repaid.

cloud_dog

Fergyfox wrote:

Government pension not yet claimed but can next month (approx £140 a week). (Should I claim it or wait?)

Have you checked if this is the maximum you can obtain? Whether working a little longer and deferring taking the SP, and possibly topping this up might be a better option?

Fergyfox

Hi. Government pension has deductions for being in the nhs pension scheme for 13 years. Although I have over 40 years NI contributions.
Can no longer contribute to government pension as will reach the pension age next month.
Thanks

cloud_dog

Ok but if you don't need the SP, are you able to defer taking it whilst you continue working? This would increase the SP payout by (I think) 5.7% for each year deferred.

hugheskevi

Auto enrolled in nest when returned to work temp with nhs bank at 62.

Does your employer offer any additional matching contributions, or salary sacrifice pension contributions? You should ensure you contribute enough to take advantage of any matching offered.

Earning approx £800 a month after tax.
Nhs pension paying me £450 a month.

So once you stop working, you will have about £12,700 p/a of income from your NHS and State Pension, plus some NEST pension.

£12,700 is just enough to use up your income tax Personal Allowance, and you will not pay National Insurance on pension income so your tax burden will be very small. However, as you will just about be a basic rate taxpayer it does make pension contributions less attractive than if you would have been able to take all the pension tax-free.

Government pension not yet claimed but can next month (approx £140 a week). (Should I claim it or wait?)

Have you checked whether there are any past years for which you can make voluntary class 3 National Insurance contributions, using the check your State Pension service?

Will the additional £140 p/w be needed? Or will it be additional money to invest?

Deferring the State Pension may be attractive if you think you would like more income once you fully retire. If necessary, you could use the £10/15K to fund the deferral period, effectively turning capital into State Pension income. In your position, you can effectively decide whether you want a higher future pension income or higher immediate capital through your deferral decision.

Putting more into NEST either in addition to or instead of deferring State Pension is only likely to be a good idea if your employer offers salary sacrifice, as NEST charges 1.8% on all new contributions and you would only be contributing for a short time. Hence contributing to a different pension would be better unless you can benefit from salary sacrifice.

There doesn't appear to be a big benefit to contributing more to a pension, but it is nonetheless probably worthwhile if you have no other immediate use for saved money - you get 20% tax relief on money going into the pension and effectively pay 15% when you take it out (25% tax free, the rest taxed at 20%). If the Personal Allowance increases significantly then you may be able to extract the money at a lower tax rate as some would not be taxed.

Note, you can only get tax relief on pension contributions up to your earned income, ie, £9600 p/a. Using relief-at-source pension you can get 20% tax relief even if your taxable income is below the Personal Allowance.

Afraid_of_Kittens

What type of NEST pension does he have?

I took my contributions out of one of the age fund initially to the High Risk Fund but now the Sharia Fund.

Sharia Fund has given consistently a greater return of all the NEST funds.

https://www.trustnet.com/fund/price-performance/p/pension-funds?manager=NETF&tab=fundOverview

nigelbb

cloud_dog wrote: »

Ok but if you don't need the SP, are you able to defer taking it whilst you continue working? This would increase the SP payout by (I think) 5.7% for each year deferred.

When the extra you got from deferring was over 10% it was worthwhile but there isn’t much point to deferring now. None of us knows what the future will hold so personally I would prefer a bird in the hand.

Deferring your pension for one year will get you a slightly higher pension (an extra £9.44 per week for maximum state pension) but will take approximately 17 years to recoup the one year of pension you have missed out on.