Worried about starting pension later in life

crv1963

sambo84 wrote: »

I’m 35 and only started paying into a pension when auto enrolment started so only have a measly £3600 in there. Before that I wasn’t offered a pension through work and to be honest I’d never really thought about it on my own.

I wouldn’t even know where to start (they really should teach this information in schools!). I’m currently paying the minimum as is my employer(me 5% and my employer 3%).

I’m feeling a bit overwhelmed where to start and what I should be doing but I’m quite concerned that I won’t have enough to retire....ever!

I’m determined to turn things around as best I can and start saving more for my future.

My question is what should I be doing? Paying more into my work pension? Set up a separate pension? Build up savings or investments? I currently have £22k in savings but some of this will be needed for renovations. Help?!

The best time to start is always now- be that now when you're 18, 35 or 55. Now you know you need to put more away is the time to start. For us we were in our early 50s!

So it is not too late, simply a bit harder slog. Don't feel overwhelmed, it seems hard but it all boils down to planning and learning. Read a few threads and ask a few questions- it is what we did and although I am no expert, once you get your head around it everything is reasonably straight forward.

Work out what you have already, so State Pension accessable at SPA. Auto-enrol Pension accessable currently at 55- this may change.

Then workout what you need to live on in retirement, some say 66% of earnings others 50%, these are ballpark average need figures- but you workout for you what your real number is likely to be. Once you have that you have a target sum to aim for.

Then work out the when- what age do you want to retire? Is semi-retirement an option for a few years or a career change? Now you have a timescale and a target income you need to save a sum large enough to consistently provide the income needs.

There are arguements over different rates to withdraw or drawdown your income and lots of ways of doing it. You need to think about that once you know what you need.

Then where to park your savings? Pension obvious tax advantages, so a no brainer really. Ask you employer if they will match any increased % savings, but if they are a small company and only have a scheme because they have to then don't be surprised if they say no. Or that they know less about it than you!

Paying more into your work pension is likely cheaper but know what funds you are investing into- these are what makes a difference, no one has a crystal ball so others are better placed to make suggestions on this issue than I.

Separate pension- possibly a good idea, can access this at a different time or drawdown rate than your workplace pension.

LISA- a possibility, can get to it age 60 tax free and without penalty, has the advantage that it gets a boost at a similar rate to a pension fund.

Pension and LISA locks your money away for years but hopefully compounding makes it grow at a better rate than savings.

Emergency Fund- 3-6 months take home pay, not monthly spending, a cushion for life events- loss of job/ health/ new boiler.

Renovation fund- keep topping up and use for ongoing house repairs/ decoration/ white goods?

Holiday fund- whatever you spend annually divided by 12 and saved each month.

Christmas Fund- ditto for Holiday Fund.

Rainy day savings- monthly amount into a cash savings account? Monthly amount into S&S ISA?

I can only give you an example of what we do-

Me- DB pension= 16-24 k pa (depends on a number of variables including length of service and enhanced pay)

Possibly if I follow my own advice I'll retire from current role and change career direction or go part time and start a DC pension- auto- enrolled to get the employers contribution (why self enforce a 3% pay cut) and start a SIPP. This will be left alone for old age costs or possibly drawn down cautiously to leave a capital sum for either Mrs CRV or children to inherit.

Some cash savings- 3 months income- my employer has a decent sick pay scheme.

SP at 67= 8.5k pa

Mrs CRV-

Pension Pot 1- Long ago stopped SERPS(no longer available reforms swept it away)- has about 100k in it = 3k pa at 55.

Pension Pot 2- Auto enrolled currently gets 8% salary into it. Employer will only pay in the legal minimum, no salary sacrifice available. Should have around 10 k when she hits 55.

Pension Pot 3- SIPP current bas savings of 200pm but ad hoc money put in as well. Plan- to have 85k in it by her age 57.

SP at 67= 8.5k pa.

Cash savings= 4 months salary. Employer pays SSP only.

Pensions income, our number or target is-

1) Basic retirement 18k pa- covers all outgoings for both of us.
2) Comfortable retirement- 24-30k pa- as above with a couple nice holidays a year and can follow hobbies/ interests without worrying too much about money.
3) Luxury retirement 36k+ pa- as above with a couple long haul holidays pa and can help the children (can I describe adults planning their own retirements as kids?)

How to take it? For us-

My DB- 20k pa (using the middle of the possible range) at me being 58 so just abut 18 months time. Then rising at 67 by adding the SP to 28.5k pa.

Mrs CRV- Pot- 1 3k pa for life.
Pot 2- probably leave it alone as a rainy day fund or draw 1 k pa for 10 years or until exhausted.
Pot 3- the SIPP- draw 8.5k pa for 10 years age 57-67. Pot exhausted at 67,

So her income 3+1+8.5k pa for 10 years= 12.5k pa

At 67 her SP 8.5k + 3k pa from Pot 1= 11.5k pa for life.

Combined income= From retirement 20+12.5= 32.5k pa.
At me age 67 for 3 years until Mrs CRV reaches 67 we have 32.5k + 8.5k SP so 41k pa- probably we'll defer my SP or use it to replace house items/ save.

When Mrs CRV hits 67 we drop back to 32.5 k as we'll have exhausted pots 2 and 3.

If I die first/ early then Mrs CRV has her ongoing 12.5k pa for life plus survivors pension of 10k pa so 22.5k pa plus any cash savings and my AE and SIPP funds.

If Mrs CRV goes first then I have my DB 20k rising to 28.5k pa at 67 plus anything left in her pots.

There are lots of different ways to achieve what you want, I would advocate having a LISA as you could get 20k into it by 40years old and it may provide a decent sum for you at 60- even better if you keep adding to it. So you could end up like Mrs CRV with a variety of pots, some you can exhaust some you keep going.

Sorry for the long post but I find examples help me understand things better, so probably wrongly I assume others do too.

Good Luck, we didn't plan anything other than we wanted to go before 60 and if possible to have that as near 55 as possible. I only started looking seriously at me age 53 and Mrs CRV age 50, so you haven't missed the boat!

Albermarle

so I need to ask for salary sacrifice and 10% contribution?

Just to be clear - salary sacrifice means your employer changing their admin systems. I am pretty sure they will not do it just for one person. However there can be some advantages for them in operating this system , which is basically a legal loophole , which reduces the NI contributions for them and you. So certainly worth suggesting it

Increasing their % contribution is a separate issue and can be done with or without a salary sacrifice arrangement. It's basically like asking for a pay rise, so be ambitious but not OTT in your request .
Maybe a staged increase is possible

thickasabrick

You have already made a great "start" to the process with 8% going into your workplace pension at age 35. With normal retirement age at 67, you have 32 years to invest !

Referring to the Which article "How much will you need to retire?" as it offers some guidance for the following questions.
Q1 How much money will you need in your total pension pot?
A1 £215,450 How much you need in your pension to get £12,000 a year from income drawdown (gives a single persion £20,767.20 per annum including full state pension of £168.60 per week (£8,767.20) at age 67 (comfortable retirement).

Q2. How much do I need to save into a pension at different ages?
A2 Pension saving at age 30, to have a comfortable retirement, with £215,450 in your pension.
Save £489 per month
Rough calculation
With 8% (3%+5%) of salary of £37000 approx £246.67 per month ( pension tax relief will increase the amount by about £ 38 (tax relief on your 5% contribution) )

So if you can squeeze another 6% (£200 per month) into savings (pension or stocks and shares ISA) you'll be well on your way to a comfortable retirement.

Interestingly, if you plug the figures into a compound interest savings goal calculator for 32 years at 3% it reckons you need to save £338 per month to save £215450 by January 2052

ForestBluebells wrote: »

I’m 35 and only started paying into a pension when auto enrolment started so only have a measly £3600 in there. Before that I wasn’t offered a pension through work and to be honest I’d never really thought about it on my own, I wouldn’t even know where to start (they really should teach this information in schools!). I’m currently paying the minimum as is my employer(me 5% and my employer 3%). I have a mortgage with 30 years remaining term although I was planning on starting to overpay this, I’m really hoping this isn’t my final home but not sure how likely I will ever be able to upgrade on a single salary either. I’m feeling a bit overwhelmed where to start and what I should be doing but I’m quite concerned that I won’t have enough to retire....ever! I’m determined to turn things around as best I can and start saving more for my future /towards paying off my mortgage (assuming that is a sensible use of money) and perhaps starting to invest also as an additional retirement pot. My question is what should I be doing? Paying more into my work pension? Set up a separate pension? Build up savings or investments? I currently have £22k in savings but some of this will be needed for renovations. Help?!

ForestBluebells

Ok so it’s not as bad as I was imagining potentially and there’s still time to turn things around without spending the rest of my life deprived. I’m currently saving £250 a month minimum Into a regular saver (only recently increased from £100 per month) so if I put some of this into S&S ISA /LISA/pension then this can compound/grow. I’ll have soon paid off my student loan (less than 2 years) which gives me more disposable income to save also. I’m not wasteful in terms of luxuries as I don’t go on holidays (not been for 5 years!) and rarely buy clothes, I’m currently working on getting my general spending down on unnecessary items so I can save even more. I intend to save a £10k emergency fund. I’m at roughly £7k so I’ll have that saved this year, especially if I save all my additional bonus instead of spending it. I will also most likely get something from my parents but I don’t want to rely on this just in case. I’ll have a look in more detail at salary sacrifice so I can at least ask about it and hope my employer will contribute more towards my pension although if not I’ll just have to save what I’m able and hope for the best. It’s so easy to get overwhelmed and I truly wish I knew about pensions when I was younger and first started working. Sounds silly but it’s just not something that even crossed my mind to investigate before now 🤦!♀️

LHW99

Another thing to consider iswhat fund your pension money is being invested in. There are usually choices (a few, or many!). With the time you have before you are likely to retire, choosing a global fund that has a high % of equity (shares) is likely to help. The value will go up and down a lot more than what is called the "default fund" (where you end up if you don't make a specific choice) but that just means you get a bit extra for the months when things get cheaper (and 'buy' less when its expensive).
In most cases you can switch the fund you are invested in, mostly without any charge, if you want to. Have a look at what's available, and ask more questions here if you like, because there are a lot of very helpful and knowledgable people.

scalextric

ForestBluebells wrote: »

Ok so it’s not as bad as I was imagining potentially and there’s still time to turn things around without spending the rest of my life deprived. I’m currently saving £250 a month minimum Into a regular saver (only recently increased from £100 per month) so if I put some of this into S&S ISA /LISA/pension then this can compound/grow. I’ll have soon paid off my student loan (less than 2 years) which gives me more disposable income to save also. I’m not wasteful in terms of luxuries as I don’t go on holidays (not been for 5 years!) and rarely buy clothes, I’m currently working on getting my general spending down on unnecessary items so I can save even more. I intend to save a £10k emergency fund. I’m at roughly £7k so I’ll have that saved this year, especially if I save all my additional bonus instead of spending it. I will also most likely get something from my parents but I don’t want to rely on this just in case. I’ll have a look in more detail at salary sacrifice so I can at least ask about it and hope my employer will contribute more towards my pension although if not I’ll just have to save what I’m able and hope for the best. It’s so easy to get overwhelmed and I truly wish I knew about pensions when I was younger and first started working. Sounds silly but it’s just not something that even crossed my mind to investigate before now 🤦!♀️

Don't forget you still have to live, if you go through your whole life just saving for your house an pension it's going to be pretty grim, try and save some money for yourself to spend on things you want and the odd holiday!

Dandytf

Other than increasing contributions.
Is there any specific reason to increase workplace contributions over AVC'S
Similar to OP I've increased my late starter recent employers pension to 5% max-10% employers matched.
Though I did begin a couple of % avc's recently.
Maybe I made a mistake and made the increase in standard from 5 to 6%
I know I'll possibly manage a small increase late q1 2020
Which makes most sense -5to 6% or a percentage or two onto AVC'S

Good luck OP nice your recognising your workplace pension advantages.
Never too late I've worked with. A few later in life that 'didn't bother' and regretted not saving.
Including myself foolishly not joking durin 10 years 'Dream Career'
Since trying to play catchup-not very simple though certainly trying.

Durban

crv1963 wrote: »

The best time to start is always now- be that now when you're 18, 35 or 55. Now you know you need to put more away is the time to start. For us we were in our early 50s!

So it is not too late, simply a bit harder slog. Don't feel overwhelmed, it seems hard but it all boils down to planning and learning. Read a few threads and ask a few questions- it is what we did and although I am no expert, once you get your head around it everything is reasonably straight forward.

Work out what you have already, so State Pension accessable at SPA. Auto-enrol Pension accessable currently at 55- this may change.

Then workout what you need to live on in retirement, some say 66% of earnings others 50%, these are ballpark average need figures- but you workout for you what your real number is likely to be. Once you have that you have a target sum to aim for.

Then work out the when- what age do you want to retire? Is semi-retirement an option for a few years or a career change? Now you have a timescale and a target income you need to save a sum large enough to consistently provide the income needs.

There are arguements over different rates to withdraw or drawdown your income and lots of ways of doing it. You need to think about that once you know what you need.

Then where to park your savings? Pension obvious tax advantages, so a no brainer really. Ask you employer if they will match any increased % savings, but if they are a small company and only have a scheme because they have to then don't be surprised if they say no. Or that they know less about it than you!

Paying more into your work pension is likely cheaper but know what funds you are investing into- these are what makes a difference, no one has a crystal ball so others are better placed to make suggestions on this issue than I.

Separate pension- possibly a good idea, can access this at a different time or drawdown rate than your workplace pension.

LISA- a possibility, can get to it age 60 tax free and without penalty, has the advantage that it gets a boost at a similar rate to a pension fund.

Pension and LISA locks your money away for years but hopefully compounding makes it grow at a better rate than savings.

Emergency Fund- 3-6 months take home pay, not monthly spending, a cushion for life events- loss of job/ health/ new boiler.

Renovation fund- keep topping up and use for ongoing house repairs/ decoration/ white goods?

Holiday fund- whatever you spend annually divided by 12 and saved each month.

Christmas Fund- ditto for Holiday Fund.

Rainy day savings- monthly amount into a cash savings account? Monthly amount into S&S ISA?

I can only give you an example of what we do-

Me- DB pension= 16-24 k pa (depends on a number of variables including length of service and enhanced pay)

Possibly if I follow my own advice I'll retire from current role and change career direction or go part time and start a DC pension- auto- enrolled to get the employers contribution (why self enforce a 3% pay cut) and start a SIPP. This will be left alone for old age costs or possibly drawn down cautiously to leave a capital sum for either Mrs CRV or children to inherit.

Some cash savings- 3 months income- my employer has a decent sick pay scheme.

SP at 67= 8.5k pa

Mrs CRV-

Pension Pot 1- Long ago stopped SERPS(no longer available reforms swept it away)- has about 100k in it = 3k pa at 55.

Pension Pot 2- Auto enrolled currently gets 8% salary into it. Employer will only pay in the legal minimum, no salary sacrifice available. Should have around 10 k when she hits 55.

Pension Pot 3- SIPP current bas savings of 200pm but ad hoc money put in as well. Plan- to have 85k in it by her age 57.

SP at 67= 8.5k pa.

Cash savings= 4 months salary. Employer pays SSP only.

Pensions income, our number or target is-

1) Basic retirement 18k pa- covers all outgoings for both of us.
2) Comfortable retirement- 24-30k pa- as above with a couple nice holidays a year and can follow hobbies/ interests without worrying too much about money.
3) Luxury retirement 36k+ pa- as above with a couple long haul holidays pa and can help the children (can I describe adults planning their own retirements as kids?)

How to take it? For us-

My DB- 20k pa (using the middle of the possible range) at me being 58 so just abut 18 months time. Then rising at 67 by adding the SP to 28.5k pa.

Mrs CRV- Pot- 1 3k pa for life.
Pot 2- probably leave it alone as a rainy day fund or draw 1 k pa for 10 years or until exhausted.
Pot 3- the SIPP- draw 8.5k pa for 10 years age 57-67. Pot exhausted at 67,

So her income 3+1+8.5k pa for 10 years= 12.5k pa

At 67 her SP 8.5k + 3k pa from Pot 1= 11.5k pa for life.

Combined income= From retirement 20+12.5= 32.5k pa.
At me age 67 for 3 years until Mrs CRV reaches 67 we have 32.5k + 8.5k SP so 41k pa- probably we'll defer my SP or use it to replace house items/ save.

When Mrs CRV hits 67 we drop back to 32.5 k as we'll have exhausted pots 2 and 3.

If I die first/ early then Mrs CRV has her ongoing 12.5k pa for life plus survivors pension of 10k pa so 22.5k pa plus any cash savings and my AE and SIPP funds.

If Mrs CRV goes first then I have my DB 20k rising to 28.5k pa at 67 plus anything left in her pots.

There are lots of different ways to achieve what you want, I would advocate having a LISA as you could get 20k into it by 40years old and it may provide a decent sum for you at 60- even better if you keep adding to it. So you could end up like Mrs CRV with a variety of pots, some you can exhaust some you keep going.

Sorry for the long post but I find examples help me understand things better, so probably wrongly I assume others do too.

Good Luck, we didn't plan anything other than we wanted to go before 60 and if possible to have that as near 55 as possible. I only started looking seriously at me age 53 and Mrs CRV age 50, so you haven't missed the boat!

CRV1963 - I really enjoy your posts and don't take this as criticism but you say you didn't plan anything but you have the huge advantage of a DB pension of £20,000 pa which the OP doesn't

crv1963

Durban wrote: »

CRV1963 - I really enjoy your posts and don't take this as criticism but you say you didn't plan anything but you have the huge advantage of a DB pension of £20,000 pa which the OP doesn't

I had it drummed into me at the start of my career that the DB was the most valuable part of my contract and that I should preserve it at almost all cost. I recognise that it is valuable and that my career choices have been tied to keeping it. A brief period of agency/ private sector work only served to reinforce that!

I know it underpins our retirement but also wanted to illustrate to OP that DC pensions/ LISA/ ISA all play a part in retirement planning so showed Mrs CRV pension savings.

I would open a SIPP now but preparing the home for when we do go is limiting my scope, that and other unexpected curve balls that have hit my savings rate, as long as I retire by 60, I'll be happy.

jonnygee2

The title of this thread made me think you'd be mid 50s. But turns out you are 35!

You still have a very long time to save. Sure it would have been better to start at 20, but even starting at 50 can work out okay. I didn't start saving into my pension properly until about 30 either, but now I contribute about 20% and the amount in there rockets up (I'll be 40 in a few years, by then I'll be close to 100k).

Just start increasing over time until you are putting a good amount in. Theres no rush and if you increase gradually over 2 or 3 years you'll barely feel it.