Pension or savings

Lisalouise1974

By my own admission I don't know much about pension planning so I need some advice.

I have been paying in to a work based pension for about 7 years, the fund is only worth 62k ( I was late to the pension game so I know this is pants ). I am female, 46, no dependants and a homeowner with about 120k left on my mortgage. I was made redundant after 15 years mid way through the summer due to covid. I was very lucky to find a new job but my salary dropped by 18k, my pension amount also changed whereby my new employer only pays 3.5% and I pay 5%. I have auto-enrolled in to the company pension scheme and have made two payments in to the People's Pension
Due to some previous saving and my redundancy, I now have saving of about 20k, which I am hesitant to touch as if nothing else covid has taught me that rainy day money is worth a huge amount emotionally and I am only three months in to my new job. 

I have never really had saving of more than a two months salary and have had just two longterm jobs in 23 years but even with my reduction in salary I have been saving and topping up my savings, again I have found this a comfort as unemployment caused me a huge amount of stress.

However, my old company pension Aviva has started to send me marketing info about paying privately in to my now lasped pension. I could afford £50 DD a month, but I am not sure if keeping it ticking over is the right thing or whether I should just keep saving this money in to my ISA ( which yes is completely pants interest wise ).

The other thing to mention is my mum passed away just two years in to her retirement and as I am not married or have any children there is a small part of me that is reluctant to tie money up in a pension that I might not grow old enough to see  - yes I know that that is odd, lol!!!!

Any thoughts gratefully recieved..

El_Torro

I'm a big fan of having an adequate emergency fund (or rainy day fund as you put it). How big this fund should be is debatable, though generally between 3 and 6 months worth of expenses suits most people. 

Once you have decided how big your emergency fund should be you can invest the rest. Either in a pension (your workplace pension, or elsewhere), or a Stocks & Shares ISA, or if you have a mortgage you could even put some money towards overpaying that instead of investing. Which of these three options you choose depends on your circumstances and preferences.

You mention your old company pension with Aviva. You can contribute towards that, or just close it and transfer the money to your current employer's pension. You could even start a SIPP with a new provider, but unless you have specific funds you want to invest in this might be more hassle than it's worth.

When it comes to investing remember the golden rule: Investing is only really suitable if you don't need the money for 10 years or more. Any money that you know you'll need before then should be saved (even though savings accounts have terrible interest rates at the moment). 

dunstonh

The other thing to mention is my mum passed away just two years in to her retirement and as I am not married or have any children there is a small part of me that is reluctant to tie money up in a pension that I might not grow old enough to see  - yes I know that that is odd, lol!!!!

4 out 5 people will make retirement.   Half of them will live into their late 80s.      

1813

Hope i do but have provisions in place in case i dont

squirrelpie

Sorry to hear of your redundancy - it's soul-destroying when that happens, especially after being there so long. You took a big pay cut to get a new job, which I expect was the right thing to do, but if you can face it I would keep looking for a better one in the meanwhile.

You should perhaps start to think about and sketch/plan your retirement now. Yes, you may not live to enjoy it, but equally you might live a very long time. If you live long enough to at least start to take your pension then the tax advantage of saving in a pension is worthwhile.

Unless you already felt that the Aviva pension was doing so well that you wanted to continue with it, I would ignore their marketing and put your funds elsewhere. You could transfer it elsewhere if you wanted.

Albermarle

The peoples pension has relatively competitive charges , which are discounted as the amount builds up.
I think if you transferred the £62K in,  the charge will drop to around a third of one per cent . You need to check but you will probably find the Aviva one has a higher charge than that , although it will probably have a wider choice of investment funds , if you were interested in more options ( most people are not)
Then the easiest thing to do would be to increase your % contributions from your salary .
We all know someone who died early but the stats are that you have a 50% chance of living past your Mid eighties , and trying to live off just the state pension and benefits would be no joke.

john798

i'm in a similar situation. i have been paying the minimum contribution of 5% into my pension from inception.
i'm considering making additional voluntary contributions but not sure if i can trust the pension provider to invest it well or that it will actually benefit me. the current predictions for my annuity make for dire reading. 
i have savings in premium bonds and an ISA. good to have the money but as said interest rates are dire too at present.
i feel i could afford more contributions. did anyone else up theirs and glad they did?

Albermarle

Most of the regular contributors to this forum have benefitted from making as much contribution to their pensions as possible.
it is the best and most tax efficient way for most people to build up a decent income in retirement.
 but not sure if i can trust the pension provider to invest it well or that it will actually benefit me. the current predictions for my annuity make for dire reading. 
Firstly the pension provider is not responsible for how you choose to invest the money within the pension - you are .
However if you ( like the majority  ) do not actually make any input of your choices,  they will invest it in a default fund for you . It is nothing to do with trust.
Secondly the projections/forecast of income in retirement sent out by pension providers are overly pessimistic . In the past they were too optimistic and now it has swung the other way.

Brynsam

Lisalouise1974 said:

By my own admission I don't know much about pension planning so I need some advice.

I have been paying in to a work based pension for about 7 years, the fund is only worth 62k ( I was late to the pension game so I know this is pants ). I am female, 46, no dependants and a homeowner with about 120k left on my mortgage. 

Any thoughts gratefully recieved..

Before you continue to beat yourself up, think about the fact that, according to the FCA's most recent survey in 2020, The average UK pension pot after a lifetime of saving stands at £61,897 - so you're ahead of the game, especially for women. Too many people on this site have unrealistic expectations (particularly of the amounts other people should save!) and love to tut and criticise with little or no knowledge of the circumstances and aspirations of the individual posting. 

Sure, the average pot isn't going to keep anyone in luxury, but yours has many years yet to grow, so you might be better placed than you fear.

I know that doesn't answer your question, but you did ask for thoughts!

JoeCrystal

Brynsam Do you have a link to that FCA's most recent survey in 2020? I generally used ONS survey on household pension wealth broken down by various factors but that is quite out of date already, 

john798

Albermarle said:

Most of the regular contributors to this forum have benefitted from making as much contribution to their pensions as possible.
it is the best and most tax efficient way for most people to build up a decent income in retirement.
 but not sure if i can trust the pension provider to invest it well or that it will actually benefit me. the current predictions for my annuity make for dire reading. 
Firstly the pension provider is not responsible for how you choose to invest the money within the pension - you are .
However if you ( like the majority  ) do not actually make any input of your choices,  they will invest it in a default fund for you . It is nothing to do with trust.
Secondly the projections/forecast of income in retirement sent out by pension providers are overly pessimistic . In the past they were too optimistic and now it has swung the other way.

thanks, i see what you mean. they have invested in a default scheme as i haven't specified anything. the options are overwhelming and i'd be afraid to make the wrong choice!
i think i'll up my contributions. another question, will my employer up their contributions if i do, or is theirs always fixed at the lowest rate?