Advice On How To Proceed at 41. Have done zero preparation for retirement

CheekyMunkey

chelseablue said:

Never too late. 
I'll use my brother in law as an example; he's 48, self employed, never paid into a pension in his whole working life, never owned a property. Has zero savings 
He takes home almost £3,000 a month so not exactly hard up 
So, you a doing WAY better than he is

lol. I guess it all depends on if you are not too fussed about it all. He may be completely content. I never really got the whole 'become financially free' thing. I mean I understood it but I was also programmed to believe I would work until pensionable age... Now... I want to retire yesterday 

Albermarle

Not really sure what Defined Benefit is?

There are two main types of pension . A Defined Contribution( DC) pension is like you have now with NEST. Contributions add to a pot of money that is normally invested in financial funds linked to the stock market . Hopefully the pot ( or pots ) grows large enough to support you when you retire.

With a  Defined Benefit (DB) pension you build up rights to a pension income when you retire. There is no pot of money as such even though you still have to contribute . These pensions are normally better and are typical for public sector employees ( NHS; local government workers , teachers etc ) . Also some large private employers offered them but less so nowadays .

When you find details of all the pensions you might have you just to be clear if they are DC or DB . Probably most/all will be DC but you never know.

wjr4

What is your gross income for the current tax year? Are you able to quickly obtain info about your NEST pension contributions for the current tax year? 

hugheskevi

Ive worked out that my current pension is with Nest. The letter I got said I would contribute 5% and that they would contribute 3%. However, looking at the actual numbers having logged in it works out that I contributed 2.7% and they have contributed 2.1% so Im not sure whats going on or I may have messed up the calculation some home.

Statutory minimum pension contributions are 8% on your total earnings between £6,240 and £50,000, of which at least 3% must come from the employer. Sounds like your employer is doing statutory minimum.

So Im going to check my state pension, but when I did speak to the lady who worked at the office who deals with tracing pensions she said I had nearly paid off all my state pension contributions so that must be pretty close to being complete. 

You will probably reach full contributions well before State Pension age, but it is worth understanding (and monitoring) the whole picture, not least so you know how much State Pension you will receive and from when - something far too long are not sure of.

CheekyMunkey

wjr4 said:

What is your gross income for the current tax year? Are you able to quickly obtain info about your NEST pension contributions for the current tax year? 

My income right now is £62.5k I probably need to get another job but with all the madness going on right now Im not sure its worth risking and that I want to buy a home. So I mentioned in a message above that my Nest contributions in my letter from my employer stated 5% from me and 3% from my employer but the % I obtained from my Nest account look way off. 2.7% from me and 2.1% from my employer. 

CheekyMunkey

hugheskevi said:

Ive worked out that my current pension is with Nest. The letter I got said I would contribute 5% and that they would contribute 3%. However, looking at the actual numbers having logged in it works out that I contributed 2.7% and they have contributed 2.1% so Im not sure whats going on or I may have messed up the calculation some home.

Statutory minimum pension contributions are 8% on your total earnings between £6,240 and £50,000, of which at least 3% must come from the employer. Sounds like your employer is doing statutory minimum.

So Im going to check my state pension, but when I did speak to the lady who worked at the office who deals with tracing pensions she said I had nearly paid off all my state pension contributions so that must be pretty close to being complete. 

You will probably reach full contributions well before State Pension age, but it is worth understanding (and monitoring) the whole picture, not least so you know how much State Pension you will receive and from when - something far too long are not sure of.

So If Im paying the minimum how comes my %s are so low? So combined Im looking at 4.9% for the year which should have been more like 8%? I have emailed the pensions guy to confirm what has happened. So lets see what he comes back with. I also asked if I could increase my contributions. 

hugheskevi

So If Im paying the minimum how comes my %s are so low? So combined Im looking at 4.9% for the year which should have been more like 8%? I have emailed the pensions guy to confirm what has happened. So lets see what he comes back with. I also asked if I could increase my contributions. 

£50,000 less £6,240 = £43,760 of banded earnings subject to pension contributions (as your salary exceeds £50,000 there are no pension contributions required on the part above £50,000).

Employer has to put in at least 3% of banded earnings, which is £1,312.80 (2.1% of salary)

You put in 5% (inclusive of tax relief) of banded earnings, which is £2,188 (3.5% of salary). Does the 2.7% you mention include the relief-at-source tax relief added by NEST? If not, then 2.7 / 0.8 = 3.375% of salary. That is quite close to the figures due on banded contributions.

Have you been claiming higher rate relief from HMRC? If not,there is a time limit of four years to claim back any tax relief from HMRC. A claim must be made within four years of the end of the tax year that a member is claiming for, so that is something else where the approaching end-of-financial year deadline is a factor to consider now.

CheekyMunkey

hugheskevi said:

So If Im paying the minimum how comes my %s are so low? So combined Im looking at 4.9% for the year which should have been more like 8%? I have emailed the pensions guy to confirm what has happened. So lets see what he comes back with. I also asked if I could increase my contributions. 

£50,000 less £6,240 = £43,760 of banded earnings subject to pension contributions (as your salary exceeds £50,000 there are no pension contributions required on the part above £50,000).

Employer has to put in at least 3% of banded earnings, which is £1,312.80 (2.1% of salary)

You put in 5% (inclusive of tax relief) of banded earnings, which is £2,188 (3.5% of salary). Does the 2.7% you mention include the relief-at-source tax relief added by NEST? If not, then 2.7 / 0.8 = 3.375% of salary. That is quite close to the figures due on banded contributions.

Have you been claiming higher rate relief from HMRC? If not,there is a time limit of four years to claim back any tax relief from HMRC. A claim must be made within four years of the end of the tax year that a member is claiming for, so that is something else where the approaching end-of-financial year deadline is a factor to consider now.

Hi Mate. Ok. So I reran the numbers and realised that the %s I calculated were based on my total income and not the £43,760 you mention above. I also was not including the tax relief. Once I added that it I realise I am actually pretty looks right.  So I had a look at that link you sent regarding higher rate of tax relief. I didnt think I could get relief as a higher rate tax payer. Ill now have a look into that. Ive only been in this job for about 2 years so well within the 4 year window. Prior to that my salary was only a little over the basic rate tax payer level so it probably wont make much of a different. Thanks again. Who would have thought pensions were soo complicated...

SSTJCKel

Lol 41 lol.... I'm 62 !
I've been tracking down my pensions for the last couple of years and found I have more than I thought but not enough to make me comfortable in retirement. I also have debts but i'm liquidating one of my pensions to pay those off because of the high interest rates then i'm going to plow everything I can into some form of pension/Sipp/ETF or other investment which i've not yet decided on.... If I were you i'd lay back, think of England and have a good long deep sleep mate. You are in way better situation than me and many others the important thing no matter what age you are is your doing something about it and taking control. Thats better for your mental health and sleep patterns than anything. I think you are on the right path and once you've got everything in place, which will take time, just revisit and update everything once a year which will then take very little time and I would say you will have a very comfortable retirement.... I have found the whole sorting out pensions thing to be quite therapeutic even though I still have a lot to learn !

wjr4

What are the exact figures in £ not % for the current tax year? I’m asking as you could use your cash to make a lump sum pension contribution before the end of tax year which will receive higher rate tax relief.