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

Dansmam

If they follow my advice (why would they?!) kids will plough every spare penny into s&s isas to FIRE as soon as they can, with a bit put by in pension to see them out. Says momma with her DB. I know and I am grateful 👍🏻

ewaste

TBH I think that's 'big company' thinking. None of the set-ups I've run or worked for over the last couple of decades would have or do offer anything but basic stat min pensions. Not saying that's a good thing at all, just that it's a fact.

I appreciate a lot of small and lean operations will offer the bare minimum but I've often had the opposite experience. The fact you can often communicate directly with decision makers in smaller organisations can help e.g. getting salary sacrifice setup. 

Depending on skill level Pensions are one of the things used for retention in smaller organisations. Usually matching contributions I put in 10% and they'll put in 10% or similar matching and this was before auto-enrolment. I'd hope at £60k+ the OP is somewhat skilled or has some value.

Big Company thinking can often be the opposite as well, staff churn doesn't get noticed unless it's really bad and the pension is the pension like it or lump it and the majority couldn't care less.

Admittedly I moved to one with a Defined Benefit Pension 😄

Albermarle

I dont really understand the higher rate tax relief to be honest but I guess every little helps. As I mentioned in another message I didnt think there was much on offer for higher rate tax payers. 

Higher rate tax relief is the gift that keeps on giving . It is so generous that it is expected it will get stopped at every budget , but it never does .

CheekyMunkey

ewaste said:

TBH I think that's 'big company' thinking. None of the set-ups I've run or worked for over the last couple of decades would have or do offer anything but basic stat min pensions. Not saying that's a good thing at all, just that it's a fact.

I appreciate a lot of small and lean operations will offer the bare minimum but I've often had the opposite experience. The fact you can often communicate directly with decision makers in smaller organisations can help e.g. getting salary sacrifice setup. 

Depending on skill level Pensions are one of the things used for retention in smaller organisations. Usually matching contributions I put in 10% and they'll put in 10% or similar matching and this was before auto-enrolment. I'd hope at £60k+ the OP is somewhat skilled or has some value.

Big Company thinking can often be the opposite as well, staff churn doesn't get noticed unless it's really bad and the pension is the pension like it or lump it and the majority couldn't care less.

Admittedly I moved to one with a Defined Benefit Pension 😄

Blimey. 10% and 10%. That would be amazing. Ive just gotten on to my pension at work and asked if I can increase my contribution. Lets see what they say.

CheekyMunkey

Albermarle said:

I dont really understand the higher rate tax relief to be honest but I guess every little helps. As I mentioned in another message I didnt think there was much on offer for higher rate tax payers. 

Higher rate tax relief is the gift that keeps on giving . It is so generous that it is expected it will get stopped at every budget , but it never does .

So I asked my pensions guy and he said I could claim back the additional tax relief. It would however have to be paid directly to me by HMRC. So it looks like its just a lump sum? Sounds like they cannot put it into my pension pot etc. 

Dansmam

I think an email asking hmrc to check it out will get you a quick repayment, may be a form to fill in. I resigned July and had tax refund for 2020/21 September iirc

CheekyMunkey

Dansmam said:

I think an email asking hmrc to check it out will get you a quick repayment, may be a form to fill in. I resigned July and had tax refund for 2020/21 September iirc

So just as a follow up question. They literally just send you a cheque for the amount the are willing to give you back and you just spend it on whatever you want? Literally just a tax refund. Has nothing to do with your pension etc?

hugheskevi

 So just as a follow up question. They literally just send you a cheque for the amount the are willing to give you back and you just spend it on whatever you want? Literally just a tax refund. Has nothing to do with your pension etc?

Research how "relief at source" works.

To summarise, your employer applies PAYE, then sends an amount of post-tax income to the pension provider. The pension provider grosses up for basic rate relief which works for most people. Higher rate taxpayers have to reclaim the higher rate relief due from HMRC. For example, if £8,000 is sent to the pension provider, they gross it up to £10,000 and you get a refund of £2,000 from HMRC.

To understand why this makes sense, if your employer operate a net pay system they would deduct £10,000 before PAYE is operated, reducing your income tax bill by £4,000. Either way, £10,000 goes into pension at a net cost of £6,000.

You can put the refund in the pension if you want, but no need to. Going forward, you simply adjust the contribution to produce the desired amount going into the pension and sort out tax with HMRC to get to the right net position.

Ive just gotten on to my pension at work and asked if I can increase my contribution.

As your employer does not operate salary sacrifice, there is no particular benefit from using your existing scheme, so you may wish to consider whether alternative pension providers would better meet needs in terms of investments and charges.

Albermarle

CheekyMunkey said:

Dansmam said:

I think an email asking hmrc to check it out will get you a quick repayment, may be a form to fill in. I resigned July and had tax refund for 2020/21 September iirc

So just as a follow up question. They literally just send you a cheque for the amount the are willing to give you back and you just spend it on whatever you want? Literally just a tax refund. Has nothing to do with your pension etc?

Yes, but be aware that for the next tax year they will change your tax code on the assumption that you will make the same pension contributions next tax year .
What that means in practice is that your take home pay will increase in the next tax year , but there will be no refund due later .
Basically you get the higher rate tax relief each month in the form of  increased take home pay .

xylophone

https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/claim-tax-relief.html

• Tax relief is currently set to a basic rate of 20 per cent. If you’re a higher earner you’ll need to speak with HMRC directly to claim any additional tax relief. 
• 
  
• See https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

See also
https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/make-additional-contributions.html