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

SomeMadeUpName

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 😄

I totally agree on the salary sacrifice comment, so long as the business decision makers have a decent grasp of the pension system and appreciate there could be savings in it for the business too it should be easier to organise. I can also see the employee retention angle, so use pension as a tool within the business.

The bit I don't get is matched contributions across a level skilled section of a workforce. What I mean is suppose you have 2no medium skilled operatives doing the same job, each is paid say £30k, one wants to pay just the minimum into the workplace pension the other wants to salary sacrifice a further 10%. If the business matches that increased contribution at any level above the (small but not negligable) saving in employer NI (so if it contributes an extra 5% or 10% too) then the total cost to the business for that employee is higher than for the basic contributor, as is the benefit to the employee higher. Why though, that higher contributing employee is not adding greater value to the business than their colleague, why should they cost the business more, and why should they enjoy greater benefit simply because their wider circumstances mean they have made different choices about how much they are willing to contribute to pensions?

Not that I'm losing any sleep over it, and good luck to anyone offered such a benefit who is able to take advantage of it.   

ewaste

If you’re on this board for any length of time you'll see posts from folk who have employer matching they don't make full use of and you'll also see folk looking to opt-out of pension schemes all together. As for the differing cost of employing people to do more of less the same job that is just the reality of business, especially in the UK where people are generally far more reluctant to talk openly about pay and benefits. Employers offering decent matching contributions will doubtless be taking into account that not everyone will be making full use of it, they also won't exactly put a reminder on every payslip stating "This month you missed out on £62.50 of employer matching, total this year £XXXX" or "If you reduced your take home pay by £50 your employer will contribute an additional £XX to your pension”. I would hope if employers done that, then most employees would realise pretty quickly what they are missing out on and increase their contributions.

The fact your even on the forum asking questions already puts you streets ahead of those who don’t ask any questions or don’t do any planning. When you next go looking for a job, bump the importance of pension provision up the priority list a bit even if the headline pay is lower it’s always worth looking at the overall benefit package on offer.

My current employer offers a Defined Benefit or Defined Contribution pension scheme, the number of people who don’t take up the offer of the DB scheme is frankly depressing and the DC scheme is of course the default. If you want to opt into the DB scheme you need to read the welcome pack and fill in a single A4 form and post it.

Albermarle

Why though, that higher contributing employee is not adding greater value to the business than their colleague, why should they cost the business more, and why should they enjoy greater benefit simply because their wider circumstances mean they have made different choices about how much they are willing to contribute to pensions?

I have often wondered that as well. My company, like many others offer a sliding scale for the DCscheme

3% from employee gets 6% from company. 4% gets 7%; 5% gets 8%; 6% gets maximum 9%

Why does someone paying less get less from the company as well- not logical really . It could be that many will pay the minimum and the company saves money and the more savvy ones who get the max are at least kept reasonably happy. 

MaxiRobriguez

SomeMadeUpName said:

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 😄

 Why though, that higher contributing employee is not adding greater value to the business than their colleague, why should they cost the business more, and why should they enjoy greater benefit simply because their wider circumstances mean they have made different choices about how much they are willing to contribute to pensions?

The business will have many employees on different salaries doing similar jobs. In regards to your specific point they will calculate a liability for each employee up to the maximum match % and if an employee decides it is better for them not to take up that benefit then it is that employees choice.

There will also be other employees (like me) who go far beyond the match contribution (in my case it's 6x as much) which helps the business save on the NI without any further liability. 

Short of it, it's not your concern. Do what is best for you.

hugheskevi

From research on how employers decide how to set pension contribution levels, one of the strongest determinants is the desire to be seen as offering something common within the industrial sector the employer operates within. Few employers want to offer a noticeably worse pension offering, but nor do they want to provide a noticeably better offer. Average pension provision can be significantly different between sectors, with hospitality being very different to sectors such as insurance or banking. There may also be a difference between workers and management.

Employers also want to ensure they are optimising their remuneration package, to offer workers what they want to best attract and retain. Unfortunately it is obvious how little value a very large percentage of individuals place on pensions. Matched contributions are a good way to ensure that the employer is not wasting money on the remuneration part of their reward package for staff members who do not value it.

SomeMadeUpName

Four good posts there all making valid obs on query. I think the most telling factors shining through to me are:

The idea that the business set a remuneration package level for the post assuming full take up of matching, then anything less is a bonus.
&
The point at the end there about matching being a way of motivating those who pay attention to pensions without throwing money at those who don't appreciate its long term value.

I run a workplace pension with about a dozen members at any given time. I not infrequently get emails asking how employees can opt out. I'll give them the info, but it will always come with a brief breakdown of how much more they will get in their pay package each week against the much greater loss of grossed contribution to their pot. Some do it anyway!

CheekyMunkey

xylophone said:

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

Thanks for this.  I  guess I have a week or so to decide if I want to pay in any more as a single payment but Im not sure its worth it now unless I put in shed loads to get some tax relief. I guess I really need to find a better job with a better pension package. Mine is pretty much the minimum as my company is bit like a start up /  mish mash of different companies and staff benefits are not really high on their agenda. 

CheekyMunkey

SomeMadeUpName said:

Four good posts there all making valid obs on query. I think the most telling factors shining through to me are:

The idea that the business set a remuneration package level for the post assuming full take up of matching, then anything less is a bonus.
&
The point at the end there about matching being a way of motivating those who pay attention to pensions without throwing money at those who don't appreciate its long term value.

I run a workplace pension with about a dozen members at any given time. I not infrequently get emails asking how employees can opt out. I'll give them the info, but it will always come with a brief breakdown of how much more they will get in their pay package each week against the much greater loss of grossed contribution to their pot. Some do it anyway!

I think thats the issue. I must admit I didnt really understand pensions well. I remember there was a time where we were told we could pay the 'minimum' if we wanted to opt into that. A lot of people did. However, if we were shown a breakdown of what the various payment amounts would be and the potential future benefit that would have been great. I guess Im not financially illiterate but I dont often think about the longer term impact. Just looking at the shorter term view...Same with buying a home and many other things where I have not done so well with money management. 

Albermarle

and many other things where I have not done so well with money management. 

At least you have made some progress by asking questions and getting answers on here .

With personal finance it is better not to put your head in the sand , like the majority do .

CheekyMunkey

So I've managed to at least track down all of my pensions. So after 20odd years of working with some gaps and some temp jobs I have amassed about 25k in my pension pot. I guess I was expecting at least one of my jobs to have been a lot larger. It wasnt. So I guess that will pay me less than my state pension at this rate.
I really need to get my skates on. Need to workout how much I would want to live on and start working towards it.
I may just have to set up a sipp. My current employer will not increase contributions. I guess I could increase my own but is that a good idea? I saw on the Nest site I could add one off payments or additional payments. Just not sure how beneficial that would be apart from the tax saving.