Ideas for saving for retirement

Albermarle

Cecily40815 said:

Sorry it's taken me a while to come back to this.My gross salary is £26k. 

I pay into a NEST pension. I pay in 6% and my employer pays 8%.

I hope this helps!

Thanks

So to go back to your original question 'Can anyone give me any ideas on how to use my savings to boost my pension income? 

The most obvious and simple answer is to use some of your current savings ( keep some for emergencies ) to fund your day to day spending and increase your Nest pension contributions from salary as much as possible.
Or alternatively pay a lump sum(s) direct to Nest from your savings . 

To be sure of the best route you need to find out how your current contributions are made. Do they come out of your salary after tax ? If so you should see in your Nest pension the tax relief being added on .

Cecily40815

I pay as much as I can into the Nest pension. However, I have been told it's not that great a pension scheme, plus I would like to invest my savings in the most useful way possible towards retirement.

Does anyone have any ideas on that please?

arnoldy

Open a low cost SIPP, eg Halifax at £90/yr, Feed your savings into the SIPP whilst retaining a cash emergency fund of 6 months to a year salary. Put as much extra savings on top of that as you can manage* and get the 25% tax free on the way into the wrapper, Invest in a basket of FTSE All Shares - but skewed to FTSE250, Small cap and AIM as these are likely to outperform. Use low cost trackers if you want instead eg LG or HSBC. Your charges will be low and have a look at at the historical Total Returns for the various indexes - they are are quite impressive and give you some confidence (no guarantee) that you will do well over the 10 yr + accumulation phase.

You will then have flexibility between NEST, State Pension, SIPP and even work (full or part time) to withdraw income as you need in a very tax and NI efficient manner. Depending on your views and health you can then also play tunes with deferring, or not, your state pension too.

*you can not put in more than your taxable income each year.

tebbins

arnoldy said:

Open a low cost SIPP, eg Halifax at £90/yr, Feed you savings into the SIPP whilst retaining a cash emergency fund of 6 months to a year salary. Put as much extra savings on top of that as you can manage* and get the 25% tax free on the way into the wrapper, Invest in a basket of FTSE All Shares - but skewed to FTSE250, Small cap and AIM as these are likely to outperform. Use low cost trackers if you want instead eg LG or HSBC. Your charges will be low and have a look at at the historical Total Returns for the various indexes - they are are quite impressive and give you some confidence (no guarantee) that you will do well over the 10 yr + accumulation phase.

You will then have flexibility between NEST, State Pension, SIPP and even work (full or part time) to withdraw income as you need in a very tax and NI efficient manner. Depending on your views and health you can then also play tunes with deferring, or not, your state pension too.

^you can not put in more than your taxable income each year.

For small amounts, £90/year vs making additional contributions to NEST may not be economical (https://www.nestpensions.org.uk/schemeweb/memberhelpcentre/contributions/make-additional-contributions.html). NEST charge 1.8% of contributions on the way in but the 0.3% annual management charge is competitive vs a number of SIPP platforms and funds.
It may not be appropriate for the OP to cram all of their spare savings into a pension wrapper. They may want a healthier sum of spare cash available.
The OP is asking for simple advice about retirement income. Suggesting they engage in buying individual shares is not appropriate, let alone a 100% UK equity portfolio, or focusing on smaller caps or AIM-listed stocks. Also, what are you basing your assertion that they are likely to outperform in future on besides historical returns?

xylophone

You  might consider opening a personal pension - you could contribute to this as well as to your workplace pension.

https://www.which.co.uk/money/pensions-and-retirement/personal-pensions/contributing-to-a-private-pension-explained/tax-relief-on-pension-contributions-explained-a27f53z7qg3f

 
Example

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

If you do not wish to choose your own funds, you could select  a Target Retirement Fund.

You could consider starting off with a lump sum contribution from your savings  and then make regular contributions thereafter.

You earn £26,000 a year and your contributions to you workplace pension are a very long way short of this figure so that you have considerable scope to contribute to a personal pension.

Cecily40815

I'm unsure whether I am better off paying more into my employer NEST pension, or starting a SIPP. What do people think about this please?

Thanks

jimjames

Cecily40815 said:

I'm unsure whether I am better off paying more into my employer NEST pension, or starting a SIPP. What do people think about this please?

Thanks

It really depends on the charges between the 2 options and you need to do a comparison to check that. Vanguard charge 0.15% plus the fund charges for example, how does that compare to NEST?  Can you pay a lump sum into NEST? If not then that would be something to consider as the sooner you get that lump sum invested the more time it has to grow. Paying in monthly instead will take a while to reach that amount.

You also have an option of a S&S ISA where all the income is tax free but you don't get tax relief on the way in. If you only have a small pension due that may not be an issue but if you would be paying tax then it can be a way to reduce that.

Albermarle

Cecily40815 said:

I'm unsure whether I am better off paying more into my employer NEST pension, or starting a SIPP. What do people think about this please?

Thanks

A SIPP would give you a lot more choice of investments ( thousands ) and needs a bit more hands on managing.
For most people the simplicity of Nest is actually an advantage .
For sure having a huge choice of investments does not necessarily mean you make better returns .

If you like you can have a good look around the larger SIPP provider websites without having an account with them .

El_Torro

Seeing as you’re mortgage free one option would be to take out a (small) mortgage and invest the cash into a SIPP, your Nest pension, or even an ISA.

This doesn’t come without risk, but if you’re looking for your money to go further this is certainly one option. Mortgage interest rates are so low you’ll almost certainly (though not 100% certain) have made a profit after being invested for 10 years or more. 

I would take out a repayment mortgage and ensure it’s paid off by the time you plan to retire.