Tiny pot panic

cod3

First time on the pension board.  Please be gentle 

I am a 57 year old single female.  I have just looked at my workplace pension pot (Nest) and there is £8,200 in there    This is my only pension pot and I am mortified to even tell you this!  I currently work full time earning £30k gross.  The contributions are:  Me 4% of gross wage + tax relief boost 1% + employer 3% of gross wage.  My questions are:

1 - Is it worth throwing any available money at the workplace pension pot now to benefit from the tax relief boost even at this late stage?
I don't have a brain for stocks & shares and am pretty risk averse. 

2 - Even if I don't work or live until I am 67, the pot would still pass to my children eventually - correct?

3 - Would I still receive the tax relief boost if I paid directly to Nest rather than going through the payroll?
My boss is very nosy and doesn't need to know all my business.

I have just finished paying off my mortgage early and am debt free.  I live frugally anyway so am not requiring a luxury retirement (just as well! )
It is predicted that I will receive the full state pension.  I currently receive a CS pension of £4.8k gross per annum until I die.  My emergency fund is currently £6k. I'm not interested in downsizing/moving home if I can avoid it.

Thanks in advance for any thoughts on this.

DE_612183

I think Nest change you if you make additional payments - maybe worth while setting up a new one for this.

official_Grant

cod3 said:

First time on the pension board.  Please be gentle 

I am a 57 year old single female.  I have just looked at my workplace pension pot (Nest) and there is £8,200 in there    This is my only pension pot and I am mortified to even tell you this!  I currently work full time earning £30k gross.  The contributions are:  Me 4% of gross wage + tax relief boost 1% + employer 3% of gross wage.  My questions are:

1 - Is it worth throwing any available money at the workplace pension pot now to benefit from the tax relief boost even at this late stage?
I don't have a brain for stocks & shares and am pretty risk averse. 

2 - Even if I don't work or live until I am 67, the pot would still pass to my children eventually - correct?

3 - Would I still receive the tax relief boost if I paid directly to Nest rather than going through the payroll?
My boss is very nosy and doesn't need to know all my business.

I have just finished paying off my mortgage early and am debt free.  I live frugally anyway so am not requiring a luxury retirement (just as well! )
It is predicted that I will receive the full state pension.  I currently receive a CS pension of £4.8k gross per annum until I die.  My emergency fund is currently £6k. I'm not interested in downsizing/moving home if I can avoid it.

Thanks in advance for any thoughts on this.

Hi Cod 3, 

1 - yes, something is better than nothing. And if you can afford to make extra pension savings, these will build up and always be available during your life. If you consider a 10 year plan to coincide with your state pension age, that is a meaningful amount of time to build up a fund that will provide additional retirement provision over and above state & civil service pension. 
1b - with regards to being risk averse, very few people will look back at a 10 year investment plan and wish they had been more cautious - investment markets have far more good years, than bad. 
Inflation will eat away at a cautious or non-invested fund, so it's best to probably at least roll the dice on this a little and ensure equity exposure. A balanced fund would be 50% to 60% equities, an adventurous up to 80%. 

2 - absolutely. Any fund left in the pot when you die will pass to your named beneficiaries. If you were to die pre 75, this would be completely tax free to them. Post 75, it would be taxed as income - but reasonably easy to access a product that would allow them to draw it gradually, rather than paying a load of income tax on receipt of the full fund, if you were worried about that as you were approaching 75. 

3 - In theory you would and should. However NEST is set up as an employer scheme so I will admit I have no knowledge if they will deal with a member directly like this rather than going through payroll. Worst case scenario is you could set up your own personal pension online that should be low cost and provide you with a range of fund options. This should cost no more than 1% per year, with cheaper 'tracker' funds usually able to bring the cost down. In theory this could be 'your' pot that you could move your NEST fund into when you retire / stop working. 

Audaxer

It's a no-brainer to pay in as much from you can to a pension. You can open a separate SIPP if you like and get 25% tax relief added to what you put in, even if you keep it in cash. If investing it, you could consider an easy to understand, globally diversified multi asset fund, such as one of the Vanguard Life Strategy funds or HSBC Global Strategy funds, which are discussed quite a lot on here. There are ranges of these funds at various risk levels.

It's a pity you are actually taking your CS pension, as presumably you took it at a reduced rate as you are 57. It would have been better if you could have left it until you were 60, although I appreciate you may have needed it.

xylophone

I currently receive a CS pension of £4.8k gross per annum until I die.

Inflation linked - that's good.

New State Pension - currently yearly increase of at least 2.5% - CPI inflation if higher or (from 2023) earnings if higher.  Also good.

Re voluntary contributions to NEST see

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

Yes, you receive the tax relief - see link above.

The alternative would be to open a personal pension for your additional contributions.

One possibility to consider would be Vanguard.

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

You say that you are an inexperienced investor -  using the Target Retirement Funds option might suit?

Re death benefits

https://www.pensionbee.com/pensions-explained/pension-rules/pension-rules-after-death#:~:text=Defined contribution pensions,-The main pension&text=If you die before your,used to purchase an annuity.

cod3

Thank you all    I will look into a SIPP with Vanguard or HSBC as an additional pot.  A while back my boss's personal financial adviser was in the office waiting to see him.  I asked what he thought of Nest and he said he didn't rate it     I have started to look into this since paying off the mortgage last month and tbh my brain gets tied in knots reading about pensions.  At least now I have more of a targeted idea of what I should be looking for   

I have set up an additional Bank of Scotland Vantage current account so will keep my emergency fund in there for instant access and up to 1.5% interest, which is apparently a good rate these days. Will keep a couple of grand in the Premium Bonds (still optimistic!) and the rest can go into a new SIPP or two.  Better to have more to spread any risk I am guessing.

Audaxer

cod3 said:

Thank you all    I will look into a SIPP with Vanguard or HSBC as an additional pot.  A while back my boss's personal financial adviser was in the office waiting to see him.  I asked what he thought of Nest and he said he didn't rate it     I have started to look into this since paying off the mortgage last month and tbh my brain gets tied in knots reading about pensions.  At least now I have more of a targeted idea of what I should be looking for   

I have set up an additional Bank of Scotland Vantage current account so will keep my emergency fund in there for instant access and up to 1.5% interest, which is apparently a good rate these days. Will keep a couple of grand in the Premium Bonds (still optimistic!) and the rest can go into a new SIPP or two.  Better to have more to spread any risk I am guessing.

The SIPP is only the wrapper that contains the investments, so you can have the one SIPP with any number of different investments. For example you could have a SIPP with the Hargreaves Lansdown, or most other platforms, with investments in both Vanguard and HSBC multi asset funds if you wanted. However with a Vanguard SIPP you are restricted to Vanguard funds, although for a relatively small sum, one globally diversified multi asset fund is really all you need.

Have a look through Monevator - Make more money, invest profitably, retire early which is a good site for learning about starting off investing.

Kim1965

At 67 you have nearly 15k fully indexed pension, coukd you live on that?
 If no, saving money in a sipp is a must, if yes extra savings give you the option of retiring early.
 Sounds like with themortgage paid off you have spare money, may aswell save in a sipp and get the tax lift. 

cod3

Thanks @Audaxer for clearing that up.  I think I am getting the hang of this now.  Still so much to read.

cod3

Kim1965 said:

At 67 you have nearly 15k fully indexed pension, coukd you live on that?
 If no, saving money in a sipp is a must, if yes extra savings give you the option of retiring early.
 Sounds like with themortgage paid off you have spare money, may aswell save in a sipp and get the tax lift. 

On paper, yes.  Thinking more about it, maybe not.  I am so used to doing DIY/maintenance myself, but now struggle with stamina and guess that this will get worse.  A couple of men came to my door last month and asked if they could cut my big hedges and I said yes (for the first time).  I can see this kind of thing being an expense in my future that I had not previously considered.  The house is getting older too.

Taking advantage of the tax lift seems irresistible.  I am in the intermediate 21% Scottish tax bracket so that is another thing for me to look into.

Dazed_and_C0nfused

cod3 said:

Kim1965 said:

At 67 you have nearly 15k fully indexed pension, coukd you live on that?
 If no, saving money in a sipp is a must, if yes extra savings give you the option of retiring early.
 Sounds like with themortgage paid off you have spare money, may aswell save in a sipp and get the tax lift. 

On paper, yes.  Thinking more about it, maybe not.  I am so used to doing DIY/maintenance myself, but now struggle with stamina and guess that this will get worse.  A couple of men came to my door last month and asked if they could cut my big hedges and I said yes (for the first time).  I can see this kind of thing being an expense in my future that I had not previously considered.  The house is getting older too.

Taking advantage of the tax lift seems irresistible.  I am in the intermediate 21% Scottish tax bracket so that is another thing for me to look into.

You will only get the basic rate tax relief added by the pension company, for example you pay £1,000 and they add £250, courtesy of HMRC giving you a fund of £1,250.

But the gross contribution increases your basic rate band by £1,250 so you could potentially get a further £12.50 in tax relief from HMRC if you pay sufficient intermediate rate tax.  This comes back to you, it doesn't get added to your pension fund.