Please point me in the right direction for the eager but clueless 17 January at 2:56PM in Pensions, annuities & retirement planning 15 replies 1.3K views

Spint

At 51 years old with no pension or career, is it prudent to look for opportunities based on the generosity of a pension scheme? For example, I saw a job advertised (currently beyond my experience and pay grade) within the government's DWP that apparently contributes up to 27% towards your pension. I'm just starting to learn about pensions properly but this amount seems staggering. Of course, I wouldn't be surprised if it turns out to be not as good as it reads but is it still worth basing a job or career at my age on how good the pension scheme is?

Due to a severe lack of confidence throughout my life and feeling like a complete loser for not realising that this was the problem that kept me from achieving anything that resembles an actual career, I find myself almost starting from ground zero. With ageism very much in existence, I'm scared as hell that I might not finally make something of myself with my new found confidence and retire adequately.

I would be profoundly grateful if some of you would kindly take the time to think about and use their wisdom and experience to give me pointers in which direction I could look or strategy I should  know to at least make up for some of the lost time whether it be types of careers or paying your mortgage off first. I realise some of this is not specifically relevant to the pension forum but for me it is all intertwined together where certain areas can affect the other. Maybe I am just looking at this naively but will bow to any wisdom that you can give me. It can be all depressing really but I'm trying to move forward as best as I can with hope.

Thank you very much and hope you can help.

Albermarle

There are  two main types of pension.
A Defined Benefit scheme. This will give you a guaranteed pension income, calculated from how many years you have been in the scheme and your salary level ( the exact calculation method can vary). These schemes are expensive for the employer ( although the employee also makes a smaller contribution) and nowadays are largely confined to public sector jobs ( such as with DWP)
A Defined Contribution scheme. This is just like a glorified savings scheme. You and your employer both contribute. However to build up a decent sized pot, you need a generous employer, or contribute a lot yourself, or both.

So in general a public sector pension is significantly more valuable, and this should be taken into account when looking at employment opportunities/salary levels.

.. I find myself almost starting from ground zero. With ageism very much in existence, 
There is currently a shortage of workers in the jobs market. Concern has been expressed about too many 50 somethings retiring early and there are options being explored to tempt some of them back to work. So probably never a better time to start a new career for a more mature person.

xylophone

The Civil Service/NHS/Local Government are among those organisations still offering  Defined Benefit pensions.

Other employers will offer a Defined Contribution pension.

https://www.gov.uk/employers-workplace-pensions-rules#:~:text=All employers must offer a,government pay into your pension.

While finding work at age 51 may be a challenge, it is not impossible.

Is this of interest?

https://www.ageuk.org.uk/information-advice/work-learning/looking-for-work/

GibbsRule_No3.

You have still a good few years before you get to SP age, so building a second pension by working be it DB, DC or Stakeholder should be attainable. I enrolled in my works Stakeholder about 6 years ago, when I went part time (3 days for 5 years and recently just 2 days), I was going to use it as a "savings account" especially with the Salary Sacrifice alongside the company % and take all of it as a lump sum but I have stayed longer than expected and the sum is now over £30,000 so no longer taking as a direct lump sum, when I do eventually finish. Roughly £15,000 a year pay.  Of course it does mean I'm not eligible for any Pension Credit and all that brings with it, entry to Kew Gardens for £1 springs to mind, so without any other Pensions, I do have them, you might actually be worse off if you start a pension.

Spint

Thank you so much for your reply, that really helped tremendously and saved me a lot of wandering!

If I may be so bold to ask further information? It's now clear that a Defined Benefit scheme is certainly worth pursuing, however, since I only (only!) have about 17 years left before official retirement, can I top up this type of scheme as much as possible? If not and it's not enough, would it be then better for someone at my stage in life to opt out and simply pump as much as possible into a Defined Contribution Scheme or whatever other options are available? Ideally, would I be able to have both types? I'm guessing that one should stick to the Defined Benefit Scheme and pump as much money as possible somewhere else whether another pension or tax saving investment.

Thanks again, I really appreciate this.

I also take note of your point about the job market for the mature person. That is encouraging with a sense of relief and hope.

**EDIT** Just seen two more replies from other members after I posted this. Thank you so much!

MallyGirl

Some DB pensions allow you to build up an extra pot alongside as the contributions to the DB will be fixed according to the rules of the scheme. This would be called AVCs - additional voluntary contributions.
Alternatively you could run a DC pension alongside. Having them separate allows you to do different things with the 2 pensions - such as leaving the DB alone and living off the DC if you retire before the retirement age of the DB.

Moonwolf

The state pension is not to be sniffed at as a starter.  It is worth checking how much you will get.   See here for guidance on checking https://forums.moneysavingexpert.com/discussion/6406767/mse-guide-how-much-state-pension-will-i-get#latest

You can also top up your national insurance payments if you are missing years and this is nearly always very good value.

Then you need to think of your private pension as a top up.  So if you are entitled to the full £10,600 a year, building up a pension of £10K a year by 67, quite doable in 17 years, will give you £20,000 to live on which isn't wealthy but nor is it hand to mouth (depending on your housing costs).

For your DB scheme, you can usually add some to it, but with limits and the employer probably won't add anymore, but there are usually still tax benefits.

Even if you can't add directly you can save into a private defined contribution scheme at the same time, you will still get the tax benefits (with limitations - simply put no more than you earn and a maximum of £40,000 a year in all pensions - there are workarounds and other limits but it sounds like you won't need worry about these for now).  You can then use this flexibly, it would give you more choices in how and when to retire and what trade-offs to make.

On work, there are plenty of jobs in the NHS which has a very good defined benefit pension and where at lower grades the pension contributions from the employee are very low for the value of the benefit.  Whatever your skills there will be a job you can do.

Roger175

Do also note that the big advantage of putting money into a pension scheme is that it is highly efficient in terms of tax. 

Any money you contribute is paid out of net earnings (ie money on which you have already paid tax), so the government will top up the payment by way of tax relief to that of gross earnings. There is lots of information on these boards covering this, but in simple terms, you can make pension contributions (gross contribution), up to the full amount of your annual earnings or £40k max. As a basic rate tax payer, if you contribute £80, then the government will top this up to £100. If you become a higher rate tax payer you can claim the remaining tax back on your tax return. In the case of DC pensions (the savings pot type), when you reach an appropriate age (currently 55, but due to rise), you can then take up to 25% tax free and the rest is taxed at the appropriate rate. If you draw it down slowly you can potentially get it all out without paying tax, but even if you do end up paying some tax, it's still a very advantageous way to save.

With DC type pensions, you typically invest the money whilst it's in the pension, so hopefully it grows significantly before you need it.

DB schemes work differently and don't have a pot as such, you just get paid a pension per year in retirement. These are the type to aim for if at all possible, but apart from the public sector they are very rare.

Brie

I won't repeat all the excellent info provided so far on pensions but just wanted to say you are still a puppy with years of pensions savings ahead so grab what you can with gusto! 

I was in my late 40s when I changed jobs a couple of times looking for a suitable role.  Then at 51 I moved again into a company who were happy to pay 17% into my work pension and I was very happy to take it.  I was almost made redundant 3 times but always found another role, most recently at the age of 60.  Redundancy finally caught up with me at 64 and I made the "executive" decision to find another employer and am happily now working part time and getting a small 6% boost into my NEST pension.  It will never amount to anything much but I figure better in my pocket than someone else's.  

So don't let anyone tell you you're over the hill or any other foolish nonsense.  Opportunities are there for someone who looks for them.

Dazed_and_C0nfused

It's now clear that a Defined Benefit scheme is certainly worth pursuing, however, since I only (only!) have about 17 years left before official retirement, can I top up this type of scheme as much as possible? If not and it's not enough, would it be then better for someone at my stage in life to opt out and simply pump as much as possible into a Defined Contribution Scheme

Opting out of a DB scheme like DWPs to contribute to a DC scheme would almost certainly be a very poor choice financially.

Say you earn £25,000 with DWP.  Each complete year you are in their scheme you will accrue a pension of £580.  Which will be inflation proofed each year.

So after 17 years, even assuming no pay rises and 0% inflation you would have accrued a pension of £9,860.  In reality it would be more.

Add to that the standard new State Pension of £10,600 (rate from April 2023) and you have a pretty good platform for retirement.

£9,860 + £10,600 = £20,460 😊

Brie

If not and it's not enough, would it be then better for someone at my stage in life to opt out and simply pump as much as possible into a Defined Contribution Scheme

No - because you'd be doing all the paying into the scheme.  yes there's the tax breaks you get but you would miss out on the extra that your employer kicks into it as well.  Now I'm assuming that you mean opting out of a work scheme and having just a private pension.  There's nothing wrong with a DC work pension because they will also have the employer paying ££ into to it for your benefit.