Should I buy more pension

ManicBisom

I wonder if someone can advise me.

I'm £61, earning £39k but I have only accrued about £7,000 on my LGPS to date through automatic sign up.

I have a bit of spare cash each month. Is it worth buying extra pension?

My employer won't contribute any extra.

If I buy £1000 a year extra pension - it will cost me £400 per month for 4 years.

By my maths, it's costing a lot for a little return (depending on how long I live

What would you do?

Albermarle

£400 per month for 4 years = £19,200 

To buy a £1000 per year pension fully linked to inflation and with spousal benefit on death ,in the open market ( an annuity ) at age 65 would today cost getting on for £30K .

The key point that you are probably missing is in bold. 

Also ( not sure about this bit) it will probably not cost you £400 per month due to tax relief on pension contributions) 

r6mile

Does your scheme offer an option for "salary sacrifice" AVCs? (I think otherwise called Shared Cost AVCs or AVC Wise?). If so this is might a decent option worth exploring, as you will not only get 20% tax relief on your contributions, but also not pay 12% National Insurance (so £100 in the pension actually only costs you £68). In addition you can take the whole AVC as a tax-free lump sum.

You would not be buying added monthly pension, but rather a separate Defined Contribution pot - but the terms in LGPS are better than what you get with other public sector AVC schemes (ie Civil Service).

QrizB

ManicBisom said:

I wonder if someone can advise me.

I'm £61, earning £39k but I have only accrued about £7,000 on my LGPS to date through automatic sign up.

What's the LGPS accrual rate, 1/49th? So each year you are adding almost £800/yr to your pension.

If you wourk to 67, that's £4800/yr so a pension of £11.8k/yr.

Add in your state pension (and do check your forecast) and you'll have about £22k/yr in retirement, all index-linked.

ManicBisom said:

What would you do?

How much income do you think you will need in retirement? More than £22k per year? How much more?

Dazed_and_C0nfused

ManicBisom said:

I wonder if someone can advise me.

I'm £61, earning £39k but I have only accrued about £7,000 on my LGPS to date through automatic sign up.

I have a bit of spare cash each month. Is it worth buying extra pension?

My employer won't contribute any extra.

If I buy £1000 a year extra pension - it will cost me £400 per month for 4 years.

By my maths, it's costing a lot for a little return (depending on how long I live

What would you do?

Is that the actual net pay contribution or after factoring in the reduced tax you will likely be paying?

If it's the actual amount of your increased contribution and you are currently paying basic rate tax on (at least) £400/month then the real cost will only be £320/month.

So instead of £19,200 the real cost is only going to be £15,360.