48 & No Pension Plans

kimwp

Please don't breed kittens in garages!

Albermarle

I am more trying to find out if I put £250/300 a month away on a pension scheme will it make much difference.

£300 + basic rate tax relief = £375 X 12 = £4,500 X 15 years = £54,000 + 12 years of 2 % investment growth ( in real terms ) = nearly £70K .

My NI all paid and will get £221 a week if continuing the way I am via state pension.
I have £2900 via Nest which I assume wont contribute much

For comparison if you were to put a monetary value on the state pension, it would be not far off Quarter of a Million Pounds ( a lot of the cost is that it goes up every year with inflation). So you can see that in pension terms £2,900 is almost nothing. If you do have 2.5 years in the CS pension it will be worth a lot more than £2,900. 

kimwp

But in order for the question to be answered, you need to know how much you want to spend each year in retirement. Your current spend is a good starting point to understand what this is likely to be. Then you think about whether you will still have a mortgage, will your entertainment costs increase because you'll have more time etc?

At that point you can do some forecasts of your likely pension and figure out of that is enough or how much more you need.

dunstonh

2.5 years should have qualified for a civil service pension.   What employment does this NEST pension come from?  (I assume it isn't your limited company as you generally wouldn't use a company like NEST for that).

As a limited company owner, you would make contributions from the limited company. Not personally.   That is for tax reasons.     So an "employers" contribution to an individual personal pension would be fine.  

You have a lifestyle based on £50k of earnings.     You have a retirement plan currently of £20k earnings from 2x state pensions.    So, that gap needs to be closed up otherwise you are looking at needing to work longer or suffer a reduction in lifestyle.

Only one thing will make that better.   Paying money towards it.    Where you do it, how you invest is important but the single biggest difference is the amount you put you aside.

Info_Hunter1976

We have 2 limited companies. We pay a payroll company to do our and our employees wages. It is Nest that this is enrolled to

Info_Hunter1976

Albermarle said:

I am more trying to find out if I put £250/300 a month away on a pension scheme will it make much difference.

£300 + basic rate tax relief = £375 X 12 = £4,500 X 15 years = £54,000 + 12 years of 2 % investment growth ( in real terms ) = nearly £70K .

My NI all paid and will get £221 a week if continuing the way I am via state pension.
I have £2900 via Nest which I assume wont contribute much

For comparison if you were to put a monetary value on the state pension, it would be not far off Quarter of a Million Pounds ( a lot of the cost is that it goes up every year with inflation). So you can see that in pension terms £2,900 is almost nothing. If you do have 2.5 years in the CS pension it will be worth a lot more than £2,900. 

So is it worth putting say £300 away each month or will this not make a difference? For example our state pensions will be £442 weekly by the way they are forecasting it. I am not sure how much this would add on each month

dunstonh

Info_Hunter1976 said:

We have 2 limited companies. We pay a payroll company to do our and our employees wages. It is Nest that this is enrolled to

The directors do not normally join the employee scheme.    There is no requirement to do so, and when the directors want to pay into the pension, they usually want something a bit better.   I hope you haven't set your contributions up like your employees.  That would be wasteful.

So is it worth putting say £300 away each month or will this not make a difference? 

It will make a difference but it won't fill the gap much.

£300 company contribution gets corporate tax relief.    If your profit is above £50k, then that saves 26.5% corporation tax.  £3600 x 26.5% = £954 corporation tax relief.   You haven't drawn it out of the company.  So, that saves 8.75% dividend tax (assuming basic rate).

So, in reality,  You are paying closer to £200pm net of tax.   

£300pm gross is ticking a box to say you have done something.  Thats all.  It will make you feel better for doing it but in reality, it doesn't do any harm but it isn't solving your problem.
 
Over 20 years, that is £72,000 paid in.   

You are earning £50k.   Take £20k off for state pension and that leaves you £30kp.a. short.    Take off £10k for expenditure you will no longer have in retirement and that leaves you needing £20k a year to maintain lifestyle.      So, your £72k saved will get you about 6-7 years worth of shortfall.     You can adjust the figures to suit rather than me using assumptions.

kimwp

dunstonh said:

Info_Hunter1976 said:

We have 2 limited companies. We pay a payroll company to do our and our employees wages. It is Nest that this is enrolled to

The directors do not normally join the employee scheme.    There is no requirement to do so, and when the directors want to pay into the pension, they usually want something a bit better.   I hope you haven't set your contributions up like your employees.  That would be wasteful.

So is it worth putting say £300 away each month or will this not make a difference? 

It will make a difference but it won't fill the gap much.

£300 company contribution gets corporate tax relief.    If your profit is above £50k, then that saves 26.5% corporation tax.  £3600 x 26.5% = £954 corporation tax relief.   You haven't drawn it out of the company.  So, that saves 8.75% dividend tax (assuming basic rate).

So, in reality,  You are paying closer to £200pm net of tax.   

£300pm gross is ticking a box to say you have done something.  Thats all.  It will make you feel better for doing it but in reality, it doesn't do any harm but it isn't solving your problem.
 
Over 20 years, that is £72,000 paid in.   

You are earning £50k.   Take £20k off for state pension and that leaves you £30kp.a. short.    Take off £10k for expenditure you will no longer have in retirement and that leaves you needing £20k a year to maintain lifestyle.      So, your £72k saved will get you about 6-7 years worth of shortfall.     You can adjust the figures to suit rather than me using assumptions.

@dunstonh, may I ask what the calculation is to get 6-7 years of £20k from £72k? (Always interested in calculations related to "the number".)

BlackKnightMonty

You need to be putting money aside either into a Stocks & Shares ISA or your pension. 

I have a NEST pension. I recommend considering switching from the default fund. I am in the Sharia fund. The performance has been way better. It takes five minutes to switch.

Yes past performance does not indicate future performance blah blah. Seriously check out the Sharia Fund!

https://markets.ft.com/data/funds/tearsheet/performance?s=GB00BFZNFH05:GBP

xylophone

Time to trace your deferred CS pension?

https://www.civilservicepensionscheme.org.uk/your-pension/managing-your-pension/finding-your-unclaimed-pension/