Pension when unemployed. Is it worth paying into an SIPP and how much?

Jacline81

Hi I have family paying into my existing Nest pension but I hear a) this plan is expensive b)any pension income will reduce the amount of UC my partner and I receive at retirement age. I'd like to know how much I need to pay per month to ensure my pension income is worth losing UC money per month so maybe an annual income of £20,000 per year including my state pension which am on track for. some details are: I'm 43, have £39,000 in an old job pension Scottish Widows, and have £4500 in Nest currently. Family pay £100 per month which I'd like to add to by £50 as and when I can per month. thanks for any help.

molerat

You are limited to what you can pay into a pension. You can pay in up to your earned income or £3600 gross.  With no earned income you would be limited to £2880 per year net, the pension provider adds £720 tax reclaim to make up to £3600. As you are currently contributing £1200 you can only add another £1680 or £140 per month.  What will happen once at pension age is one for the benefits board as I believe UC is a working age benefit and pension credit will come into play which will look at your overall income, a "full" SP would preclude you from that particular benefit and all its add ons.

Marcon

Jacline81 said:

Hi I have family paying into my existing Nest pension but I hear a) this plan is expensive b)any pension income will reduce the amount of UC my partner and I receive at retirement age. I'd like to know how much I need to pay per month to ensure my pension income is worth losing UC money per month so maybe an annual income of £20,000 per year including my state pension which am on track for. some details are: I'm 43, have £39,000 in an old job pension Scottish Widows, and have £4500 in Nest currently. Family pay £100 per month which I'd like to add to by £50 as and when I can per month. thanks for any help.

Nobody can predict what the position will be 20+ years on, either in terms of what your pension might be worth or whether UC/pension credit will still exist - and what the limits might be.

Unless you are likely to be unemployed for another 20 years (ditto your partner) - and I trust not - then saving into a pension makes sense. Limit while you have no earnings is outlined in the previous answer.

NEST has an 'initial contribution charge' of 1.8%, which is extremely rare these days. Annual charge is 0.3% which is good, but other schemes can match - or in some cases - beat that.

SVaz

So for around £6000 a year income you will need £120-150000 in your pension pot at retirement.
24 years of £3600 going in plus your other pensions plus say a conservative 3%  growth = £220000.