Workplace pension

Audrey1969

Hello, advice wanted.
Is it worth restarting my workplace pension at 56? I haven't had 1 for many years, there is about £3000 in it now. If it is worth it, what would I need to add monthly? Thank you.

DE_612183

depends on what you want out of it, and what scheme your employer is in.

Pensions on whole give you a tax free element and also an employer element - so basically it's free money.

Say you put in £100 a month, the tax free amount would be £20 and then your employer would match ( or possibly more your amount ) so thats another £100.

You then have £220 in your pot for £100 outlay.

Audrey1969

Thank you. I avoided it as I could not afford to put money in. Is there a time of year to start it or is it anytime?

Silvertabby

Audrey1969 said:

Thank you. I avoided it as I could not afford to put money in. Is there a time of year to start it or is it anytime?

The sooner the better.

elsien

And as state retirement age is currently 67 that still gives you nine years to build up a better pot. 

LHW99

Bear in mind also, that contributions are limited to your gross salary (or £60k if that is less) pa

Exodi

While it depends on the scheme, to do a fuller comparison to a basic relief at source workplace scheme:

OP contributes £100 a month from their pay.

£100 is added to their pension pot then basic rate tax relief is automatically applied bringing the amount up to £125. The employer then adds their match of £100 to make £225.

The OP can then take 25% of this £225 tax free in retirement (£56.25) and the rest (£168.75) will be taxable. If we assume the OP would pay basic rate tax taking out the £168.75, they'd lose £33.75 to tax, but receive £190.25 in their bank (including the tax free element).

In comparison, if the OP is paid the £100 in their normal wages, assuming they are a basic rate tax payer, they would lose 20% in income tax (£20), and 8% in NI (£8), meaning they would receive £72 in their bank.

As you can see, from the same £100, you could receive £190.25 in your pocket by putting it into your pension and drawing from it when you retire, or £72.00 being paid it in your pay packet.

The numbers get even more ridiculous if you are currently a 40% tax payer, or you have access to salary sacrifice and can save on NI or benefit from the employer NI saving.

NB: To keep it simple, I haven't included in the negligible fees of holding the money in a pension pot , but likewise I also haven't included any potential growth of the funds.

Audrey1969 said:

Thank you. I avoided it as I could not afford to put money in. Is there a time of year to start it or is it anytime?

The best time to start was yesterday, the second best time is today.

Robin9

Have you had a State Pension Forecast ?   Any missing years ?

Albermarle

Silvertabby said:

Audrey1969 said:

Thank you. I avoided it as I could not afford to put money in. Is there a time of year to start it or is it anytime?

The sooner the better.

With as much as you can afford, as you have left it very late.

Audrey1969

No missing years in the pension. 

kimwp

How much will you need a year in retirement and what other income do you expect to have?