Top up pension or play safe with fixed rate bond

davefrombristol

Hi

 I am one year away from being able to collect my state pension.  I have a pension pot only worth approx £14,000 with nest and a mediocre job where my employers contributions are only 3% the bare minimum.  Employer wont match or increase his contributions so no benefit there !

 I have around £30,000 that I was going to put into a 1 year fixed rate bond at 4.5% and play safe but would I be better off adding all or most to my pension pot over the next year ?

 Nest annoyingly charge 1.8% for contributions so that percentage would be lost immediately. 25% of what I put in could come back as tax free once I hit pension age though ( Sep 2026 ) 

 How can I weigh up the pros and cons of adding as much as I can to my pension pot against the safety of 4.5% fixed ? any advice would be gratefully received. Thanks

Dazed_and_C0nfused

davefrombristol said:

Hi

 I am one year away from being able to collect my state pension.  I have a pension pot only worth approx £14,000 with nest and a mediocre job where my employers contributions are only 3% the bare minimum.  Employer wont match or increase his contributions so no benefit there !

 I have around £30,000 that I was going to put into a 1 year fixed rate bond at 4.5% and play safe but would I be better off adding all or most to my pension pot over the next year ?

 Nest annoyingly charge 1.8% for contributions so that percentage would be lost immediately. 25% of what I put in could come back as tax free once I hit pension age though ( Sep 2026 ) 

 How can I weigh up the pros and cons of adding as much as I can to my pension pot against the safety of 4.5% fixed ? any advice would be gratefully received. Thanks

Well you don't need to use Nest, you could open a separate pension to add your own funds to.

davefrombristol

Any idea which Pension companies would be a good bet and what their fees are 

QrizB

There's a table here, to get you started:

https://moneytothemasses.com/saving-for-your-future/pensions/the-best-cheapest-sipps-low-cost-diy-pensions

I'm sure peope will be along in a minute to tell you their favourites.

My workplace pension is with Scottish Widows, but my personal one is currently with Dodl - was previously with Vanguard. Fees for Dodl and Vanguard are pretty similar for your £30k investment.

Just to check - how much do you expect to earn in your job this year? At least £37500?

davefrombristol

Thanks for the advice, I'm on around £30,000 per annum in wages, no danger of hitting 40% tax bracket anytime soon, maxed out ISA allowance, Is it a no brainer to put as much as I can into a pension pot whether it be nest or not for a return likely to be much higher than 4.5%  In the current climate with government upheavals are pensions in danger of taking a turn for the worse ?

QrizB

davefrombristol said:

Thanks for the advice, I'm on around £30,000 per annum in wages, 

OK, so if you're earning £30k pa after deductions for pensions etc. but before tax and NI, you'll only be able to pay £24k into your pension (before tax relief).

davefrombristol

How about previous tax years ?  are they now history and I'm stuck with around £24000 this tax year and with regards next tax year 26/27 I will only be working April - Sep so I'm limited to around £12000 next tax year then ?

QrizB

davefrombristol said:

How about previous tax years ?  are they now history and I'm stuck with around £24000 this tax year and with regards next tax year 26/27 I will only be working April - Sep so I'm limited to around £12000 next tax year then ?

If you were earning more than £60k you could carry forward your allowance, but you'd still be limited to your earnings. There's no carry forward of earnings, only of allowances. Sorry.

davefrombristol

How about last year 24/25 My earnings would have been just under £30,000 and my contributions would have been the standard 5% work based pension with nest ( been with nest for around 6-7 years ) am I not able to use any of last years allowance ? or is it lost for good 

QrizB

Lost for good, alas.

ali_bear

davefrombristol said:

Thanks for the advice, I'm on around £30,000 per annum in wages, no danger of hitting 40% tax bracket anytime soon, maxed out ISA allowance, Is it a no brainer to put as much as I can into a pension pot whether it be nest or not for a return likely to be much higher than 4.5%  In the current climate with government upheavals are pensions in danger of taking a turn for the worse ?

As long as you don't need the money until retirement, then yes it works out better to put that into a pension of some sort. 

Don't worry about the alarmist headlines about the government, they still want everyone to save for their retirements, they will continue to incentivise it through the tax system.