Pension pot tiny at 52

Pocketmoths

Hi - I’ve had some rubbish years, raising disabled kids, taking redundancy and basically any money we’ve had has gone on the house, bills, illness despite earning decent ish (I earn £29k). Still a mortgage on a tiny 4 bed. can’t downsize (it’s not worth a lot, south east, kids all live here). Husband is 65 and I can’t change how he spends money so I’m worrying from my point of view. 

I have a private pension which only has £28k in it. Any calculations I’ve done indicate I need to pay in £20k a year to get £14,000 a year in retirement. That’s impossible. 

I have a work pension (only two years in). I could ask if they will contribute more. I don’t really understand the AVC or other option to buy more but could try this.

I have some debt I should clear in three years. 

I have about £1500 in a shares ISA. 

Is it best to just put as much as possible in the ISA at this stage? I could use the low risk option. 

kimwp

AVCs are where you put more into your pension.

Are you including the state pension in your calculation regarding the £14,000? 

How have you arrived at £14,000 as your figure?

Pocketmoths

Hi so using money helper my pension (private) will be £2913 per annum if I put £250 a month in from now to age 67. Any extra would be via state pension, of £11973. I’ve checked my state pension and I should get the maximum and I can’t make any additional payments to it. 

LHW99

Pension (especially work pension) usually tops ISA for several reasons:

1) you get tax relief from the government - so £100 in from you means £125 in the pot

2) in a work pension your employer has to pay in a minimum amount depening on your salary

3) when you take it, 25% of the pot is tax free. You don't have to take that in one go, you could use "UFPLS" where for each £1000 you take out, only £750 would be taxable, and only taxable if your other income is above the personal allowance.

What sort of pension are you contributing to at work? Is it DC (pot of money) or DB (building up an amount per annum related to your wage)?

Why not have a look at https://www.moneyhelper.org.uk/en

It's free, and very helpful on basic stuff.

dunstonh

I have a work pension (only two years in). I could ask if they will contribute more. I don’t really understand the AVC or other option to buy more but could try this.

An AVC is an additional plan that sits alongside an occupational pension.  Usually a defined benefit pension.   You don't see AVCs sitting alongside defined contribution plans or auto-enrolment pensions as they can handle any increase in contributions that you want to do without the need for an AVC.   

Nowadays, its mainly public sector pensions that offer AVCs.  However, you mention yours has a fund value.  So, that would suggest an AVC is not available to you.   

Pocketmoths

I don’t understand my work one. It’s public sector but only two years in. My other one I’ve moved a couple of times which in hindsight was daft but I originally moved it into nest which was my then work one, and then I moved it all to a different one to make it easier to see. So I had a private one (pot of £28000) and an auto enrolled work one. 

kimwp

I'm really struggling to understand your maths. You say you want £14000, of which 11,973 will be provided by state pension, leaving about £2000 a year to fund and if you put in £250 a month, you will get nearly £3000 a year. Where is the £20k per year figure coming from?

dunstonh

I don’t understand my work one. It’s public sector but only two years in.

Can you name which public sector pension it is?  The majority are not based on invesmtent values but time in service.   

So I had a private one (pot of £28000) and an auto enrolled work one. 

The public sector pensions are  not auto-enrolment schemes. They are far more valuable to you than that.    You should be receiving or have access to, via their website, an annual pension benefits statement telling you what you have accrued to date and/or what you are on track to get if you stay working with them until scheme age.

Many of the public sector pensions have other options, and not just AVC, and some of those other options are also very attractive in their terms.

Pocketmoths

kimwp said:

I'm really struggling to understand your maths. You say you want £14000, of which 11,973 will be provided by state pension, leaving about £2000 a year to fund and if you put in £250 a month, you will get nearly £3000 a year. Where is the £20k per year figure coming from?

Sorry. I think on money helper if I wanted to achieve £20,000 a year I needed to get a pot to top up the state pension and achieving the £6000 extra was too much in contributions.  

Pocketmoths

It’s a local council one. It sounds like contributing to that might be better. I will find the details and try to log in. I’m only now having any breathing space to look forward. 

kempiejon

Pocketmoths said:

It’s a local council one. It sounds like contributing to that might be better. I will find the details and try to log in. I’m only now having any breathing space to look forward. 

I think spending some time understanding your council pension and private pension might be beneficial. I'd guess you don't know where the private pension is invested what it's costs and performances have been so it sounds like you don't quiet understand what you have. Then once you've got a handle on potential incomes looking out outgoings is a valuable exercise.
Debts mentioned would be my priority. You said you've spent money on the house but still have a mortgage and can't access that capital via a downsize anyhow. A cash pot of a year of expenditure before ramping up pension and other investments.