Pension or savings?

bluepanda123

Hi all

I am 42yrs old and due to long-term illness have no savings or pension (except the state pension). I am now in a position to start something for an income/funds after I retire.
I have about £200 in a ‘people’s pension’ which is from an old job. They charge £6.50 a year and take 0.5% of my pension pot anually. It has been set at 85% investment in shares, last year it made £40, the previous two years it only made £15. I could change it down to 65% in investments instead.

(My partner has a university pension which will pay a percentage of the average of the last 3yrs of his salary, which currently looks at being about £28,000 a year pension once retired. He is 51 yrs old, doubt he will fully retire at 67 and perhaps continue to earn up £10,000 a year).

I suppose my question is - do I start a pension or a savings account? Would continuing with my ‘people’s pension’ be a good choice? I have tried to research into this but the options/choices are far greater than I imagined and I quickly discovered that I am out of my depth!

Thank you in advance for any advice, it will be greatly appreciated

eskbanker

Pensions are better for financing retirement, as this is what they're intended for, and hence the tax advantages.

If you're employed, then chances are that contributions to your employer's scheme will be beneficial, but if you're not employed then the annual contribution allowance into a standalone pension, such as a SIPP, will be fairly modest.

Applesarefree

I'm no expert but you are only 42 and so have time to move it investments with a little more risk but potentially more reward over a number of decades.

Brie

If you are on any sort of income related benefits then if you put money into savings you may be limited in the total amount you can save. As I understand it this doesn't happen if you put money into a pension. As for the people's pension - £6.50 a year on £200 plus the .5% seems high for fees. The £6.50 is more than 3% whereas other pension providers would likely be charging 1 - 2%. Obviously the £6.50 would be minor if you had £200k there but you don't so I'd be looking at where else might be better for someone with a small pension pot and 20+ years to accrue something meaningful.

Bluebell1000

This is slightly off topic, but please check if you will be elibible to receive a survivors pension from your partners university pension, if they pass away before you.

Something to consider; if you don't have any savings what would you do in an emergency e.g. you needed to replace the oven, or pay for car repairs? If funding that kind of thing might be an issue and your partner wouldn't be able to cover it, then I'd suggest a combination of both savings / pension until you have an emergency fund in savings available, then start directing everything to the pension.

Brie

https://forums.moneysavingexpert.com/discussion/comment/82067852#Comment_82067852

good point about the survivor's pension. do read the T&Cs, not just check if there is one available. If your "partner" dies before collecting their pension you may not be able to collect anything if you are not married. And check whether there is anything potentially payable after they start getting their pension, i.e. a "widow's" pension or some other survivor/heir guarantee.

DRS1

Your partner may not be in the USS but here is the page for death benefits in case he is

What happens when you die

Note there may be two forms to fill in.

Albermarle

As for the people's pension - £6.50 a year on £200 plus the .5% seems high for fees. 

0.5% including platform and investment fund fees is not particularly high, although you can get lower if you know what you are doing. The flat fee of £6.50 is significant when there is so little in the pension, but if the OP does start adding to it, then it will become insignificant.

I'm no expert but you are only 42 and so have time to move it investments with a little more risk but potentially more reward over a number of decades.

The OP is already invested at 85% equity level, which is pretty typical for growth funds in a standard pension fund.

DRS1

OP If you want informed comments (no "advice" on here) then you are you going to need to give more background.

Like are you employed now? Or still long term ill? Are you on benefits? How are you suddenly able to save more into a pension or savings? An inheritance? A well paid job? A hobby has turned into a lucrative side line?

Even if you are not employed or self employed you are allowed to contribute gross £3600 into a pension. Is that a lot to you or peanuts? You can contribute £20000 into an ISA. Again is that more than you need or a spit in the ocean? You can put whatever you like into non ISA savings or investments and if you have a low income then the interest received (up to £6k pa) may be taxed at 0% but if you are an additional rate taxpayer then that may just be pie in the sky and all the interest will be taxed at 45% (soon to be 47%) so an ISA or a pension or premium bonds for that matter will be more valuable for you.

kermchem

If partner is in USS then this has not been a final salary scheme for over a decade.