Anyone else with virtually no pension?

[Yogapoga123]

Cheery post for the weekend

I’m 49, and have pretty much zero in my pension pot. Wonderingly if it’s now really too late to start - there seems little point at my age unless you can afford to squirrel away £400+ a moth. Which I can’t!

I’ve never earned enough to put anything significant away. Anyone else in a similar boat?

I have a small pension and focussing on building it up (46). My father lost his company pension when the business he'd worked for nearly all his life went bankrupt and the creditors took the pensions. I think this case was one of those that led to a change in the law, I know they fought for yesrs. My father had a short break in employment working for another company so never got his full amount. This case took years to be resolved, so I grew up with a distrust of pension saving.

Lots of replies and some really good advice and comments. I find pensions difficult to understand - although there’s a lot of info out there (much better now than it used to be).

One thing I’m not clear on is the government top up bit. Is this because you don’t pay tax on pension contributions? There’s an example upthread of someone contributing £800 a month (I wish!) , and the govt pays in £200. How does this work?

@TheHoneyBadger You can have it as an extra pension. It would work really well alongside a teachers pension because you can take it when you want without affecting your main pension. So e.g. you can build up a ‘retire early’ fund.

The maximum you can pay in applies to how much is paid into both pensions combined, including the employer’s contribution. It’s not something you can work out yourself, but unless you want to put nearly all your earnings into the second pension it’s not something you need to worry about.

This is a good basic guide to tax relief on pension and includes those not working:

www.moneyadviceservice.org.uk/en/articles/tax-relief-on-pension-contributions

If you are earning and paying tax its definitely worth paying what you can into a pension to get the tax relief. If you are not working and have no debts to pay off and can afford it well worth doing the £2880 a year to get the government to make it up to £3,600.

@Yogapoga123 Yes the government top up is because you don’t pay tax on pension contributions. £100 of your gross income is equivalent to £80 of net income, so if you pay it out of net income then for every £80 you put in the government tops it up to £100.

But the curious bit is that it gets topped up even if you don’t pay tax. So if you earn 10k per year (below the threshold for income tax) you can still pay £80 into a pension and it gets topped up to £100. It’s literally free money. It happens automatically - you don’t have to fill out any extra forms or anything. The government wants us all to save for our old age and that’s one of the ways they do it.

@Yogapoga123

Lots of replies and some really good advice and comments. I find pensions difficult to understand - although there’s a lot of info out there (much better now than it used to be).

One thing I’m not clear on is the government top up bit. Is this because you don’t pay tax on pension contributions? There’s an example upthread of someone contributing £800 a month (I wish!) , and the govt pays in £200. How does this work?

www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Guidance here - whichever pension provider you set your personal pension plan up with will claim the 20%. - you don't have to do anything. If you are a higher rate taxpayer you can claim an additional 20% through your self assessment tax return

If you are in a work scheme (either employer scheme (defined benefit) or a personal scheme arranged by your employer (defined contribution) your employer will pay in their contribution (and any additional contributions you have requested) directly at source from your earnings so tax free whatever your income tax rate is.

Paying additional personal contributions via an employer can be advantageous- at my work, for any additional personal contributions above the minimum the company top up by 10%.

An employer defined benefit scheme are the ones which risk going into default if the company has problems. A defined contribution scheme arranged by an employer or you personally is your own pot of money being invested and less risky. DC schemes are less risky but often less pension benefits - other than civil service schemes, which I know have been cut significantly but pay out WAY more than DC schemes as the govt funds a large % per employee (some might say via lower wages).

The money goes in untaxed but the pension which comes out is subject to tax, albeit you have all your personal allowances first so usually more tax efficient than paying tax on earnings now and investing in an ISA.

[quote BobbingPuffins]@TheHoneyBadger You can have it as an extra pension. It would work really well alongside a teachers pension because you can take it when you want without affecting your main pension. So e.g. you can build up a ‘retire early’ fund.

The maximum you can pay in applies to how much is paid into both pensions combined, including the employer’s contribution. It’s not something you can work out yourself, but unless you want to put nearly all your earnings into the second pension it’s not something you need to worry about.[/quote]
No I'd probably just want to put say £100pm in. Do you know how I go about doing this?

When ds leaves home I may go teach overseas for a while to try and get some money together so it would be great if I could still pay into it then and it would be the only one I was paying into and I'd put as high as they'd let me as my income would be tax free and free accommodation etc so lots of disposable income.

I'd be really grateful for any advice. I currently only earn 15k max from employment and pay 7.4% contributions. I looked at paying extra years but it appeared to be astronomically expensive with little benefit.

What I really need to do is find a way to get a mortgage despite low income. I have a decent deposit but with interest rates non existent and inflation it feels like it's just wasting away and is enough to mean I'd end up not entitled to any help and would rapidly get chewed through by cost of living.

@TheHoneyBadger You can open a SIPP and set up a monthly transfer from your bank account. There’s lots of advice about SIPPs here: www.moneysavingexpert.com/savings/cheap-sipps/.

The range of options for investments can be a bit overwhelming to begin with but if you start a topic on here I’m sure you’ll get some good suggestions. There are plenty of options which are low risk so it’s not as scary as it sounds.

I’ve no idea if you can go on paying in if you’re living abroad. I guess it depends where you’re paying tax.

I truly hope some parents in here are making note - you need to advise your children that from early age in their working life that they need to save. Even if it’s a home purchase that could be used as their best egg upon retirement.

Pay into the government pension. If you do it from a young age, even on low income, it’s worth it at the end and you can top up if you have years you’re not working.

You’re really responsible for your own retirement. You need to plan and forward think. One previous poster is my age but gave excuse it wasn’t something thought about. Rubbish. I was doing a small AVC, pre tax, from my late 20’s. Worth some money now in my mid 50s so I can certainly say that’s rubbish as I heard about these things way back in late 80s /early 90s. There’s also been lots of news coverage when increasing pension age so this can’t be a surprise to people to plan for their retirement, even a small amount.

[quote BobbingPuffins]@TheHoneyBadger You can open a SIPP and set up a monthly transfer from your bank account. There’s lots of advice about SIPPs here: www.moneysavingexpert.com/savings/cheap-sipps/.

The range of options for investments can be a bit overwhelming to begin with but if you start a topic on here I’m sure you’ll get some good suggestions. There are plenty of options which are low risk so it’s not as scary as it sounds.

I’ve no idea if you can go on paying in if you’re living abroad. I guess it depends where you’re paying tax.[/quote]
I won't be paying tax on salary as international schools pay you tax free in your home currency and it's not taxable in the uk. I could potentially voluntarily pay ni contributions if that's still allowed. That's a way off and hypothetical at this stage.

I will follow the link and do some research thank you.

Thanks for the info on tax relief Bobbingpuffins Properthelp and SilkieCat

Ok I read the page on sipp and it genuinely feels too complicated and like it would take too much knowledgeable input from me and/or charges. I may be quite dim or risk averse but it feels too complicated

@TheHoneyBadger SIPPs are generally only for sophisticated investors. You can set up a personal pension with the like of Hargreaves Lansdowne but probably worth speaking to a financial adviser if you are completely new to it

Thanks property. That's the impression I got that they were for seasoned investors.

I just wish we'd stop with artificially low interest rates. It's over a decade now and it's painful for anyone other than existing mortgage holders.

I have work pension (nhs) but have heard a rumour that by the time its time for me to reach state pension age in just under 40 years those of us who have private/occupational pension won't be able to access the state pension!

|I can believe it.

I have an NHS pension because of ill health.

I have a full NI contribution, this means I am entitled to contribution based ESA. But because I receive a pension I only get half of it.

So I have paid twice but don't get twice the benefit.

One thing I’m not clear on is the government top up bit. Is this because you don’t pay tax on pension contributions? There’s an example upthread of someone contributing £800 a month (I wish!) , and the govt pays in £200. How does this work?

You don't pay tax on pension payments, but tax is already taken via PAYE so the government 'refunds' the tax into the pension.

I do have a SIPP, I had small pension pots of £100 here and £150 there so put them all together.

As it is never going to be my main income I just 'play' with it. You can select funds as well as shares which means you have some security.

49 is not too late to start a pension pot. As PP have said, it beats normal savings because the government contributes to it.

I have a small occupational pension but started an additional personal pension in my 50s. I wish I had done it sooner.

@thegcatsmother

Full state pension works out at about £760 per month It really isn't a lot. My bills come to that even being mortgage free, when you take CTax, water rates, oil and electricity into account, plus the phone/broadband bill, insurances etc.

if you have been contracted out at any time by dint of having been in public sector employment, the full amount is restricted, as your employers pension is supposed to make up the difference.

You can make up the shortfall from having been contracted out of SERPS by paying NI or voluntary contributions for extra years to boost your state pension to the full amount. It's worth doing as you make your money back in only a few years so if you live long enough you will be in profit.

Some of the people on this thread are forgetting the awful pension scandals of the 80s. Rip-off management fees and stories of people paying for years but the pension fund worth next to nothing at retirement. Unregulated and zero accountability. Pensions were absolutely not the place to put your money 15+ years ago. Unless you were lucky enough to be in a final salary scheme or worked in the civil service/teaching/NHS.
I don't know why people so glibly say "if there's a state pension left when I retire". Why the f**k shouldn't there be? You pay taxes all your life. You pay NI, plus another 20% in VAT on everything you spend (so that's over 40% of your earnings gone in tax when you pay for anything). It's your right. The government think nothing of spending your money on £3-5k monthly expenses for 800+ members of the House of Lords. Which country in the world needs 800+ unelected government members??
That's just a drop in the ocean on how tax payer money is wasted. Why should anyone who works and pays in to the system for 35+ years live in poverty in old age? Are we one of the poorest countries in the world?

@DianaT1969

Some of the people on this thread are forgetting the awful pension scandals of the 80s. Rip-off management fees and stories of people paying for years but the pension fund worth next to nothing at retirement. Unregulated and zero accountability. Pensions were absolutely not the place to put your money 15+ years ago. Unless you were lucky enough to be in a final salary scheme or worked in the civil service/teaching/NHS. I don't know why people so glibly say "if there's a state pension left when I retire". Why the f**k shouldn't there be? You pay taxes all your life. You pay NI, plus another 20% in VAT on everything you spend (so that's over 40% of your earnings gone in tax when you pay for anything). It's your right. The government think nothing of spending your money on £3-5k monthly expenses for 800+ members of the House of Lords. Which country in the world needs 800+ unelected government members?? That's just a drop in the ocean on how tax payer money is wasted. Why should anyone who works and pays in to the system for 35+ years live in poverty in old age? Are we one of the poorest countries in the world?

Because anybody who points out that we have one worst state pensions in the developed world is accused of being a communist. 😂

I am 41 and got nothing . Been a SAHM for most of my adult life so I have zero pension but have all my Ni stamps. My husband and I own a property worth about £70k and we are hopefully buying a second property this year around the same value. His pension is ridiculously small, currently has about 3k in it and so last week I worked it all out and he can afford to pay £30 a week without us being short so that will help to boost his up a little. But at the same time he is 55 and so only has 10-12 years to keep saving.

I can afford to save £20 a week so I'm thinking a personal pension would be best?

if you have been contracted out at any time by dint of having been in public sector employment, the full amount is restricted, as your employers pension is supposed to make up the difference

That isn't true, the new state pension is a flat rate and as long as you have paid enough NI contributions by the time you retire you get the full rate and your occupational pension won't affect that.

However it may be the case that you will need to pay contributions for a bit longer to get to the point where you are eligible for the full rate.

www.unison.org.uk/get-help/knowledge/pensions/occupational-pensions/

"Under the new State Pension rules occupational pensions do not affect your right to a state pension. Currently you must have at least 35 qualifying years of national insurance contributions to qualify for the full new State Pension amount. Currently £175.20 a week.

Being a member of an occupational pension scheme could however have affected your pre April 2016 state pension entitlement if it was “contracted-out” of it. The benefit to you of this is that you would have paid less in national insurance contributions. You can always check your position by requesting a State Pension Forecast which you can do at www.gov.uk/check-state-pension."

You can make up the shortfall from having been contracted out of SERPS by paying NI or voluntary contributions for extra years to boost your state pension to the full amount.

Not once you hit 37 years of contribution, you can't go back and make up the short fall for any contracted-out period. At least that's what DWP told me.

No I don't think you can do that Ifailed, but if you are still working you will continue to pay NI and that will continue to bump up the pension you get or you can pay voluntary contributions to do this.