So now all I need to do is save up 300K--is this for real?

[Coffeetree]

An article from This Is Money showed up on my feed this morning. Basically someone with £290K in pension pots at 50 years old, asking whether they're on the right track for retirement. The rest of the article was various investment advice. Generally the advice was "You're nearly there."

I read these articles and I feel like someone is playing a joke on me. I usually feel very very privileged in that, at 52, I have a mortgage that I'll hopefully be able to pay off in 4 years, plus about £50K in pensions. No inheritances on the horizon. I've worked in charities my whole life, then became single about five years ago, hence not much saved.

So, after paying off my mortgage, I then need to buckle down and save up 300K? That's not going to happen. My plan is to keep working and then go part-time or contract when I reach retirement age.

Am I the only one who thinks these "retirement advice" articles are really out-of-touch?

That advice was based on people needing to buy annuities, it's out of date now.

Ah I see! So when you earn over £50k you should do a tax return to get tax relief? Is that because of the lump sum contributions you made or should one be doing tax retuens anyway?

There is still a lump sum in LGPS

https://www.lgpsmember.org/your-pension/planning/taking-a-lump-sum/

And there is also ill health retirement available under specific conditions.

@Michaldog yes to get the tax relief on higher rate tax of 40% which is the rate over £50k you need to do a tax return as the standard relief is just 20%. Please someone else on thread correct me if I'm wrong, it's a long time since I looked into this and determined I needed to do a tax return.

I did it in the years that bonuses pushed my earnings over £50k. If I had just earned the £50k there would be no benefit in the tax return, as I would automatically have got the 20% relief anyway.

@michalwave I meant!

For anyone who finds pensions confusing, this is a really good starting place from Money Saving Expert

https://www.moneysavingexpert.com/savings/discount-pensions/

Also, really important as a poster has already said, you cannot use a will to mandate where your pension goes when you die. You must complete the Expression of Wishes Form. It is absolutely worth checking any old pensions aren't going to benefit someone you don't now want to benefit, e.g. a now ex-husband!

To be fair DB pensions are really good. I have a very modest one that would probably equate to around a £280k pot if I live another 20 years, more if I live longer.

Omg! I’ve never done a tax return. Does this mean I’ve been losing out all these years on tax relief on the 40%? 😳

You don't have to if it's an employer scheme, but outside an employer scheme you have to reclaim it from HMRC. This doesn't specifically mean you have to do a full return though, they probably have a form you can use or just write to them. But they love a return so once you've done it one time they probably put you on the tax return list forever more.

@michalwave possibly - I think in some situations the employer takes care of it, e.g. if there is salary sacrifice.

Ah phew! Thanks

Brilliant. Good to have this info when I talk to my employer to set this up.

@vangoghsdog thanks, that makes sense, I do pay outside the employer's scheme as well as my current employer (to a previous employer's scheme). Sorry @michalwave for scaring you!

Have you not been in the NHS long or did you not join the pension scheme?
NHS is one of the most generous that there is. If you have worked there paying in for a decent amount of time you will have a very good guaranteed income every year until you die.

I pay 38.5% into mine currently, and my employer pays 15%. I do this to stay under the higher rate tax band. Luckily this current employer doesn't have a cap on sal sac payments so I still get the NI relief for all of it.

I’m learning so much here. Are there any downsides to this (aside from less money for mortgage and billls)?

Yes, it is, annoyingly. The payments already made are still there, the scheme was basically just frozen. The pension is based on a calculation of however many years' service whilst in the scheme, so cutting this off naturally meant that the amount is based on far fewer years. Like a lot of non-government DB schemes, they found they had a shortfall in funds for what they would be having to pay out. Obviously, they closed the scheme after all the men (and it was men) who set it up were already drawing their nice healthy pensions, or near to retirement 🙄

@VanGoghsDog Yes, that advice may be out-of-date, US-oriented, and aimed at those buying annuities although now interest rates are better (as long as you have savings rather than debt) annuity rates are improving again but the rule of thumb still has some value on the guiding principles of asset allocation in my opinion not that I followed it. In those day, my employer only offered two funds, an equities fund and a fixed income/annuity fund.

Everyone's circumstances are different. I have no partner, no kids, no mortgage, a high salary plus bonus, and my own business which earns another c£10-12k pa (I can take dividends, or pay into pension, or as I am now just let the money build up and use it as salary in future).

After my 38.5% I still take home over £3k. I couldn't put all of my bonus in this time because it would take me over the £60k so I had to earn some which means this month I've taken home over £4k.

The downsides, other than bringing home less ....well, you can't access it until you're 55 (I am now 55) so if you might need it that's unhelpful.
There's always the risk that the govt might change the rules and suddenly tax you more (but if you had saved tax initially you'd be no worse off than if they had taxed you at source, just pissed off I guess).
And if it's invested, investment risk too.

Upsides are massssive, imv. I stay under the 40% tax band (just - and this helps reduce tax on savings interest and dividends I might take). Gain the NI saving. When I decide to give up work I can take 25% tax free, or even if I don't decide to give up work of course. My pot is c£450k, so that's over £100k I can have any time I fancy it and that's a nice feeling.

You can do an expression of wishes to leave it to your offspring, mate, hairdresser....so it doesn't disappear when you die or anything.

Since I was 45 I decided to view pension as a medium term savings vehicle. I still save elsewhere though, I have stocks and shares ISA, cash ISSAs, fixed term bonds, premium bonds....all can be accessed tax free as the tax was isic when I earned the money.

My plan was to have £400k pension and £100k stocks savings, but now I'm over the £400k my new aim is £500k. This is also a good sum for care home fees.

Well, I suppose very little value is still some value. I would say that advice has very little value. It's simply not relevant today.

The schemes set up like this start moving money once you are 55. Many people will have forty years still to live off that money so they need the majority of it to still be invested, not all moved to low rate cash and bonds when they are sixty!

Most employer schemes have stopped doing this now.

To help a lot of people you're really going to have to dial it back even more.

What's an index?
Whats standard and poor?
Equity? Isn't that to do with my mortgage?
What's a fund manager?

Your post is a perfect example of exactly why people shy away from facing up to tackling their pension or financial commitments. Its a totally closed room to so very many people, they stick their head in the door, get confronted with speak thats totally foreign to them, and think "I'll never understand that, I'll stick as I am".

I uses to work in a hospital lab. We once had a group of students come round as part of their coursework and the lab manager was explaining the problems with making sure donated blood was suitably compatible with Patients who needed it. And she kept talking about them being haemolysed. The whole crux of what she was explaining was lost because she hadn't thought to explain what haemolysed meant. I noticed the completely blank faces and stepped in to add "that means the red blood cells have died" and got many "Ahhhh!" noises as pennies dropped.

You are wildly underestimating just how much you know and understand compared to the (wo)man on the street.

A lot of people here don't understand salary sacrifice either and are misusing the term.

I don't "have" to do anything. You asked, I answered. Google is available.

I'm not a pension advisor, you're not paying me. Go and get paid advice if you need to know more. Or, you know, teach yourself, read a book, like I did.

Exactly. I started a pension the day I started a proper job - 21. Way before i bought a house etc. I’m now 57 and have continued to pay a pension all through buying a house and having children. My only disadvantage is that I’m also divorced so now can’t factor in my ExH pension into my future life. It can be done. If you don’t do it as soo as you start work you won’t do it and then in 30 years time will be thinking shxt.

Fidelity have no platform fees for under 18s so good for children's pensions and ISA. I have ones for DCs, both in low cost index tracker, fidelity index world. I wish I'd started when they were born. But the best time to start investing was yesterday and the second best time is today so I'm putting in £240pm into JSIPPs and government tops up to £300.

I'd highly recommend watching James Shack and Meaningful Money on YouTube for excellent pension advice aimed at both young and older people. You will feel a lot more optimistic after watching.

You've obviously decided I was having a pop at you when I wasn't. I came back to explain that, and clarify that I was using your post as an example. If you look back you'll notice I never said I didn't understand those terms. I'm just pointing out that most people need to start at much much Noddy-and-Big-Ears level to benefit from the majority of pension advice banded about.