Should I not bother with a pension?

[riae]

Is a local authority pension actually worth it when you're 40, working very pt and probably won't be working at the local authority for the next 30 years.

Am I better just not having a pension and maybe invest the money in shares or something instead. I'm thinking is there no point in a pension when you work so part time and in your 40s. It won't be worth much will it? Need to decide by end of month so can opt out.

@SpringisSpinning

That's the hard part to understand though.... only a few grand... seem to dispiriting but as pp point out in pension terms it's a lot.

Van Gogh thanks, I'm sure mine said could buy something...is it worth it?

Depends what they are saying you could buy.

Your employer won't be contributing to that part, so no gain there. The tax gain you get whether it's an employer scheme or your own SIPP (I've just added £5k to my SIPP and Vanguard have added £1,250 because the £5k is from earned income and you get tax relief at 20%, if you're a higher rate tax payer then you claim the additional relief via your self assessment). If the scheme is set up as salary sacrifice then there would also be an NI saving, but last time I looked at it LGPS was not salary sacrifice.

So, you need to read the rules of the scheme and see what it is saying you are able to "buy" and do the maths on the value of that.

@riae

Is a local authority pension actually worth it when you're 40, working very pt and probably won't be working at the local authority for the next 30 years.

Am I better just not having a pension and maybe invest the money in shares or something instead. I'm thinking is there no point in a pension when you work so part time and in your 40s. It won't be worth much will it? Need to decide by end of month so can opt out.

Get the pension - employer's contributions are free money that you'd only have to find yourself. I was part time thirty years ago - I didn't think it mattered but was advised to stay in it. That was great advice - it makes all the difference now.

I’m wondering why you think you won’t be there for long. We all thought that! 14 years later and counting...plus local government jobs have good sick leave, annual leave, flexi time etc, besides being reasonably secure.

LGPS every time.

I'd defo go for a pension. I also put £150 per month into our share scheme. Pretty failproof as we're still at 97% of last year's revenue even with covid.

Do it & I think you can do AVCs which you can later take out as part of your lump sum.

There are many older people who invested in modest workplace pensions who now find themselves very badly done to. That modest pension is just sufficient to deny them any kind of benefit such as help with council tax, NHS dentistry, glasses etc. Then there are the feckless people who never saved a penny and pissed away all they earned. They are given pension credit at the taxpayers expense, and therefore a passport to all kinds of subs and handouts.

@viques

As others have said why would you refuse free money? And many pensions are either transferable to similar schemes if you move jobs, or you can leave it safely in the LA scheme to get on with maturing. I would also get signed up ASAP, employers often tweak their pension schemes for new applicants, and not in the applicants favour, established pensions are often better value so the sooner you are signed up the better.

Exactly. I just got under the wire by a matter of months for a much better deal than I’d have been offered 4 months later. Don’t dither. Make it a priority.

as tesco says 'every little helps' just pay into it and more when you feel like it, you will be grateful long term to have say 20k extra

I think you are wrong. Local authority will contribute into your pension to add to the contribution you make. You have.many years to go. It will.all add up. If you opt out the LA won't have to put anything in for you. A pension is best investigation you can make.

The best not of advise I ever hot was pay into your employer pension every month and pay into an additional stakeholder to top up. Put in as much as you can afford every month. I retired at 56 because I did that. It is never too late to start a pension and the alternative is to trust the government of the time to provide for you. I don't trust them.

Without doubt @riae I would do it. So I think its normally better to join a pension scheme as early as you can - but let's say you were asking this question when you were 50 - you might wish you had joined 10 years ago , A friend of mine asked me the same question - now - her work pension won't be enough of itself to retire on but it will very much top up what she would get by retiring on the state pension. & As other more informed posters have said - check what matching money goes in for how much you put in, because that is essentially free money. ( assuming you are not bumping up to the top of maximum pension) There have been changes to pension tax things but by and large if you can afford it , that will be money you can benefit from down the line. Once you are a member you can ask to get an illustration of what it would give you from those who administer the pension. ( & you can always stop if you don't think it is worth it )

That said my father who worked in insurance says pensions are not magic - but they can get you more money that you could get elsewhere - so his advice was 1) get a pension ( i.e. a work / private not state pension) if you can and once you understand what it gives you then you can make a choice whether sticking cash under the sofa ( I paraphrase there ) makes a better return. I think in general it is 1) pension = good but 2 ) a combination of that and having freely available savings. So as I say a pension is not the holy grail - but a very good thing. Some money you can get your hands on if you need it - also good. A combination of the two is great.

& now readers you can tell why I am not Martin Lewis

Take the pension!! It would be daft not to.

I’ve found this thread really interesting as I am already in the LGPS and have never really had it explained to me how it works so thank you to those of you that have. When I joined the LA I originally opted out because I really couldn’t afford it but now have 5 years worth of contributions and hopefully will add another 25 to that. Gutted I didn’t pay in for the first nearly ten years. I’m whacking my pension up because my overtime is pensionable so that’s really helping but I would like to make up the shortfall as much as possible. The LGPS does offer AVCs but there is nothing on the website which clearly explains what this is and what it means.

I think it’s a bit unfair to have a go at those not understanding the pensions. I can see my pension online and none of it has ever really made sense to me, this thread has explained it more clearly.

Does anyone know about the AVCs in the LGPS? How much would I pay in? What happens to the money? What would I get out of it if I paid say £100 into it every month for 25 years? Is it worth it?

@LeSquigh
You can pay up as much as you like, up to all your salary (!) into an AVC, via the pension provider. This is the county council usually and the maagement costs are very low compared to doing it independently. You get the tax relief on this. It sits there hopefully increasing in value as share values rise till you take it at retirement.

Then you can take it all as a tax free sum - so it is tax free both on the way in, and the way out- providing the AVC sum plus the capitalised value of your pension (calculated by the annual pension multiplied by 20) is not more than 25% of the total. If it is, you get the surplus as extra pension. Or you may prefer more pension to a lump sum anyway.

You can choose what type of shares you want the AVC to be invested in. A "lifestyle" one has mores risky, but more remunerative, investments in the early years, but they get safer as one approaches retirement. All this moving of investments is done for you, you just have the payment deducted from your wages each month and forget about it. You can stop or suspend at any time.

If you leave local government, the AVC sits there, quietly increasing until you can take it at retirement.

PS Definitely worth taking out an AVC, tax free in both directions!

@lidoshuffle thank you, that’s very helpful :)

@LeSquigh

I’ve found this thread really interesting as I am already in the LGPS and have never really had it explained to me how it works so thank you to those of you that have. When I joined the LA I originally opted out because I really couldn’t afford it but now have 5 years worth of contributions and hopefully will add another 25 to that. Gutted I didn’t pay in for the first nearly ten years. I’m whacking my pension up because my overtime is pensionable so that’s really helping but I would like to make up the shortfall as much as possible. The LGPS does offer AVCs but there is nothing on the website which clearly explains what this is and what it means.

I think it’s a bit unfair to have a go at those not understanding the pensions. I can see my pension online and none of it has ever really made sense to me, this thread has explained it more clearly.

Does anyone know about the AVCs in the LGPS? How much would I pay in? What happens to the money? What would I get out of it if I paid say £100 into it every month for 25 years? Is it worth it?

It's all laid out here:. www.lgpsmember.org/arm/already-member-extra.php.

@lidoshuffle you can lose the "value" of AVCs can't you so I should pick less risky options?

sorry finds

funds!!

I think it’s a bit unfair to have a go at those not understanding the pensions.

Do you? I don’t. Unless somebody has special educational needs then it is absolutely our responsibility to educate ourselves about pensions and other financial products.

Library and bookshop shelves are groaning with books explaining personal finance for women, with particular reference to the fact that it’s more important for us to sort out our finances because as women, we usually have more to lose than men. We might take time out to have children or look after elderly relatives and we are more likely to work part time. After a divorce we are more likely to see a reduction in income.

There are loads of personal finance websites too, and regular features in magazines.

I get that it’s an in exciting subject for most people, but we have to engage with it. What’s the alternative? Burying our heads in the sand and expecting somebody else (a man, the government) to bail us out?

I can see my pension online and none of it has ever really made sense to me, this thread has explained it more clearly.

So you are clearly capable of understanding how the LGPS scheme works. I’m not sure how you could have gone almost fifteen years - ten years during which you didn’t join the scheme and another five since you joined - without at least doing some finding out. Most public sector bodies have resources to explain the pension scheme, or at least can provide details of where to find out more.

You could have asked a colleague. I work in finance and I explained the two types of civil service scheme (when I was a CS) to female colleagues from different disciplines on multiple occasions.

It is our responsibility to educate ourselves.

You can pay up as much as you like, up to all your salary (!)

Capped at £40k pa.

And it's not necessarily tax free on the way out.

@Iamthewombat

I think it’s a bit unfair to have a go at those not understanding the pensions.

Do you? I don’t. Unless somebody has special educational needs then it is absolutely our responsibility to educate ourselves about pensions and other financial products.

Library and bookshop shelves are groaning with books explaining personal finance for women, with particular reference to the fact that it’s more important for us to sort out our finances because as women, we usually have more to lose than men. We might take time out to have children or look after elderly relatives and we are more likely to work part time. After a divorce we are more likely to see a reduction in income.

There are loads of personal finance websites too, and regular features in magazines.

I get that it’s an in exciting subject for most people, but we have to engage with it. What’s the alternative? Burying our heads in the sand and expecting somebody else (a man, the government) to bail us out?

I can see my pension online and none of it has ever really made sense to me, this thread has explained it more clearly.

So you are clearly capable of understanding how the LGPS scheme works. I’m not sure how you could have gone almost fifteen years - ten years during which you didn’t join the scheme and another five since you joined - without at least doing some finding out. Most public sector bodies have resources to explain the pension scheme, or at least can provide details of where to find out more.

You could have asked a colleague. I work in finance and I explained the two types of civil service scheme (when I was a CS) to female colleagues from different disciplines on multiple occasions.

It is our responsibility to educate ourselves.

I couldn’t afford to pay into it originally. I only started paying into it because of something completely unrelated. No one in my family had a workplace pension and not one of my colleagues really seems to know the fine details of how it works and how much they will get on retirement. I have asked. I have also spoken to the pensions department which just refers me to the website but I really don’t find that particularly clear. My only experience of pensions (other than state) was of knowing countless colleagues from previous jobs who had paid in vast sums and found that they ended up with zero pension or next to nothing because they were in schemes that had gone wrong for whatever reason. So my experience was all doom and gloom basically, it never sounded worth it. Clearly I now know it is but I don’t find the LGPS website particularly helpful.