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.

@VanGoghsDog

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.

True, VanGoghsDog , though not many people manage an additional £40k pa into a pension, and one should be able to avoid tax by keeping an eye on totals.

@dinder, yes "investments can go down as well as up". But if you go for a lifestyle profiled one, the risk/return reflects how close you are to retirement so that the majority of your money in invested in safer bonds and cash towards the end.

It's down to you to assess how cautious/bold you are. If you have say 30 years of work ahead you can afford to be bolder as shares tend upwards over time. Mine fell precipitously last February as Covid hit, but they have made up all the ground now.

If you only have a few years left it is still worth taking out the AVC , if only for the tax relief, but go for a more conservative fund. You have a small number to choose from, it's not complicated.

@lidoshuffle thank you. I have at least 25 yrs so will do it. I reckon I could 1k a yr

Reasons given by a PP for never finding out how the LGPS worked:

I couldn’t afford to pay into it originally. I only started paying into it because of something completely unrelated.

But you still could have found out about how the scheme worked, which might have led you to reprioritise some spending or at least think about joining when you were able. You said in your previous post that you wished that you had joined during the ten years when you were employed but not a member of the scheme.

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.

Frankly, that is frightening. That your colleagues didn’t understand the scheme either, unless you were asking them to calculate how much you would get on retirement on your behalf, in which case they couldn’t help you.

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.

Workplace schemes? That is pretty unlikely. The Mirror Group pensioners got compensation 26 years ago, and the Allied Steel & Wire pension scheme failure in 2004 led to the formation of the pension protection fund, so I find it difficult to believe that any workplace scheme failing in the last thirty years has left its members with nothing.

The Equitable Life policyholders (private pension) also got a settlement.

I’m astonished that you had ‘countless colleagues’ claiming to have ended up with nothing, or a tiny amount, after paying into workplace schemes.

In any event, local authority schemes are government guaranteed so your contributions were not at risk.

I work very full.time for a LA.now but I previously had a very very part time and low paid job with another LA for a couple.of years while studying and I am always surprised how much they are worth. So definitely do it!

@Iamthewombat

Unfortunately I really couldn’t afford it for the first number of years, I had a crippling amount of debt, and was a single parent going without food so pension was way down the list.

With regards to my colleagues, none of them really seemed to know or were interested in what they would get, and not one of them understood how it worked. You are right, it is frightening 🤣.

I had two sets of colleagues at two different jobs, the first paid into a company pension and the company went under and they were left originally with no pension as I think there had been some foul play or sorts. It was a long time ago and I was young so didn’t really understand what had happened. I am in touch with some of them still and they have recouped a very small percentage of what the were originally expecting to get.

At my last job (before my LA one) there was a couple of staff that joined from a rival company who had been left with zero pension after years of paying in and faced working until they died because of it. I don’t know if that was ever since resolved but it wasn’t looking good for them but clearly I don’t know the details. It was just a case for me of hearing one bad story after another.

Everyone in my family has only had the state pension bar my Gran who receives some/part of my late Grandads pension but has been left worse off with it because of some offsetting against her state one. Again I don’t know how that works and I’m not sure she fully understands it but has been told by DWP that he would have been better off not paying into it.

So lots of stories of things going wrong in my past.

I am going to look into extra contributions and AVCs but even now I don’t have much disposable income. Maybe disposable is the wrong word - maybe available in better. I get it would be better used in the pension but it’s hard to find month to month.

My basic salary is £30k ish and I always earn £4-5k of overtime a year so that’s probably really helping bump things up as it’s pensionable.

I think there is quite a huge lack of understanding of pensions. Whether that’s warranted or not is another matter :)

I think pensions are one of those things many people aren't very interested in until retirement is a distant glow on the horizon, by which time there is is limited opportunity to do a lot about it. And there are always other calls on one's money so that it's easy, although a big mistake, to let the pension slip.

So well done everybody here who is beginning to appreciate its importance. It's the most important financial decision most people make - much more than a mortgage - and money invested in the early years is the money that matters most. But it's never too late to start.