If you are late 30’s and can only afford to pay a small amount into a pension is it worth it?

[Moongazingbare]

If you are in your late 30’s and haven’t been able to start a pension before now but now have the chance to join a work auto enrolment pension where you can only afford to pay the minimum contribution which works out at about £75 a month,
Is it even worth joining?

Looking at pension forecasts for that amount I wouldn’t get much at all at retirement as I don’t think there’s enough for it to grow

Don’t bury your head like me and now trying desperately build my pot. I do not want to wait till I’m 67 to claim my state pension which when I was going was age 60. Don’t be suprised when your state pension age is increased. Start it now definitely

I'm 62 and thank god I've been paying in since my 30's.

Actually you should be thinking on how you can retire before state pension age I have friends retiring mid fifties as they planned and as someone said your state pension will be 70 and beyond

Best time to start paying into a pension is as soon as you start work. Second best time is right now!

Considering the tax benefits, employee contributions, employee matching etc, it nearly always makes sense to start contributing something, unless you need to completely maximise your takehome pay for a very specific short term reason/goal etc (say a few years hard saving for a house deposit)

The problem with the pension company predictions, is they are based on you choosing an annuity, which most people are unlikely to do. You are more likely to ‘drawdown’ money as and when you need it.

As others have said, you have 30+ years for it to grow, which is a long time in the stock market, plus you are getting free money from your employer and tax relief. If you put just your contribution into a savings account, it would lose money against inflation.

What I would say is, when you are enrolled, log on to the pension provider website and check where your money is invested. You should have a choice of funds or lifestyle trackers. The latter will invest according to your age and drop to less risky investments as you get older.

I always chose my own funds, rather than the lifestyle ones, and a minimum of 2 to spread the risk. At your age, you can afford to go high risk to get maximum growth opportunity.

My DH (late 50s) has recently gone PAYE after many years self employed and has been auto enrolled. We did consider if it was worth it, as I am already retired and we have a large number of investments/other pension pots, plus he only intends working 2-3 more years, but….it is free money from employer, and he has other pensions that he can move ‘pot’ into when he leaves this employer.

Definitely good to pay in now, when your fund has a long time to grow. Relying on state pension and house equity as your sole source of retirement income feels intrinsically risky, so even if your pension pot doesn't end up being huge it's good to diversify your investment options.

I would think this would be a defined contribution pension fund (Final Salary/defined benefit scheme being very rare these days) - that’s a positive thing in my book, as it’s your pot with more flexibility of use when you retire - we have these, and the projected annuity is quite dreadful. We’re planning on draw-down and investment into ISA/SIPPs so we can manage and benefit from performance, rather than the pension company, who will pay about 4%, if that.

Make the most of your employer’s contributions, and pay in extra if you can for tax efficiency and growth. If you potentially have 20yrs of working life, you should see a meaningful sum emerge.

We’ve done better with Global funds, but depends what’s available in your scheme, and future performance of course.

If you dont pay into a pension and have only the state pension to live on you will get pension credit and lots of other subs and handouts. For example council tax benefit, free prescriptions, dentistry and glasses. People who have a small occupational pension get none of these and can end up worse off financially than someone who has never saved.

Can you imagine the resentment this causes to those who were responsible and saved money in pension funds? Whereas those who pissed away their money get subbed out by the taxpayer.

@memberofthewedding I find this a very sad attitude, although understand that there may be a fine line between getting that support and not, so someone who has saved a little potentially being worse off than someone who hasn’t at all.

We don’t know what will happen in the future regarding state pension and benefits, but I can only presume they will become less generous/higher age qualifier/lower limit of means-testing, so I would always want to save and be prudent where I can so that I have some reliability of support and choice in older age.

Nor do I begrudge ‘subbing’ those that need it.

I would be surprised these days, with the cost of living as it is, that many people can afford to ‘piss away their money’..................