Does anyone else worry about their future pension?

[NatMoz]

I have 2 pensions. One from my former employer with Legal & General which has a total pot of roughly £21k. Based on predictions this will equate to £363 a year by retirement age . Bearing in mind I contributed for almost 8 years it just seems so low.

My current one is faring a bit better. It's a Civil Service one and over 3 years amounts to £2k (annual statement was from March this year so may be a little more than that now).

Even so, as it stands it all equates to about £200pm pension.

Am I being dumb here? Is there any way I can make my Legal & General pension work harder? You can choose which investment to opt for but they are just names on a page to me.

I feel like pensions are such a minefield. I have no clue what I'm doing. Also don't think there's any point relying on state pension. I'm 32 and have been working since 21.

Does anyone else feel like this? What do you do? I'm considering a stocks and shares ISA such as Vanguard?

OP, you've got another 36 years to go before you reach retirement age (though no doubt that will be pushed back in the intervening years). Your Civil Service pension is generous compared to many in the private sector, so generous that I wouldn't be surprised if it wasn't raided at some time in the future to pay for whatever shambles a future government leads us into. I'd be looking at my own backup plan to run along side your current state-funded pension.

Great thread op. Late 50s here and suddenly I also have lots of questions (which I should have asked years ago frankly) about this. I created a gov.uk account and saw my ni standing and what that means for my state pension.
As for a small defined benefit pension I have for some employed work I do - I’m largely self- employed) I thank god that when that started and I asked not to pay in (I wanted the money for ‘fripperies’) I was told it was a contractual requirement. Thank god as it is the healthiest and safest of my pension strands by far.

If you have a defined benefit civil service pension at 32 you really don't need to worry about this. I have twenty five (ish) years of work left and pay around 6k a year into my pension currently (50k salary.) The pot is currently around 130k, predicted to be about 300k on retirement. Predicted income - 8k a year (obvs interest rates are very low at the moment.) If you're looking at 20k a year income contributing much less be grateful!

I think I might try and switch to the CS purely pure for the pension.

Yes, people don’t realise the size of pension pot required in defined contribution to deliver a decent retirement income.
As thedarkling says, if she gets to £300k pension pot, that’s expected to pay out £8k per year. I think that will be based on buying an annuity and if she uses draw down, she could have more than £8k from £300k, but it is then subject to stock market shifts still and the risk of it running out if she lives a very long time. And most people won’t achieve £300k in their pot. That means they won’t achieve £8k per year from their occupational pension, although hopefully most will be close to the full £9k from having earned 35 years of NI contributions. That state pension element can make up a decent chunk of what people need. Going back to the £8k pension from the £300knpension pot, with the civil service accrual rates, someone earning £43k would have an 8k pension in less than 8 years. For someone earning £21.5k it would take 16 years to accrue that. In the private sector, many people will work a full 35-40 years and not get a pension pot of £300k to enable the £8k yearly pension. It is a stark difference.

Yes to more people considering the public sector for work, for the pension benefits. It is generally estimated that the pension benefits add the equivalent of 1/3 to your overall package. It’s a case of jam today or jam tomorrow. You might get paid a bit less now, it you benefit enormously into the long term.

@Rugsofhonour

Don’t open a stocks and shares ISA. Open a lifetime ISA. You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40. The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year. If you have more than £4K to contribute put the rest in a stocks and shares SIPP.

Can you have a LISA at the same time as holding (and contributing to) a help to buy ISA?

I’m really worried about not having enough, even though I am only in my 20s and there is time for it to compound. I’m following the rule of thumb of the % contributions being half of my age when I started a pension.
I would look at contributing extra into your usual pension before opening an ISA - keeping things in one pot usually means lower fees and you may be able to benefit from your employer matching your contributions if you are in the partnership scheme. Next I’d open a S&S LISA.

@ PPs, civil service is not necessarily a DB pension anymore, you have the choice between DB and DC schemes. And the DB scheme is career average, not final salary.

@bloose, no you can’t but a LISA is better than H2B so I’d switch it

Sorry guys to confuse. I used £20k as an example for easy maths but earn £31k at the moment. Saying that I am pregnant and when I return to work I plan to work compressed part time for a couple of years 0.75 hours rather than 1.0 so there will be a reduction from around £715 per year into final pension to £535 but I can't do much about that.

There is something called 'added pension' which the civil service offers but I honestly cannot understand it one bit. Have read threads on money saving expert but just feel more confused than ever so probably need to speak to a specialist at a pension know about.

This is going to sound rude but a pension pit of 21k is tiny.
There are calculators to use online and I think a single person needs to have a pot of about 200k to live a reasonable lifestyle.
If I were you I'd increase the risk of the legal and general one.

@JasonMomoasgirlfriend

This is going to sound rude but a pension pit of 21k is tiny. There are calculators to use online and I think a single person needs to have a pot of about 200k to live a reasonable lifestyle. If I were you I'd increase the risk of the legal and general one.

I have 2, the L&G and the Civil Service defined benefit one. If it was just the L&G I'd be incredibly nervous right now. The L&G is historic, I just want to make the £21k in that one work harder rather than ignore it completely, it's still money after all.

Yes I know you have the other but that's fairly fresh too so your pension pots are small. Try and plough as much as you can afford to into your civil service one. Increase risk on the legal and general one. I have a Scottish widows one in a similar state and need to change the risk on that too.

@JasonMomoasgirlfriend

Yes I know you have the other but that's fairly fresh too so your pension pots are small. Try and plough as much as you can afford to into your civil service one. Increase risk on the legal and general one. I have a Scottish widows one in a similar state and need to change the risk on that too.

That isn’t how the civil service defined benefit scheme works. You don’t get a better pension if you pay more in. Your contribution rates are set and your pension benefit is, well, defined!

Interested as I'm mid30s also and looking into pensions. I have just over £2000 on a defined benefit scheme (incredible, I worked for just under 4yrs to accrue that) but have been in and out of study since and not been paying into a pension or NI.
I have one year of LGPS contributions and have recently switched to another region's LGPS. I am contributing 6.5% which equates to about £140 pcm.
Interested in the advice about investing in a LISA over S&S ISA. I'm only able to add about £100 a month at present due to renovations and debt payoff but was putting it towards the S&S ISA but do have a LISA too. Will start adding this to LISA.

I don’t even have one. I’ve managed to fuck myself over and won’t even have a state one. I can’t think about it too much, its too upsetting (nearing 50)

I am massively worried about our retirement. We are mid/late 40s. I had a decent pension at my old job, but had only been in it for 8 years. I'd managed to build up about 50k but now that's stopped.

My new job is appalling. I am on fewer hours and they pay the bare minimum i.e. 3% on everything over £6k. I have about 50 quid a month going in. We earn less than we spend at the moment so dipping into my redundancy money. I hope when dh finds a job we can make extra payments, but trying to pay in the £3000 a year ish that was going I'm before will be impossible. I also have another one from a short term contract that will pay me £50 a month.

herroyal go into gov.uk Re your state pension. You can see your situation and even if you have ‘fucked yourself over’ there is good info there about how you can buy years of ni contributions etc if you can afford to to slightly ‘unfuck’ yourself. Friend of mine who is self employed discovered (yes should have known but hey) she had ‘fucked heralded over by falling behind with ni payments/years and was able to claw back/buy back a goodly number of qualifying years.

@Rugsofhonour thanks, I will do that.
I considered buying the missed years of No contributions but is it really worth doing ... many my age can't see state pension actually being upheld by the time we get there. It was several hundred pounds last time I checked. Will have another look and a think. Haven't got much spare money at all.

@JasonMomoasgirlfriend

Yes I know you have the other but that's fairly fresh too so your pension pots are small. Try and plough as much as you can afford to into your civil service one. Increase risk on the legal and general one. I have a Scottish widows one in a similar state and need to change the risk on that too.

I’m not sure you understand how the Civil Service pension works - it’s not about lowing money into it like a private sector pension pot. The OP is only 32 - if she stays in the civil service for her career, and has the standard deductions taken from her salary, then by retirement age she’ll have a very decent annual pension as well as the option of a lump sum. She’s got nothing to worry about

@OldSu *The new state pension is actually very simple, if you have a NIC record before 6th April 2016 they calculate your pension using 2 amounts, the amount you would have got under the old scheme basic plus any additional state pensions you would have accrued - graduated pension benefit, serps, second pension, with the amount you would have got if the new flat rate pension had been in place all your working life and you get the higher of the 2 its called your starting amount

if your starting amount is higher than the new basic any NICs/Credits you accrue after 6th April 2016 do not increase your pension, if its lower then your pension increases through NICs/Credits until you hit the basic or reach pension age which ever comes first.

Anyone without a NIC/Credit history before 6th April 2016 will only ever get the basic no matter how many years they work

I get a lot higher than the basic £179.60 plus I get a private pension for the years I opted out however I got nothing for the 5 years (4 full tax years) I worked between 2016 and this year when I reached pension age*

Thank you for that. Very embarrassed to admit that sadly, I didnt understand it, even after reading it 3 times. Not your fault, but mine!

DH and I are self employed. DH did most of the accounts. I assume he only ever paid in basic amounts. DH and I both now 60. He has paid NI for over 40 years. Mine has 31 years[fully paid until 2008, and then after that either not paid or partly paid, not sure which]. We dont have serps. I dont know what graduated pension benefit is. A small private pension, we cashed out when we could. I have a small work pension[I thought it was defined benefit, it says it is, but further into the blurb it says it is a mixture of defined benefit and defined contribution].

When DH did the gov pension forecast it says £179.60. Mine says something like £142 currently. I need to pay in I think 4 more years worth to get £179.60.

I presume there is no way him and I can get more than £179.60? I dont understand how people can.

If @OldSu is not around on this thread now, I would be happy for someone else to answer instead.

Re whether it’s worth paying for missed year NI contributions, the answer is generally, to wait until you’re close to retirement age to see if you want to then. I think you can cover up to the 6 previous years. So actually, there is a window for covering missed years.

Lots of people will achieve 35 years by the time of retirement even if they have some missed years. That’s why it might not be worth bothering to back-fill until the point when you actually know if you need to. Additionally, for those worried that it will all change, that means you’ll have certainty that your payments will benefit you.

It seems unlikely to me that what people have already accumulated will suddenly be whipped away from them with no notice. The older you are, the more likely the scheme will be the same by the time you hit state retirement age. They like to give at least 10 years notice of any changes as otherwise there isn’t time for anyone to plan ahead.

I don't.
I won't have a pot to piss in, but ho hum.

Yes, if you’re significantly short, filling the gap when you can is a good idea.
However, a number of people find that they have gaps but don’t know exactly what they will be doing in future. If they end up working longer than they thought they would, then they can end up have filled gaps they didn’t need to…..waste of money. For example, lots of teachers who retire early do a bit of exam invigilaton once retired. That can be sufficient to build up extra years of NI contributions and means they don’t need to plug gaps.

For those with big chunk of non-contribution early or mid career, who will never ever reach 35 years, if they can afford to buy the years when they are available (ie within 6 years) it can make a significant difference….the gain from doing this in terms of pension return in relation to cost of paying, is often far better than you’d get with private pension contribution.