Too old for a pension?

[pensionnightmare]

Firstly, no judgement please. My life hasn't panned out the way I planned in my younger days.

In my 20's, full time employment with a decent employer who had a non contributory pension - approx 5 years worth.

Then had a two year break with an employer who didn't have a pension - this was before it was made a legal requirement.

Late 20's, early 30's - back with a large employer and a pension - approx 5 years worth with me contributing and the company.

Those two pensions are sill there - both frozen as such but will give me something on top of the normal state pension. First one doesn't' have a value as such, will just give me roughly £30 a month, second one there's about £25k in there.

Then had a career break - then got pregnant. DH at the time earned minimum wage and we were on tax credits for ages. Could barely afford to live, definitely couldn't afford to put money aside into a pension.

Fast forward to now. I'm 45 and finally earning money - not a great deal but probably enough to put say £200 a month aside into a pension.

However, I'm being told that's pointless at my age and if I can't afford to put at least £600+ into a pension, I'm wasting my time and money.

I'm starting to massively panic to be honest. My 20's and 30's have just zoomed past and because I wasn't in a 'normal' job whilst pregnant and subsequently bringing up babies/toddlers, I haven't kept up that pension part.

I have full state pension according to my online record - as in, I can't get anymore, I have the full allocation.

What should I do? Start adding £200 a month to one of my existing pensions, or just start saving? £200 a month for 20 years is only £48k . I will be mortgage free when retired I might add and DH has a regular work pension (nothing amazing but just a Standard one where you pay in and your employer does too)

Why are pensions so bloody complicated?!

Could you combine the two pensions and add to a current pension plan? I would def suggest speaking to an advisor

I saw an advisor just before I got pregnant and he advised leaving my first pension well alone as it would lose value massively moving it. I could combine my second pension to a few little ones I also have knocking about (Nest ones) that are practically worthless (talking less than £200 in total in them) and then restart that ones to to speak?

Anyone reading this in your 20;s just make sure you don't ever stop your pension payments!

Who said it's not worth it? At 45 you've got 20 years + earning potential ahead of you, and you'd be surprised how much what you put in can grow in that time.

I would check your current state pension entitlement and see if you need to do a topup first. Do you have a pension with your current employer? I agree with PP, talk to and advisor about the best way forwards but pensions are a very tax efficient way to save and you'll be surprised to see how much your pension can grow.

Definitely contribute the 200 per month now. It will compound over the 20 years or so until you retire and add up to much more than you think. Obviously, increase the contribution in the future as much as you can, but it's certainly not too late to get started.

You're only 45; unless you have aspirations of retiring at 50, that's around 20 years to grow a decent pension pot. Who is saying it's too late? Are they financially qualified in any way?

I am 45 too and will be just short of 48 when I hit state pension age, that is 23 more years to not only contribute but for compound interest to do its thing.

I put the £200 a month into the Nest Pension Calculator and it said over £85k

As per mentioned, pension contributions are a very tax efficient way to save and Albert Einstein called compound interest the 8th wonder of the world.
I recommend looking on the Money Saving Expert website, there is some excellent pension information on there, starting with the basics.

consider too that you may be able to increase contributions in future, e.g pay rise - divert (some of/all) the extra to your pension.

Ignore whoever said that. Put as much in as you can

You have to have 35 years of contributions to receive full state pension. If you are 45 it's not possible you qualify yet as surely you haven't worked long enough ?

I'm self employed so anything I save, it will just be me, no top up.

Yes, it was a financial advisor! Said I'd left it too late and would need to put in about £600 a month to have any kind of pension pot :S

Guessing I need a better financial advisor then!

Found this online :

You usually need at least ten years of national insurance contributions to receive anything and 35 years to get the maximum amount. You can check how many years you have on the government website. You can find out more about pensions and how they work in our simple guide. We also list ways to boost your pension pot.

The first one sounds like final salary so leave that, you also can't add to it anyway. Check the details of when you can claim with no reduction. It's probably age 60.

The other one - you need to know what it's invested in if you want to add to it. Personally I'd move it and invest it in something I choose but I know people find that daunting.

It's never too late really, well until age 75. If you ever become a higher rate tax payer it's even more worth putting money in a pension. But as a basic rate tax payer you get tax relief as well, and if your employer makes deductions via salary sacrifice you also have relief from national insurance.

And you also need to check what your employer puts in, if they have matching and what it goes up to. That's more free money.

So 35 years of full contributions = full state pension.

You can open a LISA. Whatever you put in for pension government adds 25 percent. It soon mounts up. Choose one with a good interest rate too.

Alas, you have to open this before you’re 40.

Max age for a LISA is 39.

Just to point out that if the OP was claiming child benefit, then these years count as contributing years towards the 35 years required for the state pension.

OP - I absolutely agree with everyone else. 200 a month is far better than nothing and you will gain the 20 years plus of compounding and (Hopefully) investment growth. You'll also receive tax relief.

OP, for now, just get started with the NEST pension.

Then, do some reading. There’s a good podcast called Meaningful Money, and loads of info on pensions online. You have time. You can move your NEST pension into a SIPP later, when you feel you understand it all, but for now just get started.

Also, I don’t think you’re doing as badly as you think. PP calculated:

I put the £200 a month into the Nest Pension Calculator and it said over £85k.

You’ve already got £25K. So over £100K right there. In retirement you can draw down about 4% a year they (financial bods) reckon, so maybe £4,000 a year for 25 years. Plus your state pension. Plus the £30 a month! Every little helps!

This. Even if you had full contributions from age 16 you've only paid 29 years so far.

I think it's worth is as you get tax relief on your contributions, but as pp have said you have 20 years to make contributions before you're going to retire.

I didn't know that.

No sorry mistype on my behalf - I'm 49. I was thinking 35yrs contribution in my head and typed 45yrs old! My Gov page definitely says I can't get any more pension though which doesn't make sense does it? I was working from age 16 but that would only give me 32 years (unless it's changed?)
as I have one missing year from when I finished Uni and before i started work.

Yes, first pension was non contributory final salary one. I have literally no idea really how much it's worth - was just told to leave well alone. I'm sure I can find out somehow though.

So tax relief? So basically if I'm putting in say £200 a month, my accountant can take that into account when doing my return?

Ironically, whoever said Nest, that's what started this panic. Got a letter in the post from them today. Completely forgot I did some temp work that used them as a pension - said my entire pension pot was worth £30 and did I want to leave it to anyone if I was to die lol

It will mean that you will get the full state pension if you keep working until the relevant age. It means you are on track with the state pension at least.

You are self employed. So open a SIPP and every £200 you put in HMRC will add £50 giving you £250 a month. Even if you earn less than £12k a year.

Also, you don’t have just 20 years, as once you retire your pension pot will keep growing if you keep it invested, hopefully retired for a further 30 years!

The Nest estimated returns are garbage low due to high fees and low growth expectations - I wouldn’t touch them with a bargepole, but then I know what I’m doing.

If you were to create a spreadsheet you would see that:

£2400 a year with £600 a year Tax Relief, added to a starting pot of £25k, and invested in a low cost index tracker such as the S&P500 that continued to perform the same as it has for the past 60 years (9.5% per annum average) would mean that it would grow to £330,000 in 20 years (I suspect state pension age may be 69 by the time you retire).

It would be over £100k in just 10 years time. When you retire with a £330k pot you could maybe take out £12k a year and leave the remainder of the pot growing or be adventurous and take out double that to start with which should still be less than the annual growth.

If your second pension (the one with £25k in) is a DC pension then you could transfer that into a new SIPP you open and invest it in the same things as your new contributions.

Financial Advisors often work on being paid a percentage of other peoples money and simply can’t afford to give advice to people with small pots/contributions. But that does not mean it is not worth you doing the right thing for your future self!

Avoid lifestyling which is supposed to reduce risk as you get older, but in reality just reduces results/performance.

3/4 of all managed funds do not even match the performance of a tracker index so avoid them.