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?!

That image looks like a projection, not the actual pot. Do you have the actual current pot figure?

DC pension is 'defined contribution' - basically any modern private pension.

SIPP is a type of DC pension you manage yourself so tends to be cheaper, stakeholder pensions have capped fees so are also a good option.

Don't move your Scottish Widows one until you've checked it thoroughly - there may be better guarantees or a lower retirement age than you'd get with a new one. And the fees could be good or bad - can't tell just from the company name.

The Vanguard fund isn't a pension or an alternative to a pension - it is an jnvestment that you'd hold inside a pension. A SIPP or other pension is a type of investment 'wrapper' (an ISA is another type of wrapper). The money inside the wrapper can be held in different types of investment - trackers, managed funds, bonds, individual shares or even just as cash.

The Vanguard Lifestrategy funds give you a broad mix of stockmarket and bond investments in 1 package rather than you having to pick your own. They also have 'target retirement' funds that are similar but shift the balance of investments over time: you start with more 'higher risk' ones (that on average give a better return, but the value fluctuates a lot) then as you get near retirement they sell those and buy more stable things that won't go up and down in price much.

You need the Vanguard SIPP/ Personal pension

You’re reading it incorrectly. It’s 35 years. You may have a full sweet of NI and therefore max but you have 4 more years still to pay.

SERPS and contracting out are a different thing and do not add years, nor does COPE.

The ONLY reason to use a lifestrategy or lifestyling fund is if you plan to buy an annuity on retirement. They alter the mix of investments as you near retirement to be bond heavy.
People have been horribly stung by not understanding this due to the bonds crash of last year. Had you bought an annuity, it was fine as the rates went up to compensate and you’d still get as much for your money.
Had you retired and not been planning to buy an annuity, your ‘safe’ funds would have lost up to 40% and you would be stuffed - you would never make that money up due to having to take an income.
Anyone wanting to use flexi-drawdown needs to stay in at least 80% equities for long term growth and use income funds or money market funds for keeping 2-3 years income as a buffer, so you don’t need to sell in a downturn.

The ONLY reason to use a lifestrategy or lifestyling fund is if you plan to buy an annuity on retirement. They alter the mix of investments as you near retirement to be bond heavy.

I don't think that's right for lifestrategy. They have a fixed proportion of equity:bonds and don't alter it as you reach a particular date. IIRC Vanguard have target retirement funds that do have lifestyling.

Oh and Vanguard Sipps only let you buy Vanguard products. The LS product is very overweight in UK funds, which will create a drag.

on my previous post I meant Target retirement funds and Lifestyling funds NOT lifestrategy - you can have 100% equities in the latter.

It's definitely worth paying anything into a pension for the next 20 years. Before you do anything get an IFA to look at the benefits that come with the pensions you already have. You never know... the one with the tiniest amount could have some great benefits and features attached to it that make it the best place to pay into for the next 20 years.

The best time to start a pension is when you're 20 and the second best time is right now.

Have a listen to Meaningful Money podcasts, particularly the pensions ones. Really straightforward and easy to understand.

If one or both of your existing plans are defined benefit (ie you'll get a certain amount depending on what your salary was), its not always a good idea to transfer. But if they are defined contribution (ie you built up a pot of money), it might be worth it but you need to make sure you don't have any guarantees that you might lose. You can find an adviser on unbiased.com.

Youre only 45, you have 20 years yet. £200 a month with the benefit of compound interest and decent growth means you can accumulate quite a tidy pot by retirement.

Plus the tax relief from the government, forgot that in my excitement!!

It says this about my state pension ----

Not sure the number of years are relevant as such, once you've hit the maximum, you've hit it!

Looking at a vanguard SIPP pension now..But will look properly next week!

As I said, you are tied to Vanguard products with a Vanguard Sipp, nothing wrong with them, I have VLS 80 as part of my portfolio, but you are better with a proper global fund, Vanguard is very heavy in UK stocks and bonds, more than double what would be in a fully global tracker, of which UK only makes up 6%.

Lots of other alternatives -
Interactive investor.
Hargreaves Lansdown.
Fidelity to name a few.

Vanguard have loads of funds, if you don't want it to be UK heavy, choose another fund that invests outside the UK. They have a global fund too, if that's what you want.

Here's a wider one of theirs, as an example:

www.vanguardinvestor.co.uk/investments/vanguard-ftse-developed-world-ex-uk-equity-index-fund-gbp-acc/portfolio-data

This is a common misunderstanding. It isn’t 35 years for everybody. It only applies to people who started paying NI from 2016. The rest of us all need different amounts depending on a variety of things.

Another vote for Meaningful Money - definitely check it out

That shows you're forecast if you make full contributions. you need to check the bit below with the green bars to make sure whether you have done so, or how many more years you need.

(I think the line that says 'you cannot improve...' on yours and 'you need to contribute...' on mine probably means you're OK, but read all the way down that page to make certain.)

ONLY if you got the full 30 before 2016.

No that’s not true. I didn’t have the full 30 years before 2016 & I come under transitional arrangements. I don’t need 35 years for my full pension.

Please pay the 200
your accountant will sort the tax so that is worth 250 which will grow that is why stockbrokers earn a fortune
the advisor who told you not to bother is a total idiot
why would you turn down 25percent tax relief

Transitional arrangements can’t apply to the OP though as she’s too young - or that’s my understanding- would love a doc on the guidelines if you have one. They were to protect people who’d accrued more state pension than the new pension due to GMP/SERPS/S2P

If you’re a basic rate taxpayer then the tax relief is added automatically to your pension contribution. You put in £200 a month, the gov tops it up by £50.

if you pay tax at the higher rate then you let your accountant know how much you put in your pension in the tax year, the accountant grosses it up and your basic rate band increases by that amount meaning you pay more tax at 20% and less at 40%. It also reduces your income for things like child benefit tax charge.

Any amount you can pop in a pension is a plus, where else would you immediately get an extra 25% return? No where. Best form of saving there is. As long as you don’t need the money easily accessible.

Mine says the following:
If you’re working you may still need to pay National Insurance contributions until 7 January 2043 as they fund other state benefits and the NHS.

In other words, I don’t need to pay NI for my pension. In fact, it previously said that I didn’t need any more contributing years. They’ve obviously changed it to try to persuade me that I need to keep working!

I don't work as I'm carer.

You can't pay in a lump sum to a pension or more a year if you don't work?

Tax Relief on pension contributions is limited by earnings. So if you don’t work the maximum you can contribute and get Tax Relief is £2880.

You can put more in, but you won’t get Tax Relief on anything over £2880 so it’s not usually the best option as it will be taxed on the way out. So if you dont work then put £2280 in and anything extra you have put in a LISA or failing that an ISA.