42 and very little pension - advice greatly appreciated

[Bonnie2101]

I’m 42 and for various reasons i only started paying in to a pension a few years ago. In those last few years i’ve also had two maternity leaves. My pension pot at the moment is just over £9k which is pretty depressing but i’m trying to do what i can now to help me in the future. My employer is now matching contributions up to 8% so i am upping my pension contribution from 4% to 8% when i return to work in the new year. I could possibly up my contribution to 10% but as my employer doesn’t match above 8% i am wondering if i should that money (i think an extra 2% equates to just over £50 a month) in a different type of savings plan/private pension/stocks and shares?

My student loan should be paid off in a years time, so i will have the money that was paying that off available then. Current that’s around £75 a month on my pro rata salary.

My savings total £37k but approx £15k of that will be used on house renovations this coming year. I have just put a lump sum in a fixed rate bond for a year and that will pay out interest that will max out my tax free savings allowance next year. I also opened a ISA and put the rest in that.

My partner is due a decent pension but we are unmarried so i want to protect my own future and get my finances in order. There are just so many options and things to consider. Any advice greatly appreciated.

NC for this one.

Have you checked that you have enough NI contributions for your state pension? This can often be a cheap fix for a boost in your retirement savings.

You're so on it @Bonnie2101 and you didn't even know it!!

I'm in a similar situation with not being married, but we will get married when the stars financially align so it makes sense. You will get advice from people on here telling you to get married because they assume certain things that aren't relevant to you. Just make sure you read up on what marriage changes. It is all on the citizens advice website. You can then apply that information to your own circumstances.

I'm a bit torn with investing in my own property v's sticking all my money into a pension. I think there is a definite balance to be struck here. I want to live in a certain type of house so that is my goal and that will become my pension when I downsize. Only hindsight will tell me which would have been the most profitable investment, but it is the value of living in the home I need and love that a price can't be put on. I will live a better life in a house I love than a house I don't with a stacked pension pot!

I think what I'm saying is, try balance your financial plans with your values then you will be happier. If you are just comparing your pension pot to somebody elses pension pot at 42 then its going to cause stress. Focus on you and your families goals, protect your financial independence, but work together with your partner to live a good life. It's not easy to keep monitoring and predicting all the future tax rules, inheritance tax changes, house price increases, stocks prices etc so to maximise your results, so that's why I focus on being in the right ball park. If you have a home you're paying off, no consumer spending debts and a pension pot, that's golden. 👌

I’ve started working for my LA because their pension is good. I think for every £100 I put in they put in £350 or something. I am buying extra years of pension so I sacrifice about 9k of my salary per year of work plus 10% pension contributions and get credited with two years of pension. Am 44 so if double up pension for next 20 years it should be ok for me.

Damien talks money

have a look at this video too. You sound like you’re in a great position and can get on top of your pension easily. I started 3.5 years ago sorting out my pension. the change I’ve managed to make in that short time has been big and I feel really confident I will get there now.

@IDoLikeToBeByTheSea yes we have 2 young DC so some of saving capacity will be used for them. We have no formal agreement in place regarding the deposit.

@Wolfpa Idid and i was on track to achieve it, however i will double again so i am
clear how many more years i do need. Thank you

You have been so so helpful @Yocal I really appreciate it

@FuckinghellthatsUnbelievable definitely goes to show how you can turn things around with a super focused and committed approach, esp if you find a good position/employer like you have and are able to sacrifice a good chunk of salary. Thank you for sharing, much appreciated.

@sonypony brilliant thank you. Lots to watch over the festive period and ahead of a new year :)

As your employer will match 8%, doing 8% yourself makes sense.

Then look at ISA. Do you have anything in S&S ISA? Using that does not get the benefit of tax relief but it is more accessible than pension.

Most people just need Pension and ISA.
Pension wins long term, so the more you do to that the better but don't do all to that and none to ISA. At retirement you want to be able to choose from a mix of investments, depending on the tax position at the time.

Pension to the match, then build ISA, then increase pension.

Dave Ramsey would say 15% is a good percentage of income to aim for, so in your case 8% to pension, then 7% to ISA. Once ISA has a good amount in it, say £30-40k, then up the pension percentage.

Video: Pension vs ISA

m.youtube.com/watch?v=y-4s1wqwQ7k

You still have 20+ years of working life to save! Put in as much as you can, it doesn't matter if your employer won't match it all - it's still money you're saving and it's still the most tax-efficient way to save. You've got this.

I am in a very similar position as the OP. I have just been gifted £1k from a family member. There is nothing immediate I need to spend it on and I have no debts/credit cards other than a joint mortgage. Should I put this £1k in to my pension as one off payment?

@winnie1980 Yes you could put it into pension, assuming you are not over your pension annual allowance (thus not able to get tax relief on it).
You could put it into ISA, which is more accessible but does not get the 25% tax relief on the way in, but ISA is tax free. You could 50/50 it, some to pension, some to investment ISA.
You could pay it off the mortgage.
There are all sorts of thing you could do, but there is nothing you Should do. It is very hard to predict the future to know what is the most beneficial thing to do with it today.