Starting a pension at 64. Totally crazy, stupid and insane?

[Beautyandthemoon]

title may be exaggerating, apologies

So my mum never had a private pension. (Was a sahm, low paid jobs, ill health ) She has state pension though and recently bought years.

Today she told me she wants to start a private pension! She read that’s it’s never too late and she can take the money out at like 74 or later.

She said even a small amount/something is better than nothing!

And at least it could maybe pay for funeral costs or a holiday one day

Her siblings and my brother think it’s crazy and stupid?

She already signed up to nest pension as self employed.

what do you think? Too late and she should not bother?

Depends what she's putting in, how much tax relief she's entitled to etc.

Depends what she's putting in, how much tax relief she's entitled to etc.

Depends what she's putting in, how much tax relief she's entitled to etc.

I’d be concentrating on maxing out my ISAs if I were her if she has any spare cash

Very tiny amounts. She doesn’t earn enough to pay tax. 12k. Which is why it sounds weird

Too little info to answer but things to think about:

1. How will she cover her living costs when she’s not working. If she doesn’t have a pension or much savings she might be entitled to pension credit, housing benefit and other benefits which would cover her costs.
2. How much are her living costs and when would she stop work altogether? Would she be able to cover expenses with state pension and self-employed work for the next 10 years while she saves into a pension. She might be able to save tens of thousands in that time.
3. contact the money advice service, self employed people over 50 can get a free pension review from the govt.

Forgot to add, she currently earns less than 12k

It’s ridiculous. When does she intend to retire? She’s not paying tax, so there are no tax savings to be made. She’s self-employed so there will presumably be no employer contributions assuming she’s a sole trader. Even if she managed to save £1000 a year for the next handful of years, it would give her an income of less than a tenner a week. She’d be better of saving into an ISA if she wants a lump sum for a holiday or something.

Totally pointless.

She’s about to be employed from next month so will get employer contributions

shes saying she avoiding an isa because you need to understand what you are investing in but I a private pension it’s done for you, just pick default

She plans to retire at 75

Not completely useless. Employer contributions aren't nothing (if you don't take them it is pay you are going without). Because she earns so little, and NEST is a relief at source scheme, her contributions will be topped up by HMRC (so she will get 29% extra).

If she is planning to keep working for a few years she will likely save a small lump sum that she is able to withdraw in a few years, possibly without having to pay tax. She isn't going to produce a useful pension income from her pot, but she could have a little nest egg.

That should say 20% extra

Currently she'll get tax relief on her contributions so it's probably worth doing as it is money for nothing.

Definitely worth doing if she has the spare cash.

For every £80 she puts in, it will get topped up to £100.

Her tax paying status is irrelevant to this. Even people who earn zero get the tax benefits on annual pension contributions of £2,880 (net).

The only thing to say about most pension schemes is that the default funds are normally crap. Make sure that she understands her tolerance to volatility and picks a fund that will perform within her tolerance for risk.

If she can tolerate an equities only fund then Nest's Sharia fund has been returning 17% per year. Her age suggests that this might not be an appropriate fund choice, but if she's happy to leave it for 10 years, then that should be enough time to ride out any market dips. It's risky, maybe too risky, but might be her best chance of making some cash

Worth doing it if she gets employer contributions. It's free money.

Agree with this. She'll get 25% on top of her contribution up to a net annual contribution of £2,880 (to give a max contribution of £3,600 per year). Not to be sniffed at. She'll need to think about what to invest in though as it's not recommended to invest in stocks and shares for a timeframe of less than (at least) five years.

Nest always put new pensions (irrespective of age) into low risk funds, and due to her age they ow won't move it. If she isn't planning on using it for another 10 years, I'd be inclined to move it to the sharia or ethical fund.

Just to add, Nest will eventually move the contributions to a higher risk fund if the employee is young then move it back to low risk as they approach 60 so it's worth keeping an eye on this if anyone has a Nest pension