Pension Panic - WWYD

[lollypoppy123]

I'm having a belated retirement reality check at age 50.

I've had my head in the sand for a very long time. For context, I had a long time off work due to cancer so have, stupidly, not been paying into my pension. Now I'm 50, back working and I only have about £50k in my pension pot. My husband has closer to £300k in his. I'd love to retire at 62 but realising this is a fantasy.

Our outstanding mortgage is £200k and has ten years left. It's up for renewal this year. We have £50k in savings. Should we put those into our mortgage at renewal or would it be better to invest that in our pension?

I know that nothing is guaranteed so it's not so much asking for advice as WWYD. I can't sleep at night for worrying about the future and want to start ploughing as much money into mortgage / pension as possible but don't know which one to start with.

If you've had time off, have you checked your NI contributions are up to date/enough for the max State Pension? I'd start there - it may be the case you pay a small amount to cover a gap but that then puts you in a much better position in future (assuming we still have a state pension by then!)

I'd definitely work on maximising what you can now/putting the max you can into your pension and getting all the company matching you can.

With the 50k it depends on what it's doing now. Is it earning significantly more in interest than your mortgage rate? If not I'd probably reserve an 'emergency fund' and put the rest on the mortgage.

Pension, you get tax relief on it and the compounded growth should usually exceed the saving on your mortgage interest.
The mortgage will be gone in time with your monthly payments anyway, which will feel less and less over time.

Thanks for your replies. I should have added that I am self-employed by my own limited company so no company matching.

The £50k is currently sitting in Premium Bonds so earning more than my current very low mortgage interest rate but less than the likely increased rate we will pay when we remortgage.

Our outstanding mortgage is £200k and has ten years left. It's up for renewal this year.

The question for me is

• how big is the house and how much equity is there?

We might never pay our mortgage off tbh. We are raising our kids then will downsize

Premium Bonds is not a good idea. A SIPP would give you 20% tax back immediately. It sounds like it's not in a pension vehicle. Is that right?

Why on earth have you got it sitting in premium bonds if it is for your pension? It should be in SIPP where it is attracting the tax relief. Premium bonds are not guaranteed to get you a win every month. What are you averaging in prize money each year?
Have you checked your state pension forecast to see if you have enough qualifying years for your state pension or how many more you need? You can also check for incomplete years.

I am guessing the OP is referring to the 50k savings here rather than the pension which coincidentally are the same amount.

Check your state pension.

www.gov.uk/check-state-pension

Look at your assets as a whole.

You say 50k in your pension, 300k in husbands. What other assets do you have? House? Any potential inheritances?

Yes, that is probably the case. I missed that also. Even so I think there are better places for 50K than premium bonds. Fine if you've maxed out ISAs etc.

You need to look at this re your ltd company and pensions
Contributing to your pension via a limited company explained | unbiased.co.uk | Unbiased

Also, you have in theory 17 years to go until you retire so plenty of time to pay off your mortgage and top up your pension if you are careful.

Thank you all so much.

Yes, confusingly, we have £50k in savings (Premium Bonds) and I have £50k in a private pension. We plan to downsize when the kids are gone. At today's values, that would release about £400k in equity. I think I've always just relied on the equity being enough for a comfortable retirement but now that I'm crunching the numbers, I'm not so sure.

Thank you - I'll look at this. Also stopping living like there's no tomorrow with immediate effect. Too little, too late, I know.🙄

Because you have a Ltd company you can put any extra profit you make into a pension. You will save paying any corporation tax on it.

We were in a very similar situation to you at 50, we’ve spent the last 10 years working very very hard and putting all profit (apart from our dividends) into a pension. we’ve now both got very healthy pension pots. It can be done.

No ISAs. I am a terrible financial planner, I know. But am going to turn things around immediately.

You can get even a cash ISA with over 5% at the moment. Put the max into one for you and one for your husband now. After the new financial year put the other 10k in and save into them.
Your 50k would give you £2500 in interest a year.

Make sure any further pension payments (up to £60k per year) go from your Ltd co bank account to your SIPP provider as an employer contribution. This will reduce the tax burden

What income are you aiming for in retirement (as a couple)? For ref Home - PLSA - Retirement Living Standards

How much do you earn and how much of that can you put in a pension?
How old is your husband, how much does he contribute and when does he want to retire?

Surely you'll need the equity to buy somewhere to live?

I’m in a similar position, a big younger but not by much. It actually terrifies me. The thought of potentially working past 60/65 out of necessity and being a doddery old chocolate teapot in any workplace is also scary!!! Honestly, there’s a reason we’re meant to not work past a certain age. 🙄🤣 I can only imagine the uselessness of me dreaming about gardening and travel but having to ‘keep up’ with new fangled methods at work. (Which I’m sure will be the methods we tried 30 yrs ago but didn’t work!)

Our earnings are pretty variable but net income probably in excess of about £50 - £60k each after tax. Husband is same age as me. I think we'd probably need about £30k each as retirement income to maintain a comfortable lifestyle. I'm now realising that's a huge sum of money.😥

We threw all our money at our house so that's worth quite a bit. We should have £400k left over after we've downsized. Intending to sell up when mortgage is paid off in ten years.

I'm no help, but feeling v similar to you and reading with interest! My pension pot is 43k (self employed, earnings too low to be able to put anything in for YEARS but hamstrung by needing flexibility in work for my dc as their father does/contributes sod all).

Household income (including new dh) is 48k. Dh has a few small private pensions but won't be anywhere near what we'll need and I can see myself having to work until I drop but can't see a route to improving things until my dds are self sufficient (by which time I'll be pushing 60).

We have around 400k equity in today's values and no savings at all as old cars keep going wrong. Obvs would need to live somewhere too.

If you haven't already got an IFA, chat to one and make a plan now. Fwiw, sounds like you're in a pretty good position but I realise it doesn't feel like that.

Having worked flat out my entire adult life (and done up 14 properties, mainly with a financially irresponsible exh) the whole thing just makes me feel sick, esp as we live really frugally now. Scary.

60k between you to retire on sounds loads if you have no mortgage to pay. That's what most families live off now with a mortgage etc. are you planning on some fancy cruises?
Also presuming you still get the state pension (I am almost the same age as you and hoping it'll still be a thing!) that's almost 1k a month each which will help

Interesting - we are in similar situations. I'm hoping that if I can save like mad and live very frugally (never done either of these things), I can turn things around. Another thing we could do is to retire to Ireland where I'm from originally as property is much cheaper than where we live in SE England. Not my first choice but something we could do if necessary.

Is your state pension up to date? There’s an end of March limit date for topping up missed payments -you need to check that.