Worried about lack of pension

[Ritaskeeterdidit]

I’ve found myself in my late 40s with only around 50k in my pension pot. I’ve been neglecting it for years due to having seemingly more important things to pay for/working part time to raise children and now I’m really worried. I’m self employed so no workplace pension to join. I will get a full state pension (whatever that looks like by the time I reach retirement age) but I’m not sure what to do for the best to bolster my private pension. How much, realistically, do I need to have in the pot to be able to live comfortably? Do I need to open a basic pension with AJ Bell or similar (one where I can be hands off) and put away as much as possible? I won’t have a mortgage by the time I retire so that’s something but I’m worried about affording the basics.

If you open a SIPP then every £100 you pay in HMRC will add an extra 20% for you and you can claim more if you are a high rate tax payer.

Some good advice about personalfinanceUK subreddit their flowchart is very clear lots of pension specific advice on there too. Can I ask do you have a husband or partner? If so have they continued in full time employment whilst you have taken the hit to be at home with the kids? In a SIPP someone else can contribute to your pot

Where is the thread about living on a state pension?

Another vote for rebel finance school, they also have a Facebook page where you can ask questions after/during the course to help with anything you don’t understand or a more personalised forecast.

Ive gone from not having a clue about any of it to understanding all of it from SIPPS, drawdowns, crystallising, 25% tax free, different investment funds - honestly it’s amazing

Check out Meaningful Money podcasts. They're a very accessible starting point amd there is an associated Facebook group which is perfect for this sort of question.

OP contact pension wise, they are funded by government and give really good and more importantly accurate information.

Will your self employed job be one you can do as you get older?

Plenty of people just have to work beyond retirement age.

Use a pension calculator tool like this

MoneyHelper https://share.google/SMzAmtyE0GQFQPFST

And play around with the numbers. Figure out how much you need to save a month into a SIPP to give you the a reasonable pension pot. I'd try to aim for around 100 to 150k if you can. You've got around 20 years to get there.

Remember when the calculator asks about gross contributions, that's the money you put in plus 20% from the government. Eg you put in £80, the government puts on £20. Your gross contribution is £100

@Morningswim Yes that's a good point to factor in. I have two jobs (main self-employed job and a side hustle) and they're both things I can do flexibly and for as long as I can (in fact I think I'd like to carry on working for as long as possible in some capacity as I'm quite a 'busy' person and I don't do very well with too much spare time).

you can't contact pension wise until you are 50 but they are a good call,

I think you said you were on track for full state pension and your house will be paid off, as soon as you pay your house off you can redirect what was your morgage payment into your pension without any drop in living standard ( maybe 90% and the other 10% for maintenance of property)
obviously with no mortgage you can live on less than currently though house maintenance is an ongoing factor
work out your current living expenses annually ( excluding mortgage) and include clothes Christmas and holidays maintenance of house and car pet bills etc , when you have a figure what you need annually then work out what % of this figure would be covered by state pension so if you need 20,000 after tax to cover living expenses you need approx £1700 a month , your 50K will yield about £200 as a pension, current state pension is £997 per month so you have a shortfall of £500 a month, so you need a pot of 125000 ( a 100K gives 400 per month on average so for 500 125k, total pot 175K with compound interest
to have this amount in 18 years time you need to save approx 357 a month ( before tax) with compound interest at 5% however most SIPP funds out perform this so you would probably need less also your current 50K will be worth £ 121k in 18 years (with 5% compound interest )
most peopes expenses drop after retirement, no commuting costs, no work clothes no lunches / coffees daily, however heating costs will go up as home for more of the time, also food can be variable, more time to cook so unlikely to grab a coffee out on commute or get takeaway as too tired to cook, but more likely to go out for coffee or lunch with friends, holidays can be cheaper as can travel off peak and midweek so going away tuesday to Friday is cheaper than a long weekend but you might take more breaks,

also you do not mention a partner as that will reduce the amount you need the bills for 2 are not double the bills for 1

That's good! I always think that is worth considering too. If you have a job you enjoy sometimes there is not the rush to retire /you can plan to top up your pension with part time work for longer

You are not the only one OP. It only hits some of us when we are reaching 50; there are always other priorities: mortgage, children, holidays, etc.

I only started contributing heavily late 40s, and now age 52 have a pot if 135k; still very low.

I wished I would have started earlier to benefit of the compound interest

Are you married? If so what's DH/DW pension like? Could you rent out a room in your home and put all that money into a pension?

Let's say you're 48 at the moment with £50000 in pension, to get a pension of £12000 as state pension age that you can take alongside your state pension, you would need to save:
£780 per month (including tax relief) if your pot grew at 2% above inflation
Or about £420 per month (including tax relief) if your pot grew at 5% above inflation.

You need a pot of £300000 in today's money in a SIPP (self-invested pension) at the time of retirement (e.g. through vanguard/Hargreaves Lansdowne/AJ bell etc) in order for the 4% you draw down annually to be worth £12000 to you.

This would give you an income of nearly £24000 which you should hopefully be able to live on depending on your spending patterns.

what happens if you die to your pension

you spend years paying a chunk in but then die before you can claim it - or say retire at 65/67 etc and have one year of it
what happens to the leftover pot ?

do you put in your will that you want your pension to go to abc ?

You specify a beneficiary when you set up the product (or later if for some reason you didn't to begin with, or if you want to change who gets it)

Thanks. Need to check what’s in mine. My will says goes to dd but might need do check what pension says

I was in the same situation a few years ago. When you became a Sahm pensions were not discussed. When I started to work in my late 40s I put all my salary into my pension. In 8 years I’ve been amazed by the growth. I use Vanguard for my Sipp. I invest company funds with interactive investor - which I find easier to use. I might switch my pension over to Interactive investor if the fees are similar. I’m very passive in my investments.

Every £100k in a pension pot only gives £400 a month pension - oh crap that is depressing!!!

You've got quite a long working life ahead of you (especially if you are a busy person!), and outgoings are typically lower in this period, so I would focus on working to make additional pension contributions. It'll build/ grow quickly. If you are SE, you need to just consider pension contributions (for yourself) as a cost of the business. If that makes the business not worthwhile, it might be better to look for more lucrative employment?

Also, how is your DH's provision? And do you have savings? Retirement income / expenditure is easiest looked as as a household rather than as individuals IME, but also considering what would happen / how the survivor would fare if one of you died earlier than 'expected'.

they aren't saying that it will pay you £400 a month pension. Rough numbers they are saying for every £100k you had in your pension if you got an interest return of roughly 4% a year then it would grow at roughly £4k a year.

Most people wouldn't have their retirement pot invested in cash though, certainly not 20 years out from retirement. You would want to be fully invested and averaging 8% plus annual returns.

Yes, me too. Very complicated circumstances in my case, but I thought I was going to be ok but divorce and having to sell an investment property mean that my pot is also very small. I am now (early 50s) saving as much as I can but also trying not to panic as that is not going to help.

it’s best to avoid the smug “I am retiring at 55 with a £1 million pot” threads.

I would keep in mind that you can also potentially downsize to release funds (and save living costs) and once expensive dc leave home it’s surprisingly cheap to live! We find we need about £2k a month and live very well, holidays come out of savings (once they are gone they can be cut back) we only need one car, we aren’t at state pension age but that will be nearly £2k a month as there’s 2 of us

If you had a £100k pension pot, a £400pm withdrawal wouldn't be an unreasonable draw actually, £4800py, just over 4%.
It's not an amount to be sniffed at, it would make a noticeable difference on top of £12k state pension, not bad for a relatively small pot of £100k, especially if the pot holder has not mortgage and a partner who also with a full SP and a similar sized pot, they would have about £35k pa to live on which is very liveable post DC and mortgage.

I’m in the same boat as you!
I’m 48, self employed and have just started paying into an H&L SIPP.
Only got 10k in it so far, but it is very satisfying watching it grow, the tax relief is very pleasing, and I’m shovelling a grand a month into it.
Am well aware I’ve left it VERY late, but when my mortgage is paid off in a couple of years time I am hoping to put at least half of my monthly income into pensions.