I’m 58 and I have this much in my private pension

[elsaandanna]

I have £75,000. In a Nest Account
My chances of retiring early are not looking good.
I genuinely did not understand the principles of a private pension despite being self employed for 30 years.
These things should be taught in schools!
My mortgage is paid off and I have about £8k in a rainy day fund.

I wish I hadn’t looked now.

I just wanted to say that you should not feel bad OP. I am a professional woman in my early 50s - I have always worked - but became a lone parent as so I had to focus on the costs of daily life.

I expect you are attached to your home, I know I am to mine, but if you dont need a two bedroom property there may be some advantage to be gained from downsizing.

What could OP downsize to? @Icedvanillacoffee

to be honest I think with all you have had on your plate you have done well. and you have a decade or so left to build up your pension so I wouldn't panic too much.

If you’re fit and healthy there is no reason you won’t be fine to work til 70 - my mum did that (opposite of my dad who retired on a decent pension at 57) as she needed to financially. Tbh I’m not sure what she’d have done if her health failed, but I assume she’d have had some benefit entitlements before pension age. But she’s happily retired in her mid 70s now.

Open a SIPP. You’ll get the 20% tax relief on it from the government. So that’s a nice top up.

Then buy some all world trackers/EFTs etc
Much better than a few percent in a savings account.

As my job is a childminder I can’t down size or take in a lodger.Although the reason I started to think about early retirement is that I’m shattered.
Childminding is full on! I’m rated Outstanding and I’m always full. I used to love my work.
Also the constant interference from the local authority, Ofsted etc means that childminder numbers have more or less halved in 10 years.

I have a 2 bedroom place with a garden. I’m lucky. It’s fully paid for.

There isn’t much scope to downsize. A one bedroom flat would mean I can’t work!

Besides, I love my home and garden. I have grown up kids who come and stay.

I think I should possibly look for some sort of civil service job and keep saving as much as I can. I still don’t want to move though. I’m set up here.

@fashionqueen0123The Nest pension gets the tax relief but I’ll look at your other ideas on the weekend

@PyongyangKipperbangThank you! I appreciate the understanding.

My Dad also told me at 18 when I got my first job to open a private pension years ago.
I’ve paid into it on and off over the years, having to stop when I was on mat leave etc because money was tight but it’s been ticking along in the back ground.
I’ve only just realised that now I’m in my early 40’s I need to be more proactive but thankfully due my Dad I have made a good start already.
At 18 my friends thought I was bonkers for paying into it!

You can have more than one. You can open a SIPP and start investing separately with spare cash.

As i am employed, is it not better to keep paying in to to my work Nest one, so that I get the tax relief?

I just wanted to come and say well done op. The whole pension situation can be a mine field. You’ve done bloody well!
I agree, this should be taught in schools. But then again, is it information they want you to know? Part of me thinks they just want us to work (and contribute) for as long as we can.

Keep going though, you are on the right path x

Well retiring early is a luxury that not many people will be able to afford. Unless they are wealthy or didn’t have much money in the first place. Put as much away as you can now and it’ll make a difference, presumably you’ll still have state pension as well.

Who’s “they”?

You've got £75k more than a lot of people. Just put in as much as you can over the next 10 years, that is all you can do so no point worrying about it.

Let this be a wake up call for people who are reading this.

If you keep up the NEST payments, you might be sat on enough of a pot to boost your retirement income by about £5,000 per year (very rough estimate). Which on top of the state pension would put you at about £17k/year or about £1,400 a month.

to figure out if you can retire early, consider that you might need to save £1,400 x X, where X is the number of months you want to retire early.

For example, if over the next 5 years (63), you can save another £10k in your rainy day fund you could afford to retire about 7 months early.

this is a massive simplification but doing a proper financial forecast won't move that dial very much at this stage.

What principles of a private pension do you wish you'd understood sooner?

Don’t look solely at your pension pot…you need to consider all your financial circumstances for this.

You note you’re mortgage free - do you have any other consumer debt? If yes, prioritise getting that paid off in full.

Do you have a fully funded emergency fund (generally 3-6 months worth of your core outgoings/expenses)? If not, that’s your priority after repaying any debt. Keep it in an easily accessible (in the event of any said emergency) - check MSE website for best/current deals.

Do you budget? What’s your excess income every month? If you don’t have any excess income you need to look at reducing your outgoings/increasing your income.

What age can you access your Nest pension? If later than when you’d like/have to retire then you need to think of how you bridge those years - start maxing out S&S ISA if you can.

Your Nest pension pot-get into the detail of this - what fees are you paying, what funds are you actually invested in.

Your pension pot will continue to grow, beyond your retirement date and right up until the day you expire - so you still (hopefully!) have decades left to sort this to a level you’re comfortable with.

Can you earn some extra from your current skills and experience? I'm aware of some childminders who sell packs to help other childminders or parents with resources or activity ideas. If you're rated outstanding that will give you a good starting point. What about offering training courses to others just setting up?

You can do both.

this might be useful to read

www.aviva.co.uk/retirement/aviva-pension/knowledge-centre/sipp-tax-relief-and-allowances/

I’m simple age OP and pensions weren’t a thing when I started work so am in similar situation.

An ISA with stocks and shares is good to consider.

Can I ask can you have a SIPP and a company employer pension?

Also, is a SIPP preferable to an ISA? I know with an ISA it’s flexible when you take money out and it’s tax free any withdrawals or gains.

I think that because you are over 55 you could access your pension at any time, so if you put some of your savings ( maybe £5000 of it ) into your pension you would get the 20% tax uplift (1250)immediately, you can leave it in there but be able to access it in an emergency. The only downside would be that if you do access it you could then only add 10000/ year ( think this it the amount ) to your pension going forward. Worth considering, unless you know you have costs coming up .

To echo others I also think you’re not doing too bad at all, a mortgage free house, 75000 pot and nearly 10 yrs to grow it is not too shabby.

using compound interest calculator initial deposit 75,000 adding £250 a month (plus inflation next year so 262 etc would be roughly 180,000 in 9 years
adding £100 a month about 150,000 ( growth 7% )
which is FTSE 100 yearly average; USA equivalent S&P 500 is about 10% a global tracker index around 8.5%
for all the above that is over decades the returns in last 3-4 years have been much higher
150,000 withdrawing 4% a year while rest grows gives you roughly an extra 6000 a year above state pension while this is not a huge amount living on 19000 a year is a lot better than just state pension at 13000 a year currently and is an increase of 40%
I would agree not to transferring nest egg of £25000 into your pension there is always house maintenance a new boiler a new car, in fact I would probably try to get it closer to 30+K before you retire that way you are not forced to cash in if the market dips but also even if market down one year you only need to take out 4% the over 96% stays invested and will continue growing another year
you will not be wealthy but retirement should be OK but 75,000 is not enough to retire early well you maybe able to retire at 65 instead of 67 but not now
I would try and work out with strict budgeting what you can realistically save per month and put 65-70% in retirement you get tax relief on this so its untaxed money going in ,10% into emergency fund ( cash isa at around 4% taxed money going in no tax on interest or on withdrawals) ) and 20-25% in stocks and shares following a large tracker fund like global or S& P 500 ( same as above taxed going in no taxes or capital gains on withdrawals)
I second rebel finance school
even without extra savings your 75000 with average return of 7% will be worth approx 145000 in 9 years time

if you can say what you can save monthly could give better estimates

Yes you can have as many pensions as you like. A SIPP is a type of personal pension where you choose your own investments. Most people with a SIPP invest in a global tracker either fund or ETF. The tax treatment is the same as for you company pension so you get tax relief of whatever you put in (if you’re a higher rate tax payer you have to claim some back off HMRC but otherwise it’s the same) and you can withdraw only at 57+ when you get 25% tax free and pay income tax on the rest.

an ISA you can invest in the same stuff but only after you’ve paid tax on it and then there is no tax on growth or withdrawal.

Ive always worked. I have tried to save (but not in a pension)

Do you have other savings then? £50k in an ISA is much more valuable than £50k in a pension as you will not pay tax on interest and withdrawals.

I do think if you had somebody come into assembly and do a one off explainer, in an engaging way about how pensions work and the different amounts of money and what it can mean for their retirement
It would at least mean some people thought about it more. I went to a school that did loads of this sort of stuff around gambling, debt, drink driving, the importance of voting. They managed to get really engaging people into talk about these things when we were about seventeen and it embedded lots of useful knowledge. They didn't do pensions unfortunately!