Pension Advice

[Gottahavefaithright]

I’m currently paying the minimum into an LGPS scheme which is likely to give me about 5k PA for life when I retire in t1 years. I have a pension from a previous employer that I put money into every month. I have increased my contributions to £250 per month into that. Current value is £120k. I’m overpaying my mortgage and hope to clear it in 6 years. Anything else I should be doing? I really want to retire at 60.

I don’t know the LGPS scheme but was myself in a central civil service one. I overpaid into that as it allowed me to take the pension a few years early without the standard reduction you get for taking it earlier than normal. It would be worth finding out whether you can make extra payments into LGPS and whether they would be worthwhile. Bumping up that £5k could be helpful!

How will you bridge the gap to state pension age? I would like to retire early so putting as much as I can into pension for the tax relief.

We retired 8 years ago. Over many years we had built up a reasonable size pension pot, and a similar pot in ISAs. We find it very useful to be able to mix where we draw from to balance the amount of tax we pay. We are aiming to run the pensions down and put it into ISAs over the next few years to simplify things when we die for our children. So I would recommend having some savings in ISAs as well as your pension.

@WobblyLondoner thank you, I will look into that also.

@GOODCAT My Husband should have a decent enough pension too. He is going to retire at the same time and has about 450k in his now and has about 2000 per month going in to it.

If we can clear the mortgage in 6 years we will plan to spend five years putting the money we have spare from that in ISA’s.

That is the plan but from personal experience I’m very aware that everything can change.

@Lincslady53 Thank you for sharing. We won’t be able to do the ISAs until we’ve paid the mortgage off. Hoping for five years of solid saving into them after that. We have been blessed with three amazing children and have spent a lot of money making memories and supporting them with their dreams so we haven’t managed to save huge pots for ourselves yet!!

The advice is to take 4% from a pension PA
So with 120k plus 5k a year plus stare pension that is about 21k
Less a bit of tax
Not much to live in

@zoeslim I have 11 years until I retire. So 11 years more contributions into my current £120k pot also. I currently put £250 net into it and will probably up that to £300 from next year.

Would it be more tax efficient if your husband paid some of his £2000 a month contribution into your pension, rather than his? Look at the tax relief now, but also who may be in what tax bracket when drawing back out.

If we can clear the mortgage in 6 years we will plan to spend five years putting the money we have spare from that in ISA’s

You will almost certainly end up better off if you let your mortgage run it's course and put the money in pensions instead due to higher investment growth over an 11 year+ period and favourable tax treatment.

@AlliuminBloom he is a higher rate tax payer (falling into the over 100k situation).

@Bjorkdidit I think we just want the freedom of no mortgage as soon as possible. I do hear what you are saying though and will think about it as an option, thank you.

I pay into an LGPS pension too.

When you say you pay the minimum, can you clarify what you mean? There isn’t a minimum/maximum as you pay a % in and that’s banded based on your salary.

There is the 50/50 option but it doesn’t sound like you’re in that given you want to boost your pension.

You can pay into AVCs, which is something I’ve started in the past few years. It is linked to your pension in that you have to take it at the same time and you can use it in place of your tax free lump sum, therefore increasing your annual pension amount. There’s a great LGPS Information and Advice group on Facebook with some very knowledgeable and helpful people on it, worth a look as there’s a lot more to be said about them than I can type here now!

We don’t overpay our mortgage as whilst I fully appreciate the mental wellbeing that can come from knowing it’s paid off, financially I’m immediately 20% better off getting the tax relief on pension contributions, and will hopefully benefit from a higher % growth on that compared to the interest rate on our mortgage. We can use the pension lump sum to pay off the mortgage, I have no qualms with that.