No Pension - 25, Gov looking to increase SPA to 75 HELP!!
Discussion
The mother has always been kicking me to get involved with a private pension or switch to a job where you can pay into a pension but my self employed job gives me the flexibility to essentially be my own boss whilst earning a good pay packet..
But having come across this article where they looking to increase the state pension age to 75 has really got me sitting up and take note in sorting out a pension as there's no way in hell I want to be working come 55 personally unless on my own choice for pocket money!
https://www.mirror.co.uk/news/politics/tories-rais...
The general consensus seems to be that come the next 20-40 years there won't be any state pension anyway.. hence the Gov pushing work based pensions where you pay in any amount or a certain amount and they your employer matches it or doubles it, is that right? State pension is something I have never planned on relying on anyway.
My question is I'm 25, my N.I contributions over the last 6/7 years have been little to virtually NOTHING, I am obviously way behind, I want to get into a private pension that isn't a scam or should I say, be worthless where come 50 I can draw on, I can put in 300 quid a month quite easily.
Has anyone got any pointers for VERY GOOD private pension where I can pay in and come 25/30 years time will be worth a good amount with atleast £300 P/M going into for the next 25-30 years.. where come 50/55 I can draw on.
The fear of paying all this money into a private pension for all these years and then find it's worth absolutely nothing when I want to claim is what holding me back.
Thank you.
But having come across this article where they looking to increase the state pension age to 75 has really got me sitting up and take note in sorting out a pension as there's no way in hell I want to be working come 55 personally unless on my own choice for pocket money!
https://www.mirror.co.uk/news/politics/tories-rais...
The general consensus seems to be that come the next 20-40 years there won't be any state pension anyway.. hence the Gov pushing work based pensions where you pay in any amount or a certain amount and they your employer matches it or doubles it, is that right? State pension is something I have never planned on relying on anyway.
My question is I'm 25, my N.I contributions over the last 6/7 years have been little to virtually NOTHING, I am obviously way behind, I want to get into a private pension that isn't a scam or should I say, be worthless where come 50 I can draw on, I can put in 300 quid a month quite easily.
Has anyone got any pointers for VERY GOOD private pension where I can pay in and come 25/30 years time will be worth a good amount with atleast £300 P/M going into for the next 25-30 years.. where come 50/55 I can draw on.
The fear of paying all this money into a private pension for all these years and then find it's worth absolutely nothing when I want to claim is what holding me back.
Thank you.
No comment on the pension platform but have you figured out how much you might need? A target semi retirement age of 55 sounds quite ambitious for 'only' £300/month. (please don't take this as a disincentive to start a pension, but make sure your expectations for contributions/payments are well founded).
Exactly. £300 pm for 30 years adds up to £108,000 to fund perhaps 35 years of not working. Yes, investment returns will make that bigger, but not enough that any hope of retiring at 55 is possible even if you have very low expectations of lifestyle.
Pay (a lot) more or retire (a lot) later.
Pay (a lot) more or retire (a lot) later.
Most of us dont want to work to SPA, thankfully you have woken up now that you need to do something about it whilst you are 25 and not 35 or 45 like some of us 
Have a play with a pension calculator (link below, it will give you a guide on how much to save and how long you need to build up using safe bet average returns from investments. Tax relief helps a lot to build up your pot.
Most self employed I know (inc myself) just have a SIPP - self invested personal pension. This is a tax wrapper, you are in control of it There are many providers, your bank for example. Have a look at intelligent finance at top of this forum at their service offer for PH members .
calculator.
http://www.hl.co.uk/pensions/interactive-calculato...
In its simplest form you just put money in each month, the pension provider will claim back 20% tax relief. If you are higher rate tax payer you or your accountant will claim another 20% back from HMRC. The money goes in your SIPP, you buy some low cost investment funds with it. When you 55 you can start to draw the money out. Its up to you what you invest in, a SIPP is just a tax efficient wrapper that you cannot access until 55, in return you get tax relief on what you put in.
Have a play with a pension calculator (link below, it will give you a guide on how much to save and how long you need to build up using safe bet average returns from investments. Tax relief helps a lot to build up your pot.
Most self employed I know (inc myself) just have a SIPP - self invested personal pension. This is a tax wrapper, you are in control of it There are many providers, your bank for example. Have a look at intelligent finance at top of this forum at their service offer for PH members .
calculator.
http://www.hl.co.uk/pensions/interactive-calculato...
In its simplest form you just put money in each month, the pension provider will claim back 20% tax relief. If you are higher rate tax payer you or your accountant will claim another 20% back from HMRC. The money goes in your SIPP, you buy some low cost investment funds with it. When you 55 you can start to draw the money out. Its up to you what you invest in, a SIPP is just a tax efficient wrapper that you cannot access until 55, in return you get tax relief on what you put in.
I presume you can put £300 towards it now but will be able to increase this (a lot) as your business grows? As noted above, you will need to set aside more than that.
This isn’t what you are asking about but the bit that worried me was that you are 25 now and don’t think you could cope beyond 50-55. You should love your work at your age and if not you should do something you do enjoy. Can you imagine being unhappily married now and counting down the days until you can divorce after 25 years?
This isn’t what you are asking about but the bit that worried me was that you are 25 now and don’t think you could cope beyond 50-55. You should love your work at your age and if not you should do something you do enjoy. Can you imagine being unhappily married now and counting down the days until you can divorce after 25 years?
This site is something I use a lot to try and model very rough results of different investment returns.
If you're not familiar with compound interest it's a bit of an eye opener.
They do call it the eighth wonder of the world. I just wish I'd thought of it earlier. You're very lucky in that sense.
https://www.thecalculatorsite.com/finance/calculat...
If you're not familiar with compound interest it's a bit of an eye opener.
They do call it the eighth wonder of the world. I just wish I'd thought of it earlier. You're very lucky in that sense.
https://www.thecalculatorsite.com/finance/calculat...
I am in a similar position but i am 39 
I just dont know who to go to and how to do it, i know how to build something, i now about mortgages, finance etc etc but when it comes to pensions most of the lingo isn't too understandable and worse than that like yourself i dont know who to use.
You hear all these stories about people paying in all their life and not getting much or them losing it so i am worried.
Would i just go to someone like hargreaves lansdown and just say 'i want a pension, i want to put in x per month'
I have a ltd company which is going ok so paying into a pension now has to make sense.
I just dont know who to go to and how to do it, i know how to build something, i now about mortgages, finance etc etc but when it comes to pensions most of the lingo isn't too understandable and worse than that like yourself i dont know who to use.
You hear all these stories about people paying in all their life and not getting much or them losing it so i am worried.
Would i just go to someone like hargreaves lansdown and just say 'i want a pension, i want to put in x per month'
I have a ltd company which is going ok so paying into a pension now has to make sense.
Edited by m3jappa on Sunday 18th August 08:16
The demise of the State Pension was confidently predicted 30 years ago. At the time the claim was that it would be gone in 20 to 30 years. It's still here - and will be for a long time.
It IS highly likely though that the age of eligibility for receipt of the state pension will continue to rise as this is a trend that has been in place for a number of years.
It IS highly likely though that the age of eligibility for receipt of the state pension will continue to rise as this is a trend that has been in place for a number of years.
This question is tantamount to impossible to answer with so little information. I would suggest you find - through personal recommendation - a financial advisor qualified to advise in this area and speak to them.
What I would say is to echo other posters who have said that retiring with a decent income on the back of 25/30 years of contributions at £300 per month is going to involve some higher risk investments
What I would say is to echo other posters who have said that retiring with a decent income on the back of 25/30 years of contributions at £300 per month is going to involve some higher risk investments
Personal pensions (of any type) are basically tax allowances. Any money you put into them (subject to the rules) are free of income tax today, grow free of capital gains tax and income tax, and when you come to withdraw 1/4 is completely tax free with the rest taxed at your marginal rate at the time.
Pensions got a bad name because insurance companies held a monopoly on them. You had to invest in their "With Profits" funds, which were expensive, paid away huge commissions to the adviser who sold you one and did not exactly have great performance.
These "With Profits" funds were exactly the same funds used in Endowment Policies that left millions with serious shortfalls, so it is no surprise that their association with "pensions" also gave pensions a very bad name and are a direct link as to your concerns.
However, that is history (apart from people who still hold them, of course). These days you can invest in what you want in a pension (within the allowed investments) just as you do with an ISA.
No one ever says these things about ISAs, yet for many they are not aware of the above and so continue to have outdated concerns about pensions.
I hope that clears some of your point up. A pension is a tax efficient wrapper (just like an ISA) and it is what you chose to invest in within these wrappers that will dictate your investment returns - not the wrappers themselves.
Equally, pensions are just one way of investing for your retirement, for many people an ISA could be a better route (more on this below).
To address your other points, the article you link to is talking about the opinion of an independent think tank, not the government.
It is probably inevitable that the state pension age will rise again in the future, but the state retirement age is only relevant in that this is when you will receive whatever state pension benefits are available at that time.
You can set your own retirement date for whenever you wish, you just have to work hard to fund this privately.
Given your aim is to retire 5 - 7 years before you can access your own private pension then it would make sense to also consider an ISA for part of your retirement provision.
I obviously don't know anything about your earnings, tax bracket, home ownership status or required income in retirement, so it is difficult at this point to add anything further. Please free to PM me regarding this if you (obviously) don't want to post those details here.
Also, thank you for the recommendation bogie (though Intelligent Finance is a mortgage company, we are Intelligent Money!
).
You need to get a plan in place and regularly review this to ensure you stay on track.
If you want to contact Nik on that thread he would be happy to work though this with you.
I hope that helps in getting you in the right direction.
Pensions got a bad name because insurance companies held a monopoly on them. You had to invest in their "With Profits" funds, which were expensive, paid away huge commissions to the adviser who sold you one and did not exactly have great performance.
These "With Profits" funds were exactly the same funds used in Endowment Policies that left millions with serious shortfalls, so it is no surprise that their association with "pensions" also gave pensions a very bad name and are a direct link as to your concerns.
However, that is history (apart from people who still hold them, of course). These days you can invest in what you want in a pension (within the allowed investments) just as you do with an ISA.
No one ever says these things about ISAs, yet for many they are not aware of the above and so continue to have outdated concerns about pensions.
I hope that clears some of your point up. A pension is a tax efficient wrapper (just like an ISA) and it is what you chose to invest in within these wrappers that will dictate your investment returns - not the wrappers themselves.
Equally, pensions are just one way of investing for your retirement, for many people an ISA could be a better route (more on this below).
To address your other points, the article you link to is talking about the opinion of an independent think tank, not the government.
It is probably inevitable that the state pension age will rise again in the future, but the state retirement age is only relevant in that this is when you will receive whatever state pension benefits are available at that time.
You can set your own retirement date for whenever you wish, you just have to work hard to fund this privately.
Given your aim is to retire 5 - 7 years before you can access your own private pension then it would make sense to also consider an ISA for part of your retirement provision.
I obviously don't know anything about your earnings, tax bracket, home ownership status or required income in retirement, so it is difficult at this point to add anything further. Please free to PM me regarding this if you (obviously) don't want to post those details here.
Also, thank you for the recommendation bogie (though Intelligent Finance is a mortgage company, we are Intelligent Money!
). You need to get a plan in place and regularly review this to ensure you stay on track.
If you want to contact Nik on that thread he would be happy to work though this with you.
I hope that helps in getting you in the right direction.
Rewe said:
This isn’t what you are asking about but the bit that worried me was that you are 25 now and don’t think you could cope beyond 50-55. You should love your work at your age and if not you should do something you do enjoy. Can you imagine being unhappily married now and counting down the days until you can divorce after 25 years?
Wish I’d paid attention to this. 28 years old, loathe my job and profession but can’t afford to leave it as I’d have to take a £20k pay cut....If you are planning to want to retire at 50-55 then I would strongly advise you look at a S&S ISA.
Something like Vanguard Life Strategy or Vanguard Target Retirement funds.
The advantages are very low cost, able to self manage, profits and growth 100% tax free and you can draw whenever you want.
The down sides are you can only pay into an ISA with income which has already been taxed and there is a limit of £20k per year.
A SIPP on the other hand the very earliest you can draw is 55 at things stand now, but its likely to go up. The government keeps saying they want SIPPs to be 10 years behind SPA. So if they really do push to 75 then its 65.... not good. This will have a massive impact on me as I plan to retire early and that plan is based around me being able to access my SIPP late 50s. The other down sides of SIPPs is often the fees are higher than an ISA. Not in every case, but often they are. Then when you come to draw down on your SIPP you pay tax at your normal rate after TFLS and Personal Allowance etc.
The up sides of a SIPP is you can pay into one directly from a LTD company, pre tax. However you get no tax relief. Or you can pay in post tax and get your standard rate. Limits are twice that of an ISA too.
As for how much you will need I would use this (very) rough formula to get you started if going the ISA route.
Decide age to retire, say 55. That gives you a 30 year window.
Decide what income you want at 55. Lets say £25k, just for this example.
Take that amount and x it by 25. So 25x25 = £625k.
So you will need, very roughly a pot of £625k at 55 to support an income of £25k.
Then to work out how much you need to contribute run a compound interest calculation at 4% growth per year.
This gets you back to about £850-£900 a month required for £25k with an investment window of 30 years.
You will have paid in about £300k. So you are doubling your money.
If you were to save £300 flat for 30 years you are probably, very roughly, going to end up with £200k ish. That will give you a possible income of around £8k a year.
Something like Vanguard Life Strategy or Vanguard Target Retirement funds.
The advantages are very low cost, able to self manage, profits and growth 100% tax free and you can draw whenever you want.
The down sides are you can only pay into an ISA with income which has already been taxed and there is a limit of £20k per year.
A SIPP on the other hand the very earliest you can draw is 55 at things stand now, but its likely to go up. The government keeps saying they want SIPPs to be 10 years behind SPA. So if they really do push to 75 then its 65.... not good. This will have a massive impact on me as I plan to retire early and that plan is based around me being able to access my SIPP late 50s. The other down sides of SIPPs is often the fees are higher than an ISA. Not in every case, but often they are. Then when you come to draw down on your SIPP you pay tax at your normal rate after TFLS and Personal Allowance etc.
The up sides of a SIPP is you can pay into one directly from a LTD company, pre tax. However you get no tax relief. Or you can pay in post tax and get your standard rate. Limits are twice that of an ISA too.
As for how much you will need I would use this (very) rough formula to get you started if going the ISA route.
Decide age to retire, say 55. That gives you a 30 year window.
Decide what income you want at 55. Lets say £25k, just for this example.
Take that amount and x it by 25. So 25x25 = £625k.
So you will need, very roughly a pot of £625k at 55 to support an income of £25k.
Then to work out how much you need to contribute run a compound interest calculation at 4% growth per year.
This gets you back to about £850-£900 a month required for £25k with an investment window of 30 years.
You will have paid in about £300k. So you are doubling your money.
If you were to save £300 flat for 30 years you are probably, very roughly, going to end up with £200k ish. That will give you a possible income of around £8k a year.
hellobello said:
The mother has always been kicking me to get involved with a private pension or switch to a job where you can pay into a pension but my self employed job gives me the flexibility to essentially be my own boss whilst earning a good pay packet..
But having come across this article where they looking to increase the state pension age to 75 has really got me sitting up and take note in sorting out a pension as there's no way in hell I want to be working come 55 personally unless on my own choice for pocket money!
https://www.mirror.co.uk/news/politics/tories-rais...
The general consensus seems to be that come the next 20-40 years there won't be any state pension anyway.. hence the Gov pushing work based pensions where you pay in any amount or a certain amount and they your employer matches it or doubles it, is that right? State pension is something I have never planned on relying on anyway.
My question is I'm 25, my N.I contributions over the last 6/7 years have been little to virtually NOTHING, I am obviously way behind, I want to get into a private pension that isn't a scam or should I say, be worthless where come 50 I can draw on, I can put in 300 quid a month quite easily.
Has anyone got any pointers for VERY GOOD private pension where I can pay in and come 25/30 years time will be worth a good amount with atleast £300 P/M going into for the next 25-30 years.. where come 50/55 I can draw on.
The fear of paying all this money into a private pension for all these years and then find it's worth absolutely nothing when I want to claim is what holding me back.
Thank you.
How are you earning a good pay packet but paying no NI? You really need to make sure you pay enough to qualify for a state pension. You would need quite a large pension pot to beat it But having come across this article where they looking to increase the state pension age to 75 has really got me sitting up and take note in sorting out a pension as there's no way in hell I want to be working come 55 personally unless on my own choice for pocket money!
https://www.mirror.co.uk/news/politics/tories-rais...
The general consensus seems to be that come the next 20-40 years there won't be any state pension anyway.. hence the Gov pushing work based pensions where you pay in any amount or a certain amount and they your employer matches it or doubles it, is that right? State pension is something I have never planned on relying on anyway.
My question is I'm 25, my N.I contributions over the last 6/7 years have been little to virtually NOTHING, I am obviously way behind, I want to get into a private pension that isn't a scam or should I say, be worthless where come 50 I can draw on, I can put in 300 quid a month quite easily.
Has anyone got any pointers for VERY GOOD private pension where I can pay in and come 25/30 years time will be worth a good amount with atleast £300 P/M going into for the next 25-30 years.. where come 50/55 I can draw on.
The fear of paying all this money into a private pension for all these years and then find it's worth absolutely nothing when I want to claim is what holding me back.
Thank you.
If you are in the high rate tax bracket then just putting cash into a private pension is going to get you a 40% gain instant gain (tax relief). You have youth on your side so that can grow, and through the benefit of compound interest/growth (year on year reinvestment) should grow very well.
At the very least start a SIPP pension by simply opening an account and putting the minimum cash sum in. This then locks in your ability to use previous years allowances further down the road (carry forward rules).
JulianPH said:
Personal pensions (of any type) are basically tax allowances. Any money you put into them (subject to the rules) are free of income tax today, grow free of capital gains tax and income tax, and when you come to withdraw 1/4 is completely tax free with the rest taxed at your marginal rate at the time.
Is it correct that after you've withdrawn the 1/4 tax free, in the following years, if you draw an amount each year that is less than the annual tax allowance then this is also tax free? Assuming you have no other income.pb8g09 said:
Rewe said:
This isn’t what you are asking about but the bit that worried me was that you are 25 now and don’t think you could cope beyond 50-55. You should love your work at your age and if not you should do something you do enjoy. Can you imagine being unhappily married now and counting down the days until you can divorce after 25 years?
Wish I’d paid attention to this. 28 years old, loathe my job and profession but can’t afford to leave it as I’d have to take a £20k pay cut....b
hstewie said:
hstewie said: This site is something I use a lot to try and model very rough results of different investment returns.
If you're not familiar with compound interest it's a bit of an eye opener.
They do call it the eighth wonder of the world. I just wish I'd thought of it earlier. You're very lucky in that sense.
https://www.thecalculatorsite.com/finance/calculat...
That's actually a useful little link.If you're not familiar with compound interest it's a bit of an eye opener.
They do call it the eighth wonder of the world. I just wish I'd thought of it earlier. You're very lucky in that sense.
https://www.thecalculatorsite.com/finance/calculat...
bhstewie said:
hstewie said: This site is something I use a lot to try and model very rough results of different investment returns.
If you're not familiar with compound interest it's a bit of an eye opener.
They do call it the eighth wonder of the world. I just wish I'd thought of it earlier. You're very lucky in that sense.
https://www.thecalculatorsite.com/finance/calculat...
I remember reading an article many years ago that explained compound interest in a great way. If you're not familiar with compound interest it's a bit of an eye opener.
They do call it the eighth wonder of the world. I just wish I'd thought of it earlier. You're very lucky in that sense.
https://www.thecalculatorsite.com/finance/calculat...
It showed an example of two people with the same income. Person A saves a set amount between the ages of 20 and 30, then stops saving and just left it growing. Person B started saving the same amount at 30, and continued to do so for the rest of their working life. Person A had more money at retirement.
Obviously the example needed a tipping point where the interest on A's money exceeded the monthly saving amount, which was easier when we had higher interest rates.
Newky Brown said:
JulianPH said:
Personal pensions (of any type) are basically tax allowances. Any money you put into them (subject to the rules) are free of income tax today, grow free of capital gains tax and income tax, and when you come to withdraw 1/4 is completely tax free with the rest taxed at your marginal rate at the time.
Is it correct that after you've withdrawn the 1/4 tax free, in the following years, if you draw an amount each year that is less than the annual tax allowance then this is also tax free? Assuming you have no other income.So this means if your total income (including any personal pension payments) for the current tax year is less than the personal allowance (£12,500) then there is no income tax payable.
red_slr said:
As for how much you will need I would use this (very) rough formula to get you started if going the ISA route.
Decide age to retire, say 55. That gives you a 30 year window.
Decide what income you want at 55. Lets say £25k, just for this example.
Take that amount and x it by 25. So 25x25 = £625k.
So you will need, very roughly a pot of £625k at 55 to support an income of £25k.
Then to work out how much you need to contribute run a compound interest calculation at 4% growth per year.
This gets you back to about £850-£900 a month required for £25k with an investment window of 30 years.
You will have paid in about £300k. So you are doubling your money.
If you were to save £300 flat for 30 years you are probably, very roughly, going to end up with £200k ish. That will give you a possible income of around £8k a year.
However with inflation at say a modest 2.5% pa the value in real terms of the 625k would nearly half over 25 years of drawn down which is something to consider in terms of pot size required. Decide age to retire, say 55. That gives you a 30 year window.
Decide what income you want at 55. Lets say £25k, just for this example.
Take that amount and x it by 25. So 25x25 = £625k.
So you will need, very roughly a pot of £625k at 55 to support an income of £25k.
Then to work out how much you need to contribute run a compound interest calculation at 4% growth per year.
This gets you back to about £850-£900 a month required for £25k with an investment window of 30 years.
You will have paid in about £300k. So you are doubling your money.
If you were to save £300 flat for 30 years you are probably, very roughly, going to end up with £200k ish. That will give you a possible income of around £8k a year.
Moreover whilst whilst compound interest on the investments over time will increase the final sum getting to the 625k figure inflation will reduce the spending power. So the 625k pot would in 30 years have the spending power less than half of same sum today, which then roughly halves over the drawn down period. Basically to have the equivalent of 25k pa in today's money to "play" with in 30 years time and pot needs to be roughly £1.1m, quite a lot isn't it?
Gassing Station | Finance | Top of Page | What's New | My Stuff