Choosing a pension at 38yo
Discussion
I really need some help/advice here!!
I left the army after 8 years so have a very small pension from there but no where near enough to live on. Should have really stuck it until my 12 year point...but when it's time to go... Had enough and wanted out.
I've been self employed the last 10 years but have just been taken on the payroll by my employer and looking at starting a pension within the next month. By the time my bills est have come out I'm left with around £500 p/m to live on but not really spending anything 2 weeks the month when in work as everything's provided so enough to get by on.
If I put £100p/m into a pension & my employer also put £100 in to give £200 a month will this be enough for when I retire? I'm 38 this year so need to get something sorted ASAP really! Is £200 a month a decent amount to pay in or should I be looking at more?
Very new to this so haven't a clue how it all works and who to go with? (I need advice!!)
My NI has been paid regularly since leaving the army (not sure if that'll make a difference or not) class 2 & 4 when SE and whatever it is now (gets deducted from my pay along with my tax)
Thanks Dave
I left the army after 8 years so have a very small pension from there but no where near enough to live on. Should have really stuck it until my 12 year point...but when it's time to go... Had enough and wanted out.
I've been self employed the last 10 years but have just been taken on the payroll by my employer and looking at starting a pension within the next month. By the time my bills est have come out I'm left with around £500 p/m to live on but not really spending anything 2 weeks the month when in work as everything's provided so enough to get by on.
If I put £100p/m into a pension & my employer also put £100 in to give £200 a month will this be enough for when I retire? I'm 38 this year so need to get something sorted ASAP really! Is £200 a month a decent amount to pay in or should I be looking at more?
Very new to this so haven't a clue how it all works and who to go with? (I need advice!!)
My NI has been paid regularly since leaving the army (not sure if that'll make a difference or not) class 2 & 4 when SE and whatever it is now (gets deducted from my pay along with my tax)
Thanks Dave
Dai,
It's certainly a good deal at face value, but I wouldn't place too much reliance on pensions for now. There is a 'consultation' in progress which will see big changes to the pension wrapper, and might see them being replaced by a PISA (no smirking at the back) - a Pension ISA which sees no tax relief upfront with contributions, but no taxation on draw. If you're bored, grab a look at the front page of today's FT.
But for now, that deal seems a good deal - certainly at face value. Go to the Money Advice Service website for more info on pensions.
It's certainly a good deal at face value, but I wouldn't place too much reliance on pensions for now. There is a 'consultation' in progress which will see big changes to the pension wrapper, and might see them being replaced by a PISA (no smirking at the back) - a Pension ISA which sees no tax relief upfront with contributions, but no taxation on draw. If you're bored, grab a look at the front page of today's FT.
But for now, that deal seems a good deal - certainly at face value. Go to the Money Advice Service website for more info on pensions.
£200/month at 38 isn't going to get you much of a pension, but it's better than nothing. And don't forget, you get your tax back on your contribution, so your £100 will only cost you £80 assuming you're a 20% tax payer.
As a very rough guide, you should look to pay half your age when you start your pension as a percentage, so at 38 you should be paying in 19% of your salary up to retirement. But if you can't afford it, anything is better than nothing.
As a very rough guide, you should look to pay half your age when you start your pension as a percentage, so at 38 you should be paying in 19% of your salary up to retirement. But if you can't afford it, anything is better than nothing.
griffin dai said:
By the time my bills est have come out I'm left with around £500 p/m to live on but not really spending anything 2 weeks the month when in work as everything's provided so enough to get by on.
If I put £100p/m into a pension & my employer also put £100 in to give £200 a month will this be enough for when I retire? I'm 38 this year so need to get something sorted ASAP really! Is £200 a month a decent amount to pay in or should I be looking at more?
1:1 match is a great deal! If I put £100p/m into a pension & my employer also put £100 in to give £200 a month will this be enough for when I retire? I'm 38 this year so need to get something sorted ASAP really! Is £200 a month a decent amount to pay in or should I be looking at more?
What's your top rate of tax?
- If you're paying 40% tax you'd be a fool not to do the pension. The £100 you put in will only cost you £60 of take-home pay. And for your £60 you will get £200 of pension investment. Snap it up!
- If you're paying 20% tax you should still think carefully about doing the pension. The £100 you put in will only cost you £80 of take-home pay. And for your £80 you will get £200 of pension investment. Still pretty good value, I'd say.
- You're never too old to start. The sooner you start the better.
- If an employer is willing to match your contributions, it's free money!
- Any pension is better than no pension. "Enough" is a difficult concept.
- The government review is no excuse for delay. Tax relief will be made less generous, not more generous.
£200 isn't allot but as others have said it is better than nothing. Due to the tax breaks pension contributions often make the best long term investments. Unless you have any high interest debt then is makes sense to bung in as much as you can as soon as you can bearing in mind compound interest / gains.
The current "advice" is to have enough put away for roughly 60-70% of your take home. So if you earn £20k now you would need to have an income of £13-£14k at retirement to live ok. You would need to consider inflation though. If you earn say £30k its going to be a lot harder to get to £20k PA income - you need quite a large pot! For £20k income you are going to need a pot not far off £400k...
Quite scary stuff when you sit down and think about it!
You are heavily dependant on the rules set out by HMG with pensions, and that is a big risk these days.
Quite scary stuff when you sit down and think about it!
You are heavily dependant on the rules set out by HMG with pensions, and that is a big risk these days.
red_slr said:
The current "advice" is to have enough put away for roughly 60-70% of your take home. So if you earn £20k now you would need to have an income of £13-£14k at retirement to live ok. You would need to consider inflation though. If you earn say £30k its going to be a lot harder to get to £20k PA income - you need quite a large pot! For £20k income you are going to need a pot not far off £400k...
Don't forget retirement income won't all come from your own pension, you can add in the state pension - about £7k in today's bananas. So in the illustration above you'd need an exta £7k which would be a pot around £140 if you get a 5% annuity - or whatever vehicle is popular at the timeAlthough I imagine we all plan to earn a lot more that 20k by retirement.
Assuming SP exists for us. SP age might well be 75 by the time people in their mid 30s get to the age of being able to claim. All my own calcs always exclude SP as I hope to retire at 55.
May not take the pension then (probably wont be able too either).
As for the pot, it depends I guess. As a self employed couple its a big ask for us to both get a pot of £400-£500k by 55. The other issue is it may get locked in till 57+. God knows what tax implications will be!
I think once we hit 50% of our target we will have to sit down and think if we risk the rest or put it in cash and forgive the tax relief .
May not take the pension then (probably wont be able too either).
As for the pot, it depends I guess. As a self employed couple its a big ask for us to both get a pot of £400-£500k by 55. The other issue is it may get locked in till 57+. God knows what tax implications will be!
I think once we hit 50% of our target we will have to sit down and think if we risk the rest or put it in cash and forgive the tax relief .
TwigtheWonderkid said:
£200/month at 38 isn't going to get you much of a pension, but it's better than nothing. And don't forget, you get your tax back on your contribution, so your £100 will only cost you £80 assuming you're a 20% tax payer.
As a very rough guide, you should look to pay half your age when you start your pension as a percentage, so at 38 you should be paying in 19% of your salary up to retirement. But if you can't afford it, anything is better than nothing.
For clarification: As a very rough guide, you should look to pay half your age when you start your pension as a percentage, so at 38 you should be paying in 19% of your salary up to retirement. But if you can't afford it, anything is better than nothing.
Do you mean (using 38 as age of employee)
employee contribution = 19% + employers contribution
or
employee + employer = 19%
esxste said:
For clarification:
Do you mean (using 38 as age of employee)
employee contribution = 19% + employers contribution
or
employee + employer = 19%
I think the aim is to hit the 19% target, regardless of whether that includes any employers contribution, which can't necessarily be relied upon for all people, certainly not at the moment. So if you're on your own it will be 19%, but if your employer will put in 5% then you've only got to fund 14% yourself.Do you mean (using 38 as age of employee)
employee contribution = 19% + employers contribution
or
employee + employer = 19%
Steve Evil said:
esxste said:
For clarification:
Do you mean (using 38 as age of employee)
employee contribution = 19% + employers contribution
or
employee + employer = 19%
I think the aim is to hit the 19% target, regardless of whether that includes any employers contribution, which can't necessarily be relied upon for all people, certainly not at the moment. So if you're on your own it will be 19%, but if your employer will put in 5% then you've only got to fund 14% yourself.Do you mean (using 38 as age of employee)
employee contribution = 19% + employers contribution
or
employee + employer = 19%
Just a very rough guide.
TwigtheWonderkid said:
Ozzie Osmond said:
1:1 match is a great deal!
You're not wrong, I'm on 2:1 and I thought that was good. On 1:1 I'd be selling my kidney on ebay to get funds for the pension!
Quote from my company statement; "In the past 12 months the Company has contributed £11,090.00 towards the cost of your pension. You also made personal pension contributions totalling £2,175.00 for this period"
ikarl said:
I was really lucky when I joined my current company as I got into the last final salary scheme
Quote from my company statement; "In the past 12 months the Company has contributed £11,090.00 towards the cost of your pension. You also made personal pension contributions totalling £2,175.00 for this period"
Does the size of the contribution actually matter on a final salary scheme. Surely you just get the proportion of your final salary you're entitled to dependent on years service, regardless of contribution level? So, 40 yrs service, 40/60 of final salary, or 2/3rds. Do you still get 25% of pot tax free? How does it work?Quote from my company statement; "In the past 12 months the Company has contributed £11,090.00 towards the cost of your pension. You also made personal pension contributions totalling £2,175.00 for this period"
Ginge R said:
There is a 'consultation' in progress which will see big changes to the pension wrapper, and might see them being replaced by a PISA (no smirking at the back) - a Pension ISA which sees no tax relief upfront with contributions, but no taxation on draw.
IF the "No access until you're 55" thing continues under that arrangement, why would anyone ever put money in something like that, unless they want to put aside more than the limit for a normal ISA in a given year? Seems to be putting the money out of reach with no benefit for doing so.That's the feeling I am coming round too these days too.
We generally put our pensions up each year but we left them last year.
We pay in via our LTD so it means we may still continue due to new div tax but you have to keep watching it all like a hawk just to make sure you don't get shafted. Not great really.
We generally put our pensions up each year but we left them last year.
We pay in via our LTD so it means we may still continue due to new div tax but you have to keep watching it all like a hawk just to make sure you don't get shafted. Not great really.
onomatopoeia said:
IF the "No access until you're 55" thing continues under that arrangement, why would anyone ever put money in something like that, unless they want to put aside more than the limit for a normal ISA in a given year? Seems to be putting the money out of reach with no benefit for doing so.
If you put £10K into an ISA, and you're a 40% taxpayer, do you get £4K back?Gassing Station | Finance | Top of Page | What's New | My Stuff