Is it worth paying into my pension

[andygo]

I'm nearly 65 with 18 months to go until I retire.

Is it worth paying into my pension. I have been with my current company 4 years and got auto enrolled into a 'Peoples Pension' and currently pay £150 per month with a similar amount put in by my employer.

Not sure its worth continuing as there will be very little growth due to charges and conservative investments by the pension co. I already have other pension provision, so not sure its going to make an appreciable difference if I carry on as I am.

Any rule of thumb suggestions would be helpful.

Thanks

[anonymous-user]

simple question, why would you not want free money from your employer.

returns might not be good at the moment, but if you can avoind taking the money out, then over the long term it will grow.

you havent mentioned tax either but dont forget pension contributions get a tax rebate

unless you need the cash now , Id keep saving

[JulianPH]

andygo said:

I'm nearly 65 with 18 months to go until I retire.

Is it worth paying into my pension. I have been with my current company 4 years and got auto enrolled into a 'Peoples Pension' and currently pay £150 per month with a similar amount put in by my employer.

Not sure its worth continuing as there will be very little growth due to charges and conservative investments by the pension co. I already have other pension provision, so not sure its going to make an appreciable difference if I carry on as I am.

Any rule of thumb suggestions would be helpful.

Thanks

If you are paying in £150 before tax it is costing you £120 a month to get £300 (with the same contribution form your employer) placed into a account for you.

I would stop thinking about it being a pension and start thinking about it being a tax free savings account.

For every £120 of net cash you put in you can withdraw £255 of net cash back out again.

So unless you know of another way to achieve a 47% overnight return on your money I would suggest you stick with this!

Cheers

[andygo]

Good advice, I'll just forget about it then, lol.

[JulianPH]

andygo said:

Good advice, I'll just forget about it then, lol.

No problem. Pensions are perhaps the most misunderstood tax wrappers (or tax allowances) there are.

You would never give up any tax allowance, but people give up this one because they consider it to be a product, rather than a tax allowance.

Happy to help, any more questions then just ask.

Julian

[andygo]

JulianPH said:

No problem. Pensions are perhaps the most misunderstood tax wrappers (or tax allowances) there are.

You would never give up any tax allowance, but people give up this one because they consider it to be a product, rather than a tax allowance.

Happy to help, any more questions then just ask.

Julian

Thanks for the offer. You might live to regret it, lol!

[ndtman]

Does being in the pension also entitle you to death in service?

[Ginge R]

andygo said:

I'm nearly 65 with 18 months to go until I retire.

Is it worth paying into my pension. I have been with my current company 4 years and got auto enrolled into a 'Peoples Pension' and currently pay £150 per month with a similar amount put in by my employer.

Not sure its worth continuing as there will be very little growth due to charges and conservative investments by the pension co. I already have other pension provision, so not sure its going to make an appreciable difference if I carry on as I am.

Any rule of thumb suggestions would be helpful.

Thanks

It’s a boring answer, but it’s impossible for anyone to say without knowing more. What is your annual and/or lifetime allowance, what is your health like, what could you do otherwise with the money, does scheme membership also offer life cover, have you considered estate planning issues, what is your taxation issue now and in drawdown etc?

[JapanRed]

keirik said:

simple question, why would you not want free money from your employer.

returns might not be good at the moment, but if you can avoind taking the money out, then over the long term it will grow.

you havent mentioned tax either but dont forget pension contributions get a tax rebate

unless you need the cash now , Id keep saving

Pensions aren’t my strong point but isn’t it entirely feasible that the OP could lose money? Eg he’s paying into the pension and so is his employer. But with Brexit hanging over us and the markets dropping, he could come out with less than he put in. Especially at short notice such as 18 months.

Or am I completely wrong?

[markiii]

technically correct, there is always some risk

however £120 per month cost is gaining £400 value

it would have to be some serious drop to lose money

[Zigster]

If you are (quite understandably) worried about market volatility over the short term, put the pension contributions into cash / near cash funds rather than equities, long-dated bonds, etc.

[BoRED S2upid]

ndtman said:

Does being in the pension also entitle you to death in service?

There’s a happy thought.

As said OP just cash it in on retirement and treat yourself to a holiday using your other pensions to actually retire on.

[BoRED S2upid]

ndtman said:

Does being in the pension also entitle you to death in service?

There’s a happy thought.

As said OP just cash it in on retirement and treat yourself to a holiday using your other pensions to actually retire on.

[andygo]

Ill see how the funds perform, I’m sure I can leave it until I actually need it.

Just didn’t want to chuck money away on management charges etc.

Thanks for everyone’s comments!

[TwigtheWonderkid]

JulianPH said:

If you are paying in £150 before tax it is costing you £120 a month to get £300 (with the same contribution form your employer) placed into a account for you.

I would stop thinking about it being a pension and start thinking about it being a tax free savings account.

For every £120 of net cash you put in you can withdraw £255 of net cash back out again.

So unless you know of another way to achieve a 47% overnight return on your money I would suggest you stick with this!

Cheers

Surely, if he waits until he retires, he can take 25% tax free and then in subsequent years, can take out his entire annual allowance tax free, assuming he has no other earnings. Hopefully, he can get the whole lot out tax free?

[JulianPH]

TwigtheWonderkid said:

JulianPH said:

If you are paying in £150 before tax it is costing you £120 a month to get £300 (with the same contribution form your employer) placed into a account for you.

I would stop thinking about it being a pension and start thinking about it being a tax free savings account.

For every £120 of net cash you put in you can withdraw £255 of net cash back out again.

So unless you know of another way to achieve a 47% overnight return on your money I would suggest you stick with this!

Cheers

Surely, if he waits until he retires, he can take 25% tax free and then in subsequent years, can take out his entire annual allowance tax free, assuming he has no other earnings. Hopefully, he can get the whole lot out tax free?

That would depend upon his tax rate each year. It may indeed be possible, but it may not. This has no impact whatsoever on the above though (which included basic rate tax).

[Ginge R]

TwigtheWonderkid said:

Surely, if he waits until he retires, he can take 25% tax free and then in subsequent years, can take out his entire annual allowance tax free, assuming he has no other earnings. Hopefully, he can get the whole lot out tax free?

You are correct.

The Personal Allowance does reduce by £1 for every £2 that your adjusted net income is above £100,000. This means the personal annual allowance is (currently) zero if an earner’s income is £123,700 or above. However, if someone, as you referenced, has no other earnings, we can disregard that.

So, in this instance, regardless of their ‘tax rate’, if someone has no other earnings, and if they have the funds to draw from that pension up to their annual allowance (currently £11,850), then there will be no tax to pay on the pension if drawn as income.

This might mean, of course, that the fund holder does not have to be retired to draw from his pension fund. If he earns £5,000 pa, and has a fund that can generate a further £5,000 pa, he will pay tax on neither and still have a further £1,850 pa headroom.

Ordinarily, for many savers, there is tax payable (and liable) on pension income. I am ‘fortunate’ in that I don’t have to pay tax on mine, or take it into account as taxable income against the annual allowance, as it is exempt.

But mine is very much an exception. So, it is curious (and misleading) to read that a pension is being advocated as a ‘tax free savings account’. I understand that the FT is running another story tomorrow on pension mis-selling.

[JulianPH]

Ginge R said:

TwigtheWonderkid said:

Surely, if he waits until he retires, he can take 25% tax free and then in subsequent years, can take out his entire annual allowance tax free, assuming he has no other earnings. Hopefully, he can get the whole lot out tax free?

You are correct.

No he is not, and by default neither are you, as you are making assumptions that do not take into account the information the OP has provided.

If the OP waits until he retires he will have both the state pension and the other pension provision he mentions, on top of these withdrawals.

It is therefore unlikely he will have the available personal allowance to be able to do this.

That is why I said it would depend on his tax rate each year, as it will.

I read the FT article. For anyone who can't get past the firewall, it is about independent financial advisers having their activities halted by the FCA for mis-selling after processing 5,000 pension transfers - worth billions of pounds - over the last 3 years.

It is truly frightening just how careful you have to be when dealing with certain financial advisers.

[Ginge R]

Very true. I know of one who swore by you guys. It must be an admin nightmare maintaining the standards that you do.