Would you rather have a good salary, or a solid gold pension?

Xenomorph

Member
So it's getting to that time of life when I'm actually interested in pensions. The golden years of final salary (defined benefits) schemes are well and truly gone, and these days all the risk and responsibility is put on the employee to make provision for their pension. I look at my Dad, who was a civil servant working for Dept of Transport. He retired at 60 and is doing alright. Currently burning through our inheritance on cruises :) Fair play to him though. I don't think his salary was ever that high. I believe this is still the case for civil servants, but they do get a decent pension.

So what's your priority? Would you rather enjoy life with a good salary and to hell with retirement? Or do you get worried about piling up enough cash to get you through the later years in life, and therefore save everything you can? Of course if you get paid enough, you can do both!

All a gamble though isn't it? You never know how long you're going to live. I would hate to not have enough money to live comfortably in retirement.
 

LeftyXXIII

Distinguished Member
I've got 20+ years until retirement and while I do contribute to my pension each month, I'd rather live while I'm fit and able as I have no idea what state I'll be in come retirement.
 

oneman

Well-known Member
Realistically, how much working life have you got left and how much have you saved so for ?

Reality is that people should be thinking about pensions as soon as they start work but I suspect most don't.
 

Xenomorph

Member
Realistically, how much working life have you got left and how much have you saved so for ?

Reality is that people should be thinking about pensions as soon as they start work but I suspect most don't.

Totally agree. And those first few years are the most crucial. Luckily I always paid into my employers pension scheme, probably the best piece of advice my parents gave me.
But when you see the amount of debt on young people these days you can understand why they don't really want to also pay into a pension scheme.
 

Skull n Bones

Well-known Member
I enjoy my life with my family and put a little bit away as savings, mostly for emergencies. I don't invest in pensions as no guarantee I or they will be around when that time comes, too many years to go yet.
 

Xenomorph

Member
I enjoy my life with my family and put a little bit away as savings, mostly for emergencies. I don't invest in pensions as no guarantee I or they will be around when that time comes, too many years to go yet.

If you put off pension contributions, you'll have to pay in a lot more to get the same benefit compared to if you'd started earlier.
 

The Dreamer

Distinguished Member
I'd rather have a good salary, and self-invest - it's relatively straightforward to break the LTA if you start early enough and have a decent paying job.

A bit late for my own circumstances, but this guys YT channel is worth a watch... looks like he's just starting out, but as a tax planner, he has some very interesting ideas that I wish I'd known about sooner (or at all)! There's little I can do now to avoid being whacked for taxes even in my retirement - but with a spot of forward planning....


 

Skull n Bones

Well-known Member
If you put off pension contributions, you'll have to pay in a lot more to get the same benefit compared to if you'd started earlier.

I don't intend to pay in any, or at best minimum, as too late to start now. Life's too short to worry about something that may happen 30 years in the future. I count on inheritance and property as my pension pot.
 

Xenomorph

Member
I don't intend to pay in any, or at best minimum, as too late to start now. Life's too short to worry about something that may happen 30 years in the future. I count on inheritance and property as my pension pot.

Fair play. But for most people, those things are even less certain than what your pension pot is going to be worth. Typical financial advice is to not rely on those two items specifically, in terms of future assets.
However everyone's circumstances are different.
 

Foster

Distinguished Member
I've been paying 10% (+5% from employer) since I was 23 (now 28) so hopefully come retirement I'll have a decent pot.
 

Xenomorph

Member
A bit late for my own circumstances, but this guys YT channel is worth a watch... looks like he's just starting out, but as a tax planner, he has some very interesting ideas that I wish I'd known about sooner (or at all)! There's little I can do now to avoid being whacked for taxes even in my retirement - but with a spot of forward planning....

When you say whacked for taxes, are you referring to exceeding the LTA?
 

owl61uk

Active Member
I have made contributions to 4 works pensions schemes over the years , around 35 years and still have another 7 years before I retire. I think I made the basic contribution and my employer paid in as well. Even adding them all up together I will be lucky if I get a pension of £3k per year.

So after I retire I would need to live for another 25/30 years to actually get my money back, as it were. And almost certainly if I have works pensions I would lose out on some benefits that may be available, council tax rebates, pension credits. etc.

So is it it worth paying into a pension or have the extra just now. Think I would rather have the extra just now. Plus on a grim note, you could drop down dead at any time, or keep poor health in later years and not enjoy your pension
 

craig1912

Banned
Been in company pension schemes all my working life and retired early two years ago. just started one for my youngest son who is 20 and eldest son has been putting in the maximum for the last three years so they should be sorted. I was always reasonably well paid but having a decent income when retired to be able to do lots of things now I have the time is important. If I have made a mistake it was relying almost solely on pensions (with their limits on flexibility) and not utilising ISAs etc
 

87gpk

Member
I don’t really know if you could only have one. I agree it’s important to think about but it’s one of a million things I think about to the point I’m not doing anything about any of them.

I get confused as I payed into a pension in my previous job (2013-2017) then in my last job (2018-Dec 31st 2020) I don’t know what happens with either of them, where is that money etc? Apologies for being clueless.

I have virtually no savings, no job at present but do live in my parents old house who are both gone now :(
 

The Dreamer

Distinguished Member
When you say whacked for taxes, are you referring to exceeding the LTA?
Yes, I'm in the fortunate position to have exceeded the LTA by some margin, which means that anything I drawdown in excess of the LTA gets hit with an extra 25% tax on top of one's marginal rate, or 55% tax if taken as a lump sum - either way, it works out at 55% tax in total (the 25% on top of a marginal rate of 40% is 55% of the whole).

Income £1000
Tax @40% = £400
Tax @25% on the remainder of the income (£600) =£150

Total tax = £550 = 55% of the original £1000

It basically regains (and then some) the higher rate tax relief on the original pension contributions.

With some careful tax planning (which I didn't do) it may have been possible to avoid a substantial part of this future tax bill. The only saving grace being that I still have some years left to grow the pot to where I won't really care about the tax (though that's a somewhat lazy attitude to take) - but that'll depend on what the markets do between now and then.
 

Xenomorph

Member
Yes, I'm in the fortunate position to have exceeded the LTA by some margin, which means that anything I drawdown in excess of the LTA gets hit with an extra 25% tax on top of one's marginal rate, or 55% tax if taken as a lump sum - either way, it works out at 55% tax in total (the 25% on top of a marginal rate of 40% is 55% of the whole).

Income £1000
Tax @40% = £400
Tax @25% on the remainder of the income (£600) =£150

Total tax = £550 = 55% of the original £1000

It basically regains (and then some) the higher rate tax relief on the original pension contributions.

With some careful tax planning (which I didn't do) it may have been possible to avoid a substantial part of this future tax bill. The only saving grace being that I still have some years left to grow the pot to where I won't really care about the tax (though that's a somewhat lazy attitude to take) - but that'll depend on what the markets do between now and then.

Wow that is a real hammering. I think most of us won't be going over the LTA though.
 

The Dreamer

Distinguished Member
I don’t really know if you could only have one. I agree it’s important to think about but it’s one of a million things I think about to the point I’m not doing anything about any of them.

I get confused as I payed into a pension in my previous job (2013-2017) then in my last job (2018-Dec 31st 2020) I don’t know what happens with either of them, where is that money etc? Apologies for being clueless.

I have virtually no savings, no job at present but do live in my parents old house who are both gone now :(

Get in touch with your old employers and ask for the contact details for the pension schemes you were a part of. You will most likely need your NI number when contacting the pension providers, but they'll tell you exactly what they need in terms of ID etc.

Most likely, you'll have two separate schemes run by two different companies. What you do with them is up to you - it may be possible to merge them into a single entity, most usually a SIPP.

Amazon product
You could do worse than read this book (there are many others, but this one is about as simple as it gets).
 

Xenomorph

Member
I don’t really know if you could only have one. I agree it’s important to think about but it’s one of a million things I think about to the point I’m not doing anything about any of them.

I get confused as I payed into a pension in my previous job (2013-2017) then in my last job (2018-Dec 31st 2020) I don’t know what happens with either of them, where is that money etc? Apologies for being clueless.

I have virtually no savings, no job at present but do live in my parents old house who are both gone now :(

Your previous pension schemes will still be there. Do you know who the provider is? Scottish Widows, Standard Life etc.
It's all done online these days, along with everything else. So get in touch with the provider and ask them how to access your accounts. Failing that, there is a govt pension tracking system, which could be useful to you

 

87gpk

Member
Get in touch with your old employers and ask for the contact details for the pension schemes you were a part of. You will most likely need your NI number when contacting the pension providers, but they'll tell you exactly what they need in terms of ID etc.

Most likely, you'll have two separate schemes run by two different companies. What you do with them is up to you - it may be possible to merge them into a single entity, most usually a SIPP.

Amazon product
You could do worse than read this book (there are many others, but this one is about as simple as it gets).

Your previous pension schemes will still be there. Do you know who the provider is? Scottish Widows, Standard Life etc.
It's all done online these days, along with everything else. So get in touch with the provider and ask them how to access your accounts. Failing that, there is a govt pension tracking system, which could be useful to you

Thank you both for the information, it’s very useful and I really appreciate it.

I will look into it both ways, got to do it now or never will! Won’t be massive amounts but money that I paid or can put into one for whenever retire eek. 43 now and think it is 67 pension age? Dreading it, can’t imagine going to have much.

Thanks again for your help
 

Xenomorph

Member
Thank you both for the information, it’s very useful and I really appreciate it.

I will look into it both ways, got to do it now or never will! Won’t be massive amounts but money that I paid or can put into one for whenever retire eek. 43 now and thing it is 67 pension age? Dreading it, can’t imagine going to have much.

Thanks again for your help

It's worth you checking your NI contributions. You need 35 years to qualify for the full state pension, which is £9350/year or £179.60/week. Not a lot is it?

 

The Dreamer

Distinguished Member
Wow that is a real hammering. I think most of us won't be going over the LTA though.

Yep. I get that most people in this thread are somewhat further down the road, so if they're not already close to the LTA, there will be little opportunity to breach it.

But for someone starting out, in their early 20's say, it is quite conceivable that any LTA will be breached by the time they get to retirement.

It's why I plumped for the 'well paid job' rather than a gold plated pension when answering the original question. It just opens up so many options for future financial planning - even FIRE if one so desired (Financial Independence Retire Early).

Generating a large pension pot though doesn't come free - I was shovelling in around 17% of my salary in the early days, on top of company contributions - far more than the general recommendation of 10% or so. And the greatest assistance in being able to do that if I'm honest, was having a wife that also worked (and still works) - I'm not sure I'd have managed that level of contribution had we not been an item! So it could be argued that my pension pot is that of two people combined, not just me.

And it also depends on one's lifestyle. Other than visiting friends in Ireland, we have only been abroad as a family twice in the last 20 years (which, considering my profession, speaks volumes I think). We don't smoke, drink little, and mostly eat at home. All these things (and we do them quite happily) over a lifetime will save a small (probably not so small in reality) fortune. If these savings then are invested, the returns over a number of years could be significant!
 

Xenomorph

Member
It's true you could be dead a year after you retire, who knows? But have you considered passing on your wealth to your kids. That's the beauty of a drawdown pension - that money is available to your dependents. God knows it's hard enough these days trying to get on the housing ladder. I want my kids to benefit from the financial breaks I had when I was younger. Like a free higher education.
I won't tell my kids this as I want them to make their own living, but they are in for a nice little windfall when I croak.
 

The Dreamer

Distinguished Member
It's true you could be dead a year after you retire, who knows? But have you considered passing on your wealth to your kids. That's the beauty of a drawdown pension - that money is available to your dependents. God knows it's hard enough these days trying to get on the housing ladder. I want my kids to benefit from the financial breaks I had when I was younger. Like a free higher education.
I won't tell my kids this as I want them to make their own living, but they are in for a nice little windfall when I croak.

Basically this is exactly the reason I took the 'pot' from my DB pension - so there's (hopefully) something left to be inherited. I didn't want my pension to effectively die with me.

The way things are set up, my wife will still be able to draw the same pension from the pot, whether I'm alive or dead - whereas she would have just received a small widow's pension from the DB scheme.

And when we're both gone, my older lad will inherit the lot (with the proviso that he looks after his brother). If I croak before I'm 75, they can even inherit the entire pot tax free (under current legislation)!
 

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