Advice for someone with no pension.

There always seems to be threads on here about how much pension people have and what age they’re going to retire on it. To address the balance I’m wondering who else doesn’t actually have a private pension and what their plans are come retirement age? I stopped paying into my pension when I bought my house because I simply couldn’t afford both. I have quite a lot of equity in my house but I’m not sure what to do to allow me to take my foot off the pedal a bit and start to think about even knocking a day off my working week. I’m married, 52, with no kids but have no idea how much collateral I’d need to make it through to state pension age when at least I’d get a small but regular income from the government. I definitely won’t be slowing down for about five years, but should I then look at selling the house, spending the collateral and renting? Just really vwondering what other pension-less people are planning?

Well in my opinion the last thing you should do is sell up and rent.

I’m just going to work until I die. Well I will if I can find another job anyway.

Yep my pension pot is going to be pretty pissy.

My sister doesn’t have a pension. She says her house is her pension, she has spent her life moving from one house to another working up the ladder, never really having a ‘home’, just a house. She will sell up and downsize when the time comes, releasing a pot of cash to retire with. I have no idea how this is working out for her what with interest rates/house prices etc. she might be sitting on a small fortune or she might be mortgaged to the hilt.

Do NOT sell your house.
It’s never too late to start a pension.
Simplest option is Vanguard.
You cannot afford to not have a pension.

Down size and using that equity is a reasonable approach, renting generally is bad, it will cost you way more in the long run. A reverse mortgage might give you a small sum (assuming you have no dependents this might be an idea).

If you think the state pension is enough (I dont, it really isnt much), then you probably need 10k X number of years you want to retire early saved up. If you save this into a pension today, you will get tax breaks on it. Your fund will grow a little but tbh with the timescales involved it will be small enough to not really bother calculating. You probably also want to pay off all your current mortgage

I’ve got next to **** all. At the rate at which the government keeps adjusting the retirement age my pension plan is playing right into their hands because it’s broadly “dying.”

From the perspective of a reasonably medically fit person, you definitely need a private pension on top. I look at how my retired family have survived through the last difficult years. Both those on state pension only, and those with additional private/forces pensions. There are clear differences in quality of life.

As above, never too late to start a pension. With tax advantages any spare savings it should be the default option.

Get a decent IFA, as above never too late. The power of compound interest can help more than you think.

You should start with a spreadsheet of what your current outgoings are against what current state pension covers. For the sake of ball park figures ignore inflation and just look at costs now. Then consider how much equity do you have in the house, will you be willing to downsize and possibly move to cheaper areas to get cash from that, but offset by social issues if you move away from friends and family and the support and social interaction they bring. Selling a house to rent would be financial suicide, properly nuts in most/all areas of the country, since rents are higher than mortgage. As others have said, putting something into a pension now has a tax break and cumulative interest, so best start saving what you can now and pay off as much of the mortgage as you can.

I have the crap Nest pension. About £15k in it with another £3k in savings. Wife, two kids and small dog with me as the sole earner. I’m 46 and planning on either working until I drop dead, befriending a lonely old person with no family or going to the casino on my 65th birthday!

Also loving the idea of spare savings. Only on STW! There’s a lot of folk don’t have savings, never mind spare.

You cannot afford to not have a pension.

Well, yes and no.
If you can get by with a retirement budget (great proposal @konagirl ) that is the possible state pension + some money released through downsizing then a private pension would be ‘extra’.

As there are two of you OP downsizing seems a bit moot?

On the other hand, YES! With 15 years until the OP reaches state pension age there’s time to get some of that FREE MONEY that flows into private pensions.

Yes FREE MONEY! Money saving expert Martin Lewis has a piece on pensions. https://www.moneysavingexpert.com/savings/discount-pensions/

Just like a savings plan with the excitement of compound interest but with added oomph from saving ~gross pay. Naturally, with any equity-based investment it will fluctuate in value, but index funds typically offer a return over the long term.

@konagirl has made a great suggestion. A proper rundown of what you spend now and a look forward to how that may change in retirement/part-time working will help you make your own plan and make the most of other folks’ private-pensionless retirement ideas.

52 seems early to be considering reduced working time, good on you for prioritising fun over work.

This calculator may help with estimating how long that retirement budget will go on for. https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

I’m mostly counting on a lottery win at some point (although now I’ve finally paid off my mortgage I’ve started putting 25% of my salary into a pension and probably have about 10 years of work left in me, unless AI keeps advancing quickly and people realise that’s cheaper than employing me…)

First off Id drop any notion of reducing your hours before you retire, that really doesnt sound feasible in your situation. No pension at your age, its all about damage limitation in the future rather than quality of life.

And if the house is worth so much it might fund you to retirement then unless you hit the jackpot in terms of its value going up you made a bad choice ditching your pension to afford it.

State pension is subsistence level, the best thing you can do to maximise it is not being paying rent out of it.

For what its worth I doubt you are unusal, i think our generation is a pensions timebomb, there are many people out the in a worse situatiom than you, your saving grace is yoir house, do not throw that away. Its worth more as somewhere to live than a pot of cash.

Personally Ive paid into pensions with employer contributions for 27 of my 31 years of working, house will be paid off in 18 months and I hope to save something between now and when I retire. Theres been some tough times but never did I consider ditching the pension.  I dont expect a spectacular retirement like the baby boomers have had with final salary pension schemes and early retirement bonuses. I might be lucky and inherit something but I’m not banking on it.

You say you stopped paying into a pension, so there is one somewhere – find out how much/little it is worth, and get an estimate for your state pension online, it’s relatively straightforward.

Otherwise, review your income/spending and see how much you can put away each month. It’s never too late to start. Maybe plan on fulltime till 60-62, which gives you 10 years.

Depends on the job too. A mate can’t imagine not working as he loves what he does, so has no plans to retire early. Another mate has officially retired but does 2-3 shifts a week as a Tesco delivery driver to keep busy and earn a bit extra.

All those on here talking of retiring early and living the life of riley at 55 or 60 are probably a minority, perspective helps. When i started work my parents generation were retiring in their 50s on generous schemes, but thats a thing of the past for most people.

The thing is, most people seem to say that you need about a million quid in your pension pot to comfortably retire. I’d have to put so much into one now seeing as it’ll only be in there for about ten years max (hopefully) and that’s really not an option with costs of everything going through the roof. My first thought is to try and pay off the (relatively) small mortgage we have but this will take a few years. Would that make more sense than putting that money into a pension, and does the whole pension tax break stuff still work for the self employed?

My father had a very small pension pot from a few years working at a local authority. The rest of his life was all sorts of odd work, including significant stints as missionary in India which paid he-haw.

He’s down sized from the family home after my mum died. He’s in a two bed retirement flat with housing association and the modest monthly maintenance charge comes out of his house equity. He lives a relatively frugal life and it works – the few savings he had have been spent the last decade travelling to see family in Aus, NZ and India.

He is however now having to be very careful – that said he has got good friends and isn’t completely skint.

So you can live off very little.

My pension calculator thing keeps telling me I need to save more if I want a foreign holiday and a new car every three years – I’m not sure any of the financial services people who make money by using your money will ever say ‘you’ve saved enough, don’t give us any more’….

Rent your house out to tennant s, then rent the cheapest place you can find . That might be a static caravan on a trailer park, but with the current status of the rental market you should be able to generate income that way.

But you basically cannot retir early.unless you stand to inherit say £200k, you will be working till probably 68, and then doing a little part time 3day week retail job at a supermarket.

To mitigate this buy a vanguard product or 4 , spread the risk worldwide, drip feed as much as you can in monthly. Don’t scree around, £60pcm isn’t going to make a jot of difference, has to be well into the hundreds .

To find an old pension have a look here.

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-problems/tracing-and-finding-lost-pensions

As pointed out, it costs you 80p to put a £1 into your pension due to tax relief. But that relies on you having 80p to lock away. Good to face this now rather than at 68.

most people seem to say that you need about a million quid in your pension pot to comfortably retire.

people who sell pensions and investments mainly.

This has a different take on it – still scary numbers for someone who doesn’t have a pension pot built up but the trouble with numbers like a million, is it makes people think they have no chance and so might as well do nothing, enjoy the money while you can, and then go out in a blaze of C&H when it runs out. Which does have some attraction, and looking at my mum struggling in her later years with ill health IDK if I actually want to live to 83 or whatever my prediction is.

What is a Good Pension Amount for Your Retirement Goals

I have the crap Nest pension. About £15k in it with another £3k in savings

Can you not consolidate that into a cheaper Vanguard SIPP?

My first thought is to try and pay off the (relatively) small mortgage we have but this will take a few years. Would that make more sense than putting that money into a pension, and does the whole pension tax break stuff still work for the self employed?

In my opinion yes, this is what I’m doing.  My mortgage finishes next December at my age 52.5.  The former mortgage payment is being split into SIPP and an ISA on a 75%/25% basis for the remainder of my working life.    The equity in our house (the earliest our kids will have left home will be another 8 years) will be used for our final home purchase somewhere nice and quiet + savings.

As alluded to above I watch my parents and grandparents sit around in armchairs doing very little for 20yrs becuase of a reliance on a state pension.  I’d like us to have some funds to enjoy the fruits of our labour whilst we can post retirement, but YMMV of course.

Look on the bright side, you might die at 65 and then won’t have spent your life putting money into something you will never use.

Yes do try and trace any pension you might have paid into in the past. Completely agree that the proportion of people in our age group who’ll have a nice retirement is very small, and agree we have a pensioner timebomb on our hands – I’m 43 and know a lot of people with no savings and still renting and that scares me. I disagree with singletrackmind that you need to save a lot, the point is that its tax efficient. Yes as self employed you state how much you’ve paid in pension in your tax return and usually the pension (sipp) platform will just add the 20% back (assuming basic rate tax payer). All you are doing is locking away some money but getting the tax uplift. I use Hargreaves Lansdowne regular saver. £25 per month into a tracker, over 15 years, is about £6 k (todays equivalent) which is better than a kick in the teeth. Having said all of that, with interest rates as they are it may be best to overpay the mortgage so you are paying less to the bank). Also agree it’s good you are thinking about it and do consider sitting down to do a household budget.

OP says

There always seems to be threads on here about how much pension people have and what age they’re going to retire on it. To address the balance I’m wondering who else doesn’t actually have a private pension

a few replies in someone says

Personally Ive paid into pensions with employer contributions for 27 of my 31 years of working, house will be paid off in 18 months and I hope to save something between now and when I retire.

great work

You dont say where in the country you are?  My intention is to downsize and move to a cheaper & nicer part of the country (possibly world…) once retirement comes.  Hopefully near the kids if I can

Dropping days in your early 50s is impressive, the only people I know doing that are already sorted financially.  Still its your decision, live for the now.   I’d be thinking about working that extra day and putting the extra income into a pension.  Presume you are self employed if you have no pension, so the advice above about funds is sensible.  Vanguard always get recommended (I don’t have one)

As a rule of thumb I was told you should be looking to save your age as a % of your salary.  No way I can do that!  But I have paid into employer schemes for 25 ish years.  Sadly it doesn’t seem to be worth that much 🙁

I look at my inlaws, both had pretty low paid and modest jobs for their whole lives retired at 60, own their own home, caravan, couple of sunny holidays, cruise every year and new car every 3 years….absolutely zero chance of that for my wife and I and we would be considered high earners

True, but this is a discussion forum and will always creep. I didn’t read it as ‘considerably richer than yow!’ and it’s useful for a more general reference guide, and there’s lots of useful advice for the specifics of the OP too.

Always start with you want. How much money do want to have when you stop work? Do you actually want to stop work? I’ve recommended MeaningfulMoney on youtube before. Yes he is an IFA but talks a lot of sense (in my opinion)

here is one to get you started..

You can disagree all you like , but once your into your 50s playing catch-up is almost impossible. Fwiw I started pension number 1 in 1987 at £50pcm, then pension number 2 in 1991 at £48 , and I am still looking at working till I’m 60.

Keep the MTG , defer as much as you can into a ppp, you get the tax back . The advantages now are no need to buy an annuity, you can draw down annual amounts to keep the tax liability low.

I’m 54. With 5 pension pots and I’m cramming £500pcm in , with a super generous employr additional top up.

I’m looking for £300 a week, a mix of rental income, draw down , then government pension. Because I’ve never earnt alot I am used to living on a low income and it’s just me.

No you don’t need a million pounds, that’s some fantasy amount but you do need hundreds of thousands.unfourtunatly that s the crux of it. New roof , new car , new teeth , new boiler , a holiday abroad once a year , more heating as your at home more and you feel colder as you age. Soon ads up.

I definitely won’t be slowing down for about five years, but should I then look at selling the house, spending the collateral and renting?

Don’t sell your house!!! Assuming mortgage is/will be paid off it’s the biggest security you can get. And if needs be you could take equity release at a later date.

Re pensions – I’m in a similar boat. I do have small ones (at most there will be £50k in them) so I plan on working part time to keep the grey matter going.

I don’t live an exciting life anyway so dreams of cruises and constant holidays don’t feature in my plans.

And if my parents are anything to go by (no private pensions) – if you get on one pension benefit the government just chuck money at you. Their monthly income is higher than my monthly take home wage!

I have the crap Nest pension. About £15k in it with another £3k in savings. Wife, two kids and small dog with me as the sole earner. I’m 46 and planning on either working until I drop dead, befriending a lonely old person with no family or going to the casino on my 65th birthday!

Also loving the idea of spare savings. Only on STW! There’s a lot of folk don’t have savings, never mind spare.

Whilst they aren’t the best they’re far from crap. For the average punter who has no knowledge or interest in pensions they’re ideal, very small selection of ‘funds’ (there is a high risk fund but even this is fairly low risk in comparison to what’s available elsewhere) and very little to mess with/**** up. If you’ve logged in to your online account you can see the split between your own donations, your employers and also the tax relief/raise in fund value, the amount you’ll have contributed will be around 40% of your pot value. All being well that pot value is going to be knocking on the door of £100k by the time you reach state retirement age.

Die, that’s my plan

With no kids (or don’t want to leave anything) you’ll be using your house as ‘collateral’, basically selling it while living in it – I suspect you’ll struggle to achieve 50% of it’s ‘value’.

Selling up and renting seems a poor idea, based on current rental prices – unless you’re intending to spunk the lot PDQ and then live on the State.

Or is ‘living on State benefits’ the ACTUAL plan?

Some very sound advice so thank you.

I guess what I’m trying to avoid is working like a dog my whole life then kicking the bucket with a shed load of money tied up in a house and no kids to benefit from it. I’d like to check out of this life having enjoyed some of my hard earned money, but obviously deciding when to start downsizing is a bit hard when I don’t have access to a crystal ball. I am also aware that health will play a major part in my later life which is why I bike, surf and generally have quite a physical life to try and keep myself fit.

It also depends on what the house is – a nice 4/5 bed house in a leafy suburb worth half a million or back street terraced worth £100k?

If the former it’s easy to downsize and release a load of cash – if the latter you are somewhat stuck.

“All being well that pot value is going to be knocking on the door of £100k by the time you reach state retirement age.”

And worth about £2-3k pa as a pension.

If you’re still paying a mortgage i’d try and prioritise paying that off first.

As others have said – its not too late to start a pension – if you can stick £100-£150 a month in it for 10 years it won’t be life changing but it’ll help.

The idea of releasing equity in the house is potentially good, but obviously depends on what the house is worth – you’ll have more options if the house is worth £700k than if its worth £200k.

I was a late starter to the pension game – didn’t start paying into it until i was 34 (I’m 50 now) but its a company scheme where they match my 7% contributions so i’m hoping it’ll be adequate. My mortgage currently runs until i’m 66 so realistically i’m working until then at least.

I guess what I’m trying to avoid is working like a dog my whole life then kicking the bucket with a shed load of money tied up in a house and no kids to benefit from it.

You could always look at equity release options

Be careful not to be sucked into thinking the numbers you read here are the norm. I have a teacher’s pension (you know the gold plated, unbelievably good one, well partly) It costs a fair whack every month and compared to numbers I see here will barely buy the monthly beans (exaggeration I’ll be ok)
But imho you do need a plan that isn’t selling the house until you can retire and downsize but that might be to the smaller house next door. (I wanted to move back to where I went to school but that’s too pricey even downsized).
If you can pay off mortgage and then dump that money and more into savings.