Pension planning

[az city]

You can work in HE and still be classed as self-employed. Visiting lecturer, for example. I'd check your pay slips and see if the employer was paying your NI contributions. My last employer (an academy) failed to pay the Treasury £2million in teacher pension contributions. Its possible, you were classed as self-employed and you weren't told. Especially if you never had a contract. Saves dodgy organisations coughing up NI contributions. If you can prove you paid NI for the missing years then get on to HMRC ASAP.

Thanks for the response.

I had grants/scholarships for 6 years so I don't think that counts as income. I never got payslips just cheques. I did some trawling around on the internet and all is lost for me it seems. No NIC credits for my HE years. Whereas if I'd sat on my arse and claimed benefits for the same period I 'd have full NICs.

NI systems everywhere seem crazy complicated and idiosyncratic. I'm now qualified for both a US and UK state pension. I get the UK one in full but the US is reduced for every GBP I get from the UK. Why? It's bonkers. Unless that is if I take a federal job for a couple of years.

[life on mars]

Hmmm ... yes and no.

'Recycling' your tax free lump sum back into a pension to get tax relief again is prohibited by HMRC. (Any pension has a declaration that you need to sign to confirm that your contributions haven't come from a pension lump sum).

However there's nothing stopping you living off that lump sum, and moving money from your own personal savings into a people's pension or similar.

you should be charging for this advise 👍

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

you should be charging for this advise 👍

I am! I’ve been PM-ing everyone with my invoice, but keep getting no response 😂

[Michael Morris]

I am! I’ve been PM-ing everyone with my invoice, but keep getting no response ��

Really appreciate the contributions today. I think it's raised a situation many of use are in. Cheers

[Michael Morris]

Thanks so much for all the advice, discussion and personal experiences.

Shows just how much of a situation this is and how important it is.

Can I ask about Pension Bee. I'd never noticed their ads until my ears pricked up today when they came on the TV. Seems to be an all in one app based pension solution. I guess going forward this will be a regular thing. Transfer all pensions into an app?

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

Thanks so much for all the advice, discussion and personal experiences.

Shows just how much of a situation this is and how important it is.

Can I ask about Pension Bee. I'd never noticed their ads until my ears pricked up today when they came on the TV. Seems to be an all in one app based pension solution. I guess going forward this will be a regular thing. Transfer all pensions into an app?

PensionBee are a relatively new player and there is no advice - the investment selection is what’s known as robo-advice. Pretty low costs, however other companies have tried it before and ended up going bust as the Model wasn’t profitable.

Should be fine for smaller pension pots ( values of 20-30k where it wouldn’t be viable to pay for advice) or where no at-retirement advice is needed. For anything larger (or anyone with more compex needs) then an experienced DIY investor or a half-decent IFA should be able to do a better job.

I tend to get concerned when the likes of PensionBee or Hargreaves advertise promoting transferring pensions without advice - you need to be confident of what you are giving up, and that there are no valuable guarantees or really well performing funds that you are giving up.

[Gofer Blue]

I have just picked up this thread so my ha’porth of advice comes a bit late and there has already been a lot of useful contributions. Just before I retired the boss of the small consultancy company where I worked brought in an IFA to have a chat with the staff about pension planning. It was fortuitous timing for me as it turned out. To cut a long story short I went for an income drawdown pension plan as annuities had become very poor value for money.

The positives are that this scheme is very flexible. You can take as little as you need in the way of pension (you can still work at the same time if you want), the whole pension fund is transferable to your spouse in the event of your death and it can even be bequeathed to your children (subject to usual taxation rules). The downside is that the pension pot is invested in the stock markets which can be very volatile e.g. in the immediate aftermath of the COVID pandemic almost £40K was wiped off the value of my portfolio. (It has partially recovered now, only (!) £15K down). These are exceptional times though and it must be remembered that these are long-term investments. I have been retired for about 15 years and the investments have grown by more than the amounts I withdraw every year so I am happy.

[Re-sign Carl Dale]

Nice one....hopefully. "value of the investment can go up and down."
Best thing I did was to get into cash after Brexit. Yes, stockmarket went up more afterwards, but now...still not back where it was.

I have just picked up this thread so my ha’porth of advice comes a bit late and there has already been a lot of useful contributions. Just before I retired the boss of the small consultancy company where I worked brought in an IFA to have a chat with the staff about pension planning. It was fortuitous timing for me as it turned out. To cut a long story short I went for an income drawdown pension plan as annuities had become very poor value for money.

The positives are that this scheme is very flexible. You can take as little as you need in the way of pension (you can still work at the same time if you want), the whole pension fund is transferable to your spouse in the event of your death and it can even be bequeathed to your children (subject to usual taxation rules). The downside is that the pension pot is invested in the stock markets which can be very volatile e.g. in the immediate aftermath of the COVID pandemic almost £40K was wiped off the value of my portfolio. (It has partially recovered now, only (!) £15K down). These are exceptional times though and it must be remembered that these are long-term investments. I have been retired for about 15 years and the investments have grown by more than the amounts I withdraw every year so I am happy.

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.

[az city]

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.

Don't pension schemes have "safe" (money market/cash) investment options to prevent loss post the start of draw-down in the UK? In the US you can choose a "safe" option that pays a low but certain interest rate at any time rather than holding assets in volatile funds.

[Gofer Blue]

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.

Currently I have a cash buffer equivalent to about 8 months more pension payments. My IFA advised increasing the amount of cash just prior to Brexit in January in case things got a bit hairy, which worked out well as this has seen me through the immediate aftermath of the COVID outbreak as well. Hopefully in eight months time we will be in post-COVID mode and the market jitters will have eased a bit. The tricky bit is to determine which stocks will recover quickest so we could sell the laggards and get some of the former whilst they are cheap!

[life on mars]

Great that you got the opportunity for advice via work. I run retirement courses for staff at a few Universities and they are always really well received. It’s the sign of a caring employer.

Income Drawdown is the route where probably 90% of my clients go down - suitable if they have the capacity to tolerate investment fluctuations, both financially and emotionally!

The last 10 or so years for investments have been generally really good ... the next couple of years could be more interesting, although the trajectory is always up if you can leave it long enough.

A key approach is to have a strategy of not being forced to sell during a period temporary decline - I always recommend that a cash / very cautious buffer within a pension fund is held. This is exclusively there to pay income and cover charges for a couple of years. This means that you don’t need to worry about the short term fluctuations we’ve seen over the last few months as the only part that is exposed to these, won’t be needing to be touched for a while.

This is great advise ( A key approach is to have a strategy of not being forced to sell during a period temporary decline) as we do become a bit panicky on times of crises , I know it off topic but I didn't sell my endowment mortgage plan when others were advising to do so , I kept it as it also had lie assurance attached to it , and simply increased my repayments contributions year on year to make up for shortfall , its been tough and tempting to sell buy hey it has paid off after 20 years ,yes slightly reduced but still performed better than a lot of saving plans .

There is an argument that you may make something in 5 to 10 years as markets recover , if your careful or picking the right pension

[Rock_Flock_of_Five]

It can take a month or two for your online record to be updated. Tip: give HMRC a ring a couple of weeks after paying your NIC to check payment has been credited to your account. When it comes to the HMRC voice-activated "in a few words tell us why you have rung us today" say nothing. Keep saying nothing to any further questions until the one about "is it you you are ringing about" ( or something like that). Say "yes" and you will get straight through to an HMRC advisor.

I love this board, that's just the advice I was looking for!
I was feeling a little uncomfortable about making a further lump-sum payment without any acknowledgement that they had received my first payment.
I was logging into my Government Gateway account almost every day in the hope it would be updated and show the payment.

I'm going to do exactly what you suggested concerning their voice automated process.

Cheers for that!

[IanD]

Don't pension schemes have "safe" (money market/cash) investment options to prevent loss post the start of draw-down in the UK? In the US you can choose a "safe" option that pays a low but certain interest rate at any time rather than holding assets in volatile funds.

Mine does. Higher upfront costs means I can switch between cash and shares at no cost. Worth checking the Ts and Cs of any pension to see what the options (and possible charges for switching between cash/shares) are. No interest paid on my cash at the moment. Not a problem. If you organise yourself enough and can drawdown over several years, effectively you have no tax to pay. It's the equivelant of 20% bank interest for basic rate taxpayers in England. HMRC have been excellent at refunding tax paid on drawdown from my FSAVC. HMRC paperwork can all be done online these days. Very efficient. This assumes you dont work/have another pension to pay tax on/have other income. Some would argue that following City up and down the country is "work". Its certainly hard going sometimes!

[IanD]

I love this board, that's just the advice I was looking for!
I was feeling a little uncomfortable about making a further lump-sum payment without any acknowledgement that they had received my first payment.
I was logging into my Government Gateway account almost every day in the hope it would be updated and show the payment.

I'm going to do exactly what you suggested concerning their voice automated process.

Cheers for that!

I found out that tip the hard way. These voice-activated answering systems are a pain and HMRCs is the worst.
Shouting into the phone "I just want to talk to someone" makes it sound like you have rung the Samaritans!
BTW...your 16 digit reference for voluntary NICs (presuming you paid NICs by BACS) can be reused year after year as it is unique to you. All this for an extra £4 or £5 a week on getting a state pension. But it is for life.

[Rock_Flock_of_Five]

I found out that tip the hard way. These voice-activated answering systems are a pain and HMRCs is the worst.
Shouting into the phone "I just want to talk to someone" makes it sound like you have rung the Samaritans!
BTW...your 16 digit reference for voluntary NICs (presuming you paid NICs by BACS) can be reused year after year as it is unique to you. All this for an extra £4 or £5 a week on getting a state pension. But it is for life.

You're right - that HMRC voice-activated 'service' is certainly one of, if not THE, most annoying I have come across.

Unfortunately for me, being in China means my pension isn't index linked. There might be a way around that, I really don't know...

[blue matt]

just checked my state pension, looks like i have 18 more years to pay 12 more years NIC payments , then i am entitled to £175 a week which i believe is the current max state pension

Ive been SE'ed for close to 30 years, so just pay what the HMRC tell me to at the end of the year, these are the NIC i need to pay to continue with building my years up ( as above ) ? ? ?

[Re-sign Carl Dale]

just checked my state pension, looks like i have 18 more years to pay 12 more years NIC payments , then i am entitled to £175 a week which i believe is the current max state pension

Ive been SE'ed for close to 30 years, so just pay what the HMRC tell me to at the end of the year, these are the NIC i need to pay to continue with building my years up ( as above ) ? ? ?

If you're self employed then yes, you will be paying Class 2 (and maybe Class 4) national insurance, so every year will be counting towards the magical 35 that you need. Going backwards can be done, but only if you have missing years in the last few - which it sounds like you don't. As long as you keep paying NI for 12 more years you should be fine!

[blue matt]

I think they allow you to go back as far as 6 years to repay missed years. I was procrastinating a few years back, at a time when it was 300GBP for me to make up missing years - now it is 795GBP a year!
As you probably know, you need a total of 35 years for a full state pension.

thanks
yes 2017 says " we are looking into if you paid enough " i did, as i paid what they told me to at the end of the tax year, but i dont know if that year will change

i didnt know it was 35 years, I always presumed i wouldnt get to pension age, so it never really worried me, when i got to a age where you start to think about it ( think it was my 40th ), i looked into a private pension and the amount per month it would cost was stupidly high ( i would prefer to spend it on holidays and take my chance with the poor state pension )

If you're self employed then yes, you will be paying Class 2 (and maybe Class 4) national insurance, so every year will be counting towards the magical 35 that you need. Going backwards can be done, but only if you have missing years in the last few - which it sounds like you don't. As long as you keep paying NI for 12 more years you should be fine!

thanks

a few missing years when i started work, i spent a few months in Ibiza one year and of course that year is missing, the only recent year is 2017, which i know i paid as i pay it as my tax return, yes from memory its class 4 NIC's

[Hot Shot Hamish.]

thanks
yes 2017 says " we are looking into if you paid enough " i did, as i paid what they told me to at the end of the tax year, but i dont know if that year will change

i didnt know it was 35 years, I always presumed i wouldnt get to pension age, so it never really worried me, when i got to a age where you start to think about it ( think it was my 40th ), i looked into a private pension and the amount per month it would cost was stupidly high ( i would prefer to spend it on holidays and take my chance with the poor state pension )




thanks

a few missing years when i started work, i spent a few months in Ibiza one year and of course that year is missing, the only recent year is 2017, which i know i paid as i pay it as my tax return, yes from memory its class 4 NIC's

Make sure that you have paid the class 2 nic, as class 4 doesn't count towards contributions paid. I know of quite a few people who were happily paying class 4 through their tax return thinking that was going to count when in actual fact it doesn't. Hmrc changed their system about 3 years ago and started collecting the class 2 contributions through self assessment. Prior to that however class 2 contributions had to be paid monthly or quarterly to Hmrc Nic department and was not part of your annual self assessment bill.

[Rock_Flock_of_Five]

just checked my state pension, looks like i have 18 more years to pay 12 more years NIC payments , then i am entitled to £175 a week which i believe is the current max state pension

Ive been SE'ed for close to 30 years, so just pay what the HMRC tell me to at the end of the year, these are the NIC i need to pay to continue with building my years up ( as above ) ? ? ?

I think they allow you to go back as far as 6 years to repay missed years. I was procrastinating a few years back, at a time when it was 300GBP for me to make up missing years - now it is 795GBP a year!
As you probably know, you need a total of 35 years for a full state pension.

[Michael Morris]

I've had an interesting morning on the phone to my pension providers. I had no idea that the letters I get each year with all these projected figures and plans actually have real value. Given me loads to think about and helped me to start to understand what I have and what I can do with it.

Thanks again for all the contributions.

[IanD]

I think they allow you to go back as far as 6 years to repay missed years. I was procrastinating a few years back, at a time when it was 300GBP for me to make up missing years - now it is 795GBP a year!
As you probably know, you need a total of 35 years for a full state pension.

A few years back?! Last century, maybe. Pay as soon as you can.

[IanD]

thanks
yes 2017 says " we are looking into if you paid enough " i did, as i paid what they told me to at the end of the tax year, but i dont know if that year will change

i didnt know it was 35 years, I always presumed i wouldnt get to pension age, so it never really worried me, when i got to a age where you start to think about it ( think it was my 40th ), i looked into a private pension and the amount per month it would cost was stupidly high ( i would prefer to spend it on holidays and take my chance with the poor state pension )




thanks

a few missing years when i started work, i spent a few months in Ibiza one year and of course that year is missing, the only recent year is 2017, which i know i paid as i pay it as my tax return, yes from memory its class 4 NIC's

If you worked in an EU country and have pay slips to prove it, you may be able to claim that year through HMRC. Depends on how many months you worked in Ibiza and whether you returned to UK and worked/paid NI contributions for the rest of that year. For a fiver (or so) a week extra, Index Linked, for the rest of your pensionable life it may be worth persuing with HMRC. My sister worked in Spain for a year in the 70s and she managed to get that year credited to her pension.

[IanD]

This is great advise ( A key approach is to have a strategy of not being forced to sell during a period temporary decline) as we do become a bit panicky on times of crises , I know it off topic but I didn't sell my endowment mortgage plan when others were advising to do so , I kept it as it also had lie assurance attached to it , and simply increased my repayments contributions year on year to make up for shortfall , its been tough and tempting to sell buy hey it has paid off after 20 years ,yes slightly reduced but still performed better than a lot of saving plans .

There is an argument that you may make something in 5 to 10 years as markets recover , if your careful or picking the right pension

Not that off topic....pension planning is part of overall financial planning for the future. Paying off a mortgage (which is what I presume the endowment was for) should free up some income to pay for NICs if needed, ISAs, private pension?, STs. Even changing all the lightbulbs to LEDs will shave a few £ a month off utility bills. Changing to a condensing boiler does the same. Look after the pennies etc