Man, 44, admits he has no pension savings but is told why to 'start now'

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A man has asked for advice after revealing that he is 44-years-old with no pension. The man shared that he is self employed and always has been.

He "never thought" to pay into a pension and admitted to being "pretty clueless." The man pays savings into stocks and shares as well as ISAs for both himself and his children.

But he is now considering building up a pension and sought advice on Reddit. He wrote: "I’m 44 and don’t have a pension. I’ve never been good with money, and having always been self-employed I never thought to pay into a pension (I’m pretty clueless to be honest), but in the last few years I’ve started to earn a bit more and have some spare that I can put away.

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"Recently I’ve managed to build up some savings and put some money in stocks and shares ISAs and my kids ISAs. But should I be putting all my savings and spare ££ into a pension? Can anyone recommend one that’s working for them? Or is there a better place to put my money? I’ve looked online but would love some advice."

One user advised that he checked to see if he had enough years of National Insurance (NI) contributions. Writing under the username headphones1, they said: "The state pension is £221.20 per week. You get this if you have enough qualifying years of National Insurance contributions (NICs). Check if you have enough here: https://www.gov.uk/check-state-pension.

"Also, find out what pensions you have from previous jobs, if any. Then consider that £221.20 per week isn't a lot of money for many people - it's about half of the minimum wage pre-tax. When we're old and no longer able to work, we still need to eat, heat our homes, and try to find enjoyment in life. This usually means spending money. This should be your primary motivation to start investing in your future.

"Frankly, if you have no pension savings, you need to stop paying into the ISAs for your children and invest in yourself. It's great that you can give your kids a big chunk of cash someday, but I am sure they would rather you had a happy and safe retirement instead if that's the choice."

A second person wrote: "Ughh. So start today, lots of catching up required if you want anything more than a very frugal retirement under the state pension.

"In order to achieve a reasonable retirement the rule of thumb we use is that you should be saving into a pension at a percentage that's half the age when you start. So for you, that's 22% of your salary each year. That's likely to be pretty painful, I expect. It might be worth using a pension calculator like the Free Pension calculator plan when you can retire (guiide.co.uk) to see what will happen in different scenarios.

"You can add your existing investments to a pension, the annual limit for contributions is either your salary or £60K, whichever is lower. They will instantly add 20% (basic rate tax relief), and if you pay a higher rate, contact HMRC, and they will give you that back, too. This is why pensions are better than ISA for retirement savings."

A third advised he pay into a pension over an ISA because of the tax benefits. They added: "Remember a pension is just a tax-efficient savings vehicle. So is an ISA. Any form of savings can be used in retirement if you’ve got enough of them.

"The primary difference is that a pension gets tax relief - but withdrawals are taxable. An ISA is paid into using taxed earnings, and withdrawals are tax-free. So the question is whether one of those suits you better.

"You can do a mixture of both, and a pension may be the most appealing choice if you’re a higher rate taxpayer (but it also may not be, it does depend on your situation).

"As for which pension, it doesn’t matter a huge deal. Pick one with low fees and which offers the funds you want to invest in."

A fourth person echoed this, saying: "The main benefit of saving into a pension is the tax relief - if you're paying tax at 40% on your income, it would probably be worth saving into a pension instead of an ISA. Otherwise, it's less clearcut and you might be better off just carrying on saving in your ISA."