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Is it worth starting a pension at 55 when I’m not working but have a stocks and shares ISA?

16 June 2021

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Question by Tracy

Is it worth starting a pension at 55 when I’m not working but have a stocks and shares ISA? My husband has a company pension but I will only qualify for a state pension.

Answered by Daniel Wiltshire

Hi Tracy

Whilst it’s generally good idea to start saving into a pension early, at 55 you still potentially have many years of retirement saving left.

Pensions are a very good way of saving for retirement, due to the tax benefits available. In particular, contributions receive income tax relief at your marginal rate. Because of these tax benefits you’re normally only allowed to contribute amounts up to 100% of your salary or £40,000 (whichever is lower).

But – in your situation - if you’re not working (or earn less than £3,600 a year), you’re still allowed to receive tax relief on pension contributions up to £3,600 gross. That means you can save up to £2,880 net into a pension each year. For example, if you were to make the maximum £2,880 contribution each year, you would receive a tax top-up of 25% (or £720). Additionally, there will be no tax due on gains made whilst the pension remains invested. And when you come to draw an income you will receive 25% tax free, with the rest being taxed as income.

So, in summary, it may well be worth you considering making pension contributions. I’m afraid I can’t be more specific without a better understanding of your personal circumstances and objectives, but I hope this helps.


Answered by

Daniel Wiltshire

Independent Financial Adviser

I’ve worked in finance for 15 years, initially training and qualifying as an actuary before becoming a financial adviser. I set up my own independent practice, Wiltshire Wealth shortly after moving from London to Bradford on Avon with my young family in 2017.