E50: Starting a pension from £0 at 50 years old

The following is a transcript of a bonus podcast episode of The Pension Confident Podcast. Listen to the episode or scroll on to read the conversation.

Takeaways from this episode

• It’s not too late to start at age 50 - someone saving £400 a month from 50 years old with nothing saved could build a pot of around £200,000 in 20 years, thanks to the government’s 25% tax top-up and investment growth.
• Small contributions still count - even £40 a month (topped up to £50 with tax relief) could grow to around £16,200 over 15 years, with £6,200 of that being pure growth.
• Opting out of your pension costs more than you’d think - taking a 3-year break from pension contributions between ages 30 and 33 could reduce your pot at retirement by over £17,000.
• Women are disproportionately affected - career breaks, the gender pay gap, and Pension Sharing Orders (PSO) in divorce all quietly erode retirement savings.

PHILIPPA: Welcome back. Here’s a shocking statistic for you: one third of British adults with the defined contribution pension scheme have less than £10,000 saved in their [pension] pot. Now, you might be thinking they’re all young workers with decades away from retirement to save - but no. An estimated 7 million people aged over 50 here in the UK have no private pension savings at all.

Now, are you one of them? Are you worried that you haven’t got a solid pension to lean on when you retire? If so, you may well be thinking it’s just too late to start building one, but it isn’t. And today’s guests are going to explain how to begin and why you’ll be really glad you did.

I’m joined by Hannah Martin. She’s the Founder of Rich Retiree, an online platform helping women over 45 prepare for a rewarding retirement. Now, you may recognise her from BBC Radio 4’s Woman’s Hour, or indeed as a pensions expert in the Daily Express’s financial section.

Simonne Gnessen, well, she pioneered financial coaching in the UK when she founded Wise Monkey [Financial Coaching] back in 2002. She’s also the Co-Author of Sheconomics, a book offering practical solutions to women’s money problems and looking at the emotional barriers that can hold them back.

And from PensionBee this time, we’re joined by Sarah Durber. She’s VP Customer Success, and she brings years of experience helping people take control of their pensions. Hello everyone.

SARAH: Hi.

HANNAH: Hi.

SIMONNE: Hello.

PHILIPPA: Now here’s the usual disclaimer. Please do remember anything discussed on the podcast shouldn’t be regarded as financial advice or as legal advice, and when investing, your capital is at risk.

When did you start saving for retirement?

PHILIPPA: Now look, on the podcast, we always talk about how important it’s to start saving for your pension as soon as you can, as young as you can. But, you know, millions of people don’t do this. I didn’t do this myself. When did you all start?

SIMONNE: Well, mine was forced upon me, because I joined a company that had a final salary pension scheme, which was - I was one of the lucky ones -

PHILIPPA: yeah -

SIMONNE: way back when. However, I did make a mistake later down the line with that one.

PHILIPPA: Did you? What did you do?

SIMONNE: In my wisdom as a Financial Adviser at the time, I decided that it would be wise to transfer it to a private pension. I deeply regretted it for about the next 15 years, and it really actually held me back after that.

PHILIPPA: Ah, so it just goes to show, doesn’t it? What about you, Sarah?

SARAH: So I started in my mid-20s when I had the opportunity to opt into a pension, and I made quite a sensible decision for me at the time, mainly because my Dad was a Police Officer, so I grew up knowing that pensions were super important. Like, we lived for the day the lump sum came in -

PHILIPPA: OK -

SARAH: and he took us all to Disney World in our 20s.

PHILIPPA: Nice!

SARAH: So I was like, pensions are important. I need to get on this.

PHILIPPA: You say you had good training early on, didn’t you? But Hannah, I think you and I had a similar experience. You’re a late starter, right?

HANNAH: I was very, I actually worked for companies in my 30s that had pensions you could opt into. And I didn’t opt in until I was about six months away from quitting my job. So I actually had a £1,000 pension.

PHILIPPA: OK.

HANNAH: When I entered my 40s, when I got to my late 40s, I had a company I’d worked for a few years. It hadn’t made money initially. It started making good money and my accountant recommended I put some in a pension to offset against Corporation Tax. And I didn’t realise then that actually a pension was tax efficient. So from then I have maximised, I put the most I could put in my pension every year.

Workplace pensions and Auto-Enrolment

PHILIPPA: But I mean, I think it would be useful just to quickly run through the reasons why people find themselves in that situation. The Auto-Enrolment that you’ve touched on, Sarah and Simone, that’s been a godsend. But of course, it didn’t exist when a lot of people over the age of 50 started working, so it wasn’t an option, right?

SARAH: No. So it was introduced under the Pensions Act 2008 and began rolling out in October 2012. Before it existed, only around 10.7 million workers were saving into a workplace pension and today 21.7 million eligible employees are enrolled - which is great.

PHILIPPA: So it’s just made a huge, huge difference, hasn’t it?

SARAH: Mm-hmm.

PHILIPPA: And the other thing that occurred to me was the kind of change in workplace pensions. Simonne, you mentioned that you were in a defined benefit scheme. I was looking at the numbers, 92% of workplace pension schemes, they’re defined contribution schemes. So in 1967, 8 million people in those schemes. 2023, 700,000.

SIMONNE: Wow! Gosh.

HANNAH: It’s a big change, isn’t it?

SIMONNE: Huge.

PHILIPPA: That must be a really big reason, don’t you think, Hannah?

HANNAH: Yeah, I think there are many reasons. We talked about the fact that Auto-Enrolment didn’t exist. I think there’s a lack of trust. Certainly my generation saw people who lost money under Robert Maxwell and that scandal. So I grew up with an idea that your private pension wasn’t necessarily safe.

I think also from my perspective, I just assumed the State Pension would be enough. I didn’t really think about what I was going to do at 60. And then like you, I was a freelancer and all my money went to my expenses, and I believed - I look back now, and I could have found more money - but I believed I had no money for a pension and didn’t prioritise it.

And then that classic thing with women, we take career breaks to raise children. We assume our husband or our partner is going to be saving into the pension, so we don’t take action.

PHILIPPA: Yeah, I mean, Simonne, I’m sure you encounter a lot of people who’ve got this issue of taking career breaks out because an enormous number of us do. I think it’s 33% of employees [have] taken a career break of at least 6 months. And if you don’t contribute into a pension, it’s going to kick a hole in it, isn’t it?

SIMONNE: Yeah. And it’s not just raising children, but also elderly parents. Like, women generally take the lion’s share of those responsibilities too. And that can take its toll.

PHILIPPA: Yeah, it’s fascinating. Childcare, you know, that’s the most common reason that people take a gap, even if they’ve got a pension kind of ‘on the go’. 38% of women take time out. And of course, it’s 11% of men. And they tend to be higher earners still now anyway, don’t they? So Sarah, it all just rolls up, doesn’t it, over time?

SARAH: I think that women generally, like, will be in careers that are potentially not hitting the Auto-Enrolment buffer as well. If they’re in - there’s more women in caring, carer-type careers, so they might not hit that £10,000 a year threshold, so they might never automatically qualify for Auto-Enrolment. And I don’t think everyone knows that you can opt in, like you can choose to opt in with your company, but you have to speak to them about that.

PHILIPPA: Is that a thing, Simonne, that people don’t know actually what they can do?

SIMONNE: I think they - people don’t really understand the benefits of pensions. They don’t realise that you get an automatic 25% uplift with - if you’re a basic rate taxpayer, or even if you’re a higher rate taxpayer, 67% uplift -

PHILIPPA: from everything? -

SIMONNE: - free. And free, exactly. Still, so many people don’t get that.

The impact of opting out of your workplace pension

PHILIPPA: Yeah, I mean, I think the other thing is, stuff happens, doesn’t it? When money is tight, we’ve talked about it a bit, but even if you’ve started off well, the temptation can be there - when you’re really struggling for cash - to opt out of your workplace scheme, even if you’re enrolled in one.

SIMONNE: Yeah.

PHILIPPA: Do you see that?

SARAH: We do. We actually see a lot of customers who come to us wanting to withdraw early, and we’ll hear - we’ve heard it a lot more over recent years with cost of living increases. When I first started at PensionBee, it’d be people who in their 20s wanting to withdraw because they wanted to go on holiday. But now the reasons are, “I have bills to pay and money is tight”.

PHILIPPA: I think we’ve got some numbers on that. What a difference it can make at the end of the day when you retire if you have taken time out, if you opted out?

SARAH:  Yeah, of course. This is based on a starting salary of £25,000 at 21 [years old]. The average annual salary increases of 2% [each year]. 8% pension contributions when contributing, and 3% annual investment growth [after fees and inflation].

If you have zero periods of opting out of your pension, by the time you’re 68 [years old], your pot size will be £194,185. But if you opted out from age 30 to 33, it’d be £176,740. Which is actually a difference in pot size of £17,445. So those three years make a really big difference there.

PHILIPPA: I do wonder whether people understand quite how significant those [are] - they seem like quite short gaps, don’t they?

SARAH: Yeah.

PHILIPPA: You know, if you take two years out, three years out, five years out, it’s not uncommon. Caring responsibilities, redundancy, job loss, all sorts of stuff happens, doesn’t it? Not really understanding, Simonne, that that’s a very significant or can be a very significant decision.

SIMONNE: Yeah, I had a very close friend who had opted out of a final salary pension scheme, actually, because he was going through a divorce. He wanted to prioritise childcare and he wanted to make sure his kids were fine, and he was putting a lot of money into that. And he felt that he couldn’t afford it, and it was possibly something like £30 a month or something of that ilk.

He had no understanding of how significant that decision was to opt out of a final salary pension scheme. And I - so I did some calculations for him, and I worked out that over the years that he’d opted out, he’d lost, at that time, £40,000.

PHILIPPA: Wow.

SIMONNE: And once he saw that, he opted in and he’s now retired and is very grateful for that advice.

PHILIPPA: Yeah, I bet he is. But that’s the thing, isn’t it? If you don’t have advice, you don’t know, you make these decisions. And if you’re in some workplace scheme and you decide to opt out or what - I mean, no one’s really going to argue with you.

HANNAH: But I think it’s also that, and this kind of speaks to a lack of general financial knowledge that we have. You know, we go to school, we learn maths, and no one teaches us about money and savings and compound interest and things like that. And you don’t have to be a financial expert to understand how these things work and the benefits - or the detriments.

PHILIPPA: Yeah, I mean, we talk about this a lot on the podcast. But I was really struck by what you said earlier, that you kind of got going in your pension again in your 40s because of some other issue around tax. It wasn’t really that you were thinking, “I really need to think about retirement provision”, which is kind of amazing, isn’t it? Because you’re a financially literate person.

HANNAH: Well, exactly. And I’ve always been good with money. I remember going to my friend’s house one day and she had one of the Sunday papers there and it talked about how much you needed in retirement. I think it was like £500,000. And I was, I mean, I was way off that. And actually my husband’s pension was way off that.

But I remember thinking, “Oh, my husband’s got loads in his pension”. And then when I found that out, I was horrified! And that really, I mean, I initially started doing it for tax benefit, but that I really doubled down and thought, “Gosh, I’m so far behind, I’ve got so far to catch up”.

And the thing is, we talked about how much you lose if you opt out for three years, and that comes down to compound interest, you know, of that money that’s not there and how it’s grown. But by the same virtue of that, if you were to put money in at any age, that’ll also grow.

So there’s one way of looking at it as a negative, “I’ve missed -” you know, especially we’re talking to people over the age of 50 and they might be kicking themselves, “I’ve missed this”, but actually, compounding interest could still work for you, and anything you do today has also got that chance to grow in future.

What are Pension Sharing Orders?

PHILIPPA: That is exactly it - I want to get on to how to fix this in a moment. There’s one more thing I want to talk about though, because, and it’s another thing that I think predominantly affects women - and that’s [during a] relationship breakdown. ‘Pension Sharing Orders’.

SARAH: Yeah.

PHILIPPA: Sarah, talk to me about ‘Pension Sharing Orders’ (PSO).

SARAH: OK, so a Pension Sharing Order is [sometimes] part of the divorce settlement. And there’s a reduction in people actually having Pension Sharing Orders as part of their divorce settlement at the moment by 35% - but divorce rates are increasing.

PHILIPPA: Why aren’t people having these? Because they largely protect women, don’t they? Because men tend to be the ones with the big pension pots.

SARAH: I think a few reasons. Possibly people going through less formalities as part of the divorce, having no-blame divorces. Divorce is hard and it’s emotional, and people sometimes just want it over and done with. And perhaps the thought of then involving getting information about your ex-spouse’s pension and having to dig through that.

And that going through the courts just feels like it’s going to delay things. And actually, that short-term win of, “Right, we’re getting through the divorce faster” - people need to have a think about, like, what the long-term loss is.

HANNAH: I think sometimes women can sort of not see the pension as theirs because they sort of feel that that was - “He earned that in his job” -

PHILIPPA: yes -

HANNAH: without taking into account that often the reason why women earn less is because they may have taken time out to raise children, which has impacted their earning potential. So the fact that he’s able to build a bigger [pension] pot comes down to the sacrifices that she made.

The women don’t naturally assume that they have or understand their legal entitlement to it, and that’s not counted as part of the pot, or it’s diminished. It’s not fully weighed up as to actually what that’s worth, because it’s not just worth what’s in it now -

SARAH: no -

HANNAH: it’s worth what it’s going to be worth at some point [in the future].

PHILIPPA: That’s the crucial point, isn’t it? Because if you get divorced in your 30s or in your 40s, there’s a long way to go with that pension pot.

How to start from £0 at 50 years old

PHILIPPA: OK, so I think we’ve laid out the landscape of how millions of people get there. No blame, life gets in the way, stuff happens. Let’s talk about how to fix it. So if you’re 50 or in your 50s and you’re worried - I mean, I think it might be useful, Simonne, to start with overcoming the emotional kind of block to it, which I’m guessing is quite substantial.

SIMONNE: It’s a massive part of it. So there’s all kinds of emotions to deal with.

PHILIPPA: So what do you say to people when you look at them across the table, and you see they need to get going now? And they’ll say, “It’s too late, it’s too late, and I’m strapped for cash anyway”.

SIMONNE: Well, I think it’s always starting with the story that they’re telling themselves. So what’s the truth? Without judgement, “What’s holding you back?” So if it’s a story of, “It’s too late, I’m bad with money, I’m rubbish, I’ve missed the opportunity, I should have, could have, would have”, it’s changing that narrative, helping them reframe that narrative.

PHILIPPA: Hannah, tell me, because you talk to people too. What do you say to them?

HANNAH: It doesn’t matter what you haven’t done, because we can’t change that. But there’s every opportunity, even if you’re over 60. We’re talking about over 50s, but even if you’re over 60, every pound or penny you could put in a pension today has the chance to grow and will make your future potentially better. So it’s [to] get rid of that ‘sunk cost fallacy’. Don’t worry about what you haven’t done. There are still changes that you can make.

One of the things I’d encourage people to do is get a free compound interest online calculator up and just start playing around. Because if nothing is going to motivate you more than seeing, “Oh”, if I love playing with this, “Well, if I put £10 a month in for 20 years” and let’s say about 8% interest, and then seeing what I’m going to get after that time and how much of that is actually growth, and then go, “Oh, what if I put £20 in?” And then finding that sweet spot.

I think there are cases where people literally can’t find a penny extra. But most of us, we can, [use] one less streaming service. Don’t buy takeaway coffee, it’s that classic thing. But can you find £20, £30, £40, £100 a month? Plus you get the tax benefits, which add free money onto it, which you’re losing out on if you don’t put money in. And then put that money into a compound interest calculator, and that can help motivate you to make those changes.

PHILIPPA: So Sarah, I know you’ve run some numbers on this.

SARAH: Yeah.

PHILIPPA: And we’re starting from a position of someone who’s in a better position than that, someone able to save £400 a month.

SARAH: Yeah.

PHILIPPA: Where would that take them?

SARAH: OK, so if someone’s 50 years old and they’re able to start saving £400 a month into a personal pension -

PHILIPPA: starting with zero -

SARAH: starting with zero. They will get £100 extra tax relief, so a 25% top-up from the government -

PHILIPPA: every single month -

SARAH: every month, which takes it up to £500 a month. We’re assuming a growth rate of 5% after fees and inflation, there’d be a pension pot worth around £200,000 in 20 years’ time.

PHILIPPA: That’s a sizable amount of money. What sort of income would that - I mean, obviously, you know, it’s hard to estimate at this stage, but what might we think?

SARAH: An extra £8,000 in retirement. So if you then also add that to the State Pension from your 70th birthday, that’d be around £20,000 a year.

PHILIPPA: Yeah, because the State Pension’s what - about £12,500 now, isn’t it?

SARAH: Yeah.

HANNAH: And to give people an idea, like we don’t really understand. It’s really hard to see the State Pension in context. But the Retirement Living Standards say that if you’re a single person, the State Pension isn’t enough. You’re just short of a basic, basic living standard. And that assumes you’ve got no rent or mortgage, that you’ve got a paid-off property. If you’re a couple, the State Pension gives you just, just over. But that £8,000 a year takes you, from a single person, way over [the basic living standard]. And certainly for a couple, that then gives you a good quality of life.

How to maximise your pension contributions

PHILIPPA: So if we’re thinking about maximising every possible opportunity. For people who’re already in a workplace pension scheme, and those people we talked about right at the top of this podcast, that they’ve got something going on but there’s very little - maybe less than £10,000 in it. Is there anything they can do to maximise it?

SARAH: We’ve talked about the tax top up from the government, so anything extra you put in you’ll get extra money from the government, and then that gives us more compound interest, which then you can play around with the fantastic calculator we’ve talked about.

PHILIPPA: It’s very inspiring.

SARAH: Yes, and it comes out of your salary before tax as well, so that’s another benefit of paying more in.

PHILIPPA: I think the Auto-Enrolment minimum, it’s your employee, it’s 5%, isn’t it, and employer 3%?

SARAH: Yeah.

PHILIPPA: So 8% of your qualifying earnings. I mean, that’s a floor, right? Not a destination. So if you can ask, if you can contribute more, try and persuade your employer to contribute more. It’s worth asking, surely.

SARAH: Your HR department should be able to give you this information. If I want to increase my pension contributions, can I? There should be a policy in place in your workplace to be able to answer that one way or another.

PHILIPPA: Because no one ever asks about their workplace pension, do they? I mean, well, I mean, I’m sure some people do, but I certainly never did.

HANNAH: I think there’s more financial literacy in the youth. I know my son’s 23 [years old] and he’s much more aware of finance -

PHILIPPA: is he? -

HANNAH: than I ever was. Yeah. And I think that comes from social media. People are talking about - the drip-down effect of that is people are aware about money and the growth of money and the fact that they need to take action to make money. My generation, no one talked about any of that. No one talked about money or how you grew it or could you grow it? You know, there were rich people and then there was everyone else and that was basically it.

PHILIPPA: Yeah, I think the idea that you might have some ability to influence how your workplace scheme plays out for you is quite a fresh thought for most people, isn’t it?

SIMONNE: Contributing even 1% more would make a difference.

HANNAH: And basically, if you like free money and you don’t like paying tax, put money in your pension.

Increasing your pension contributions by 1%

PHILIPPA: Sarah, I think we’ve got some numbers on that, hasn’t it? The difference it makes to your pot if you can contribute more.

SARAH: Yes. So if we’re assuming here a starting salary of £25,000 at 21 [years old], and an increase of 2% pension contributions between 21 to 54 [years old]. So basically, if you increase that 8% (so that’s the 3% employer, 5% employee) to 10%, your pot size at 68 will increase by £48,546.

PHILIPPA: A lot of money.

SARAH: Yes. And if you then increase that to 13%, it’ll increase your pot size by £121,366 - which is huge.

PHILIPPA: So this is something for young people too - I mean, largely today on the podcast we’re talking about older people, but it’s something for younger people to think about too, isn’t it?

Can you contribute more into your workplace scheme, or indeed any scheme, when you’re younger? And then you have that joyous thing that we’ve all been talking about, of compounding for longer. But it works with older people too. People too. Yeah, so if you’re 50 [years old] plus, [it’s] always worth asking, always worth doing it if you can.

SARAH: Yeah, I mean, we talked about the example of someone paying in £400 a month, and we said that’s actually, you know, at the moment quite hard for some people to find £400 a month. But if it’s coming out of your salary, before it even touches your bank account, it’s happening - it’s supporting you not paying as much tax, and you’re getting the government top up, it’s helping you get to that £400 more easily.

PHILIPPA: I always think it’s easier for people in employment this - because it’s not a decision then, is it? Every month it just disappears. You never see the money, you know, your pay comes into your bank account at the end of the month. You’re not thinking about it. Whereas self-employed people, gig workers, all the rest of it - it’s a decision every time, isn’t it?

HANNAH: Absolutely. And especially if your income is erratic.

PHILIPPA: Yeah.

HANNAH: It’s hard to commit. Commit to doing that. But to go back to numbers really briefly, if you can put £40 a month in, which is topped up to £50, so that’s a much more modest amount, and you were to save over 15 years - I gave them a slightly more generous interest rate of 8%, which I think long term is the average for some pensions -

PHILIPPA: OK -

HANNAH: you’d have £16,200 in 5 years and £6,200 of that’s interest that has grown on that. So, that £16,000 could be over every year, you could take a little bit of that and that’s like a weekend away that you wouldn’t have had had you not invested that money.

PHILIPPA: I think the point worth reinforcing again is that your contributions, if it’s hard to contribute, it doesn’t have to be the same every month. Put in what you can.

HANNAH: Or wait till just the end of the tax year and put some money away in an account so you’ve got it there. And then if you can afford to put it in, put it in then.

PHILIPPA: Do you see a lot of people doing that, Sarah?

SARAH: Yes, we do. But also at PensionBee, there’s no limit on the size of the contribution. We don’t say you have to put in a certain amount. So we have to think about good tips for people, how they can find ways of doing it and making that decision and making it more fun. And we talked about gamifying finances. There’s lots of banking apps where you can ‘round up’ what you spend and create a little savings pot.

PHILIPPA: Yes.

SARAH: I do that with mine.

PHILIPPA: With tiny amounts of money. Yeah.

SARAH: And then if you put that at the end of each month, money that you’ve been spending anyway when you’ve bought a coffee, you bought the milk from the grocery shop, and it’s rounded itself up and you put that into your pension, you’ll get that 25% tax-free - tax top up. And that’s brilliant because that helps you build the pot without you really thinking about it.

PHILIPPA: Yeah, I’m a big fan of the rounding up apps. They’re great. They just kind of do the job for you, don’t they? There’s lots of free ones to choose from.

SARAH: Exactly. And I think starting small because, yeah £400, quite a lot for some people to find.

PHILIPPA: Yeah. 

SARAH: £40, you could probably find that some months with your like round up perhaps.

HANNAH: One thing I’ve seen people do is challenging themselves to live on a certain amount. They’re going, “Look, OK, so I’m currently living on this amount. What if we could live on like £500 a month?” And make it a game. Make it like, you know, how much can I save my supermarket shop? It’s switching the mentality of taking control over it and making it fun.

PHILIPPA: I’m thinking about what else people can do, levers that people don’t necessarily think about. And this, may or may not appeal, but working longer. The longer you’re earning, the longer you pay into a pension pot, the better it’s going to be, right?

HANNAH: And the longer you’ll live as well.

PHILIPPA: Well, yes. You make an excellent point because the data says so, doesn’t it?

HANNAH: Yes, absolutely.

PHILIPPA: Working is actively good for you, as I understand it. And, you know, research certainly tells us that we are way, way healthier at 50, 60, 70, 80 [years old] than even our parents’ generation, I think, let alone our grandparents’ generation. If you want to keep on working, you’re working and you’re employed, can your employer say, “No, you’re too old”?

SARAH: So employers used to be able to force workers to retire at 65. So that was known as the ‘default retirement age’, but the law was scrapped in April 2011 following a campaign by Age UK.

PHILIPPA: OK. Yeah. So if you want to stay, if you can still do the job, you can stay. Yeah. So you can - Yeah, I mean, are the benefits of working, even if you don’t absolutely love your job, I think all the data always says, doesn’t it, that people largely - obviously we work for money, but we work for social connection too. And it’s about the people you work with, isn’t it?

HANNAH: And there are many parts of working that meet your emotional needs as a human being. And a lot of us, our colleagues are our friends, we socialise with colleagues, it gives us structure to our day, it’s our identity. You don’t say, “I was a copywriter”. I wouldn’t say, “I do copywriting”. I say, “I’m a copywriter”. So it’s a big part of that. When we take work away, a lot of those things go. So there are many good reasons why working is good for us.

SIMONNE: And it’s also, we can reinvent ourselves. It’s not to say that you have to stay doing the same career for all of your life. If you’re in a job you’re not enjoying, I’ve got a client that’s going to retrain as a teacher. And there’s government sponsorship, bursaries that gives you the capacity to be able to cover the cost of that, and also earn an income while you’re retraining.

HANNAH: I think there’s a PensionBee podcast on that, isn’t there?

PHILIPPA: I think there is, yeah. If you go back to the back catalogue, you’re going to find that.

SIMONNE: I’ve also had clients that have taken a hobby like pattern design, and they’ve turned it into an Etsy shop, or they make hats and they’ve turned it into a way of making money.

PHILIPPA: Online has revolutionised this, hasn’t it? This whole thing, don’t need premises, don’t need staff, lots of stuff you can do for the comfort of your own home that can make you some - a side hustle.

SARAH: Yeah, like if you have a pet. Like, if you were a dog lover, there’s always a demand for dog walkers. People who will look after dogs for you. All the people that are going into the office or going on holiday. And like -

PHILIPPA: it’s so true, there’s a massive industry in the town where I live -

SIMONNE: or dog sitting -

SARAH: dog sitting, dog walking, cat feeding. And actually that’s getting you out and about and keeping you active as well.

Maximising your retirement income

PHILIPPA: The other thing on my mind is - I think, and I remember thinking this myself - if you don’t have enough pension provision, but you do have a property, I think there’s a general misconception, isn’t there, that you can actually just like, “my house is my pension”, but you do have to live somewhere. I think that’s the -

SIMONNE: Yeah, I think, but I do think there’s something in that, that you can sell and downsize, depending on the value of the property. If it’s possible to buy something outright that’s of a lower value, it can release some money for you to live on.

PHILIPPA: Yeah, I’ve got some numbers actually. Four out of five Brits on the cusp of retirement apparently plan to downsize to unlock cash from the family home. That’s a surprisingly large number, isn’t it?

SARAH: Yeah. I mean, you could also rent out a room, get a lodger, so you don’t have to sell your home if you’re emotionally attached to it like some people are.

SIMONNE: And you can earn it tax-free, rent-a-room allowance, if it’s under £7,500.

PHILIPPA: That’s worth knowing.

SARAH: And coming back to making things fun, sell everything in your house. If you’ve got rooms you don’t go in, sell it on Vinted or eBay and put that money in your pension.

HANNAH: But the point is that like, that could be part of a range of strategies, but I think it’s dangerous -

SARAH: To have it as one.

HANNAH: To rely, and I know a lot of people that that is their only retirement strategy. And that’s a pretty dangerous position. What if you can’t sell it? You know, what if you don’t get enough money to buy outright? Or what if you end up having to live somewhere you don’t want to live? Like, because that’s all you can afford. So I think it’s a risky one to place all your eggs in that basket. You need to research that very carefully. Definitely.

SIMONNE: But there are also interesting other ideas. I’ve got one client that lives in India for six months of the year. That covers - so she’s retired, she lives in India for six months of the year, very low cost there. She rents out her London property. The rent she receives covers her costs in India and covers the six months that she lives back in the UK. So, there are other creative strategies potentially that we could think through.

SARAH: Yeah.

PHILIPPA: OK, I’m going to ask you all for your final tips to wrap this up for us, please. Hannah?

HANNAH: Just do something. If it’s £10 a month, whatever. And please don’t worry if you’ve done nothing to date. Just do something now. Play around with the compound interest calculator. Trust me, it’s more fun than that sounds, probably. But just do something.

PHILIPPA: Yes, it’s surprisingly fun. It doesn’t sound like a great day, but it really is. Sarah?

SARAH: Make it fun and you’ll keep doing it. You’ll stick to it. And once you see the pot start to build, however small it is, the number that you start off with, it’ll incentivise you to keep going.

PHILIPPA: It’s a very nice feeling that, isn’t it?

SARAH: Yeah.

PHILIPPA: When you first see the first interest payments coming in and you see the little pot growing and growing. It’s like watching something grow in the garden.

SARAH: Yes.

PHILIPPA: It’s very, very exciting if you haven’t done it before. [Simonne?]

SIMONNE: Yeah, I think it’s the fear and overwhelm, not having to get it right, like getting it perfect. We always want to try and get things perfect, but starting with something, whatever it is, putting some money away for your future.

PHILIPPA: Thank you very much. Really useful conversation, and I hope [it’s] inspiring for people who are looking at their pots and thinking, “What am I going to live on when I retire?”. Thank you.

ALL: Thank you.

PHILIPPA: If you found this episode helpful, subscribe to The Pension Confident Podcast. That way you’ll never miss an episode.

And just a final reminder, anything discussed on the podcast shouldn’t be regarded as financial advice or as legal financial advice, and when investing your capital is at risk. Thanks for being with us. We’ll see you next time.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

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