Is it worth saving in a pension at the age of 72?

Q: At the age of 72, is it worth putting some savings in a pension? I have a UK State Pension and a small work pension from working in a school. 

A: For many people in their 70s, questions tend to be about the best way to take money out of their retirement savings, rather than starting a pension scheme. However, pension contributions can still be beneficial, depending on your financial circumstances. 

• Read: Triple Lock: what will the State Pension be in the future? 

The main advantage of pensions as a savings vehicle is that they offer tax relief on contributions. This applies to both working and retired individuals. 

You mention you have a State Pension and a small work pension, likely a defined benefit scheme given your background in education. If your total annual income (from these and any other sources) exceeds £12,570, you can claim basic-rate tax relief on future pension contribution, effectively increasing their value by 20%. 

But you need to think about more than just tax. Most Self-Invested Personal Pensions (SIPPs) and other personal pensions will offer a choice of investment funds. If you don’t need immediate access to this money, this offers the opportunity for longer term growth in a tax-free environment. If you are likely to need this money within the next five years you may want to consider lower risk savings options, such as a cash account. You may be able to access a cash fund through a SIPP wrapper, but check first with the provider.  

As you are over the age of 55 you can access money from a pension at any time, but it’s worth noting that withdrawals beyond the 25% tax-free lump sum will be taxed at your marginal rate.  

ISAs may be another savings option. There’s no tax relief upfront on contributions, but all withdrawals are tax free. Again, there is the option to take out a stocks and shares or cash option, depending on how soon you’ll need this money and your attitude to risk.  

Previously, pensions were outside of your estate for Inheritance Tax (IHT) purposes, but following the latest Budget, this is set to change, meaning there is little difference, in terms of IHT, between saving in a pension or ISA.  

Some of the most complex financial decisions people make are around retirement, so it’s worth getting a second opinion. Providers like Fidelity offer a wealth of information, calculators, and tools on their website to help you crunch the key numbers. 

• Find out how much you need to retire with our Retirement Calculator

Fidelity’s Retirement Service also has a team of specialists who can provide you with free guidance to help you with your decisions. They can also provide advice and help you select products though this will have a charge. 

• Read: IHT on pensions to push wealthy families into 80% plus tax 

Got a burning question you want to ask? Why not drop us a line.  Click here to ask your question.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.