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  • FIRST POST
    • halesowenmum
    • By halesowenmum 18th Jun 17, 1:32 PM
    • 140Posts
    • 51Thanks
    halesowenmum
    Bother joining pension or not?
    • #1
    • 18th Jun 17, 1:32 PM
    Bother joining pension or not? 18th Jun 17 at 1:32 PM
    I've just joined my new company and there's pension on offer.

    However, I've needed every single penny so I can pay my bills and have not been able to pay into a pension for years now.

    I'm 50. I have about 78k mortgage to pay off (so will likely be working until I'm 90!!), no other investments. I do have critical illness insurance (so I'm worth a fair bit dead not that that's much help!!) and I guess I can't see the point of 'starting now' so to speak.

    I suppose what's further complicated things is my income has been up and down over the last 8 years through various forms from temping, fixed term contracts, and a short spell with a ltd co. I'm also recovering from a £2k boiler replacement 3 days before Xmas and four months without child support from my XH meaning my income took a £1500 hit and I'm struggling to catch up. Also, this job role is supposed to be for 1 year, could stretch to 2, but again it's not a permanent role so I'd be changing pensions again in due course.

    What do people think in general about not paying/paying into a pension/??? Any thoughts gratefully received. I also wonder if I should sort out a will just in case I'm run over by a bus as I don't understand where any pension would go (I'm single since the divorce and have two children who are teens) or if the payment from the critical illness etc, where would that go if I'd not got a will?

    Thank you.
Page 1
  • jamesd
    • #2
    • 18th Jun 17, 2:13 PM
    • #2
    • 18th Jun 17, 2:13 PM
    Critical illness insurance normally pays out when you're alive, not when you're dead, though quite a few of the things it covers have a substantial chance of killing you eventually. No problem if they don't, you still keep the money. As insurance types go it's fairly low in priority list. Reducing the amount of cover might not be a bad idea.

    You say who is to get your pension pot when you die using an expression of wishes form. You'd probably say it's to be split between your children. If you die before 75 they get it all tax free, else it's taxed at their normal tax rate when they take money out, which can be at any age for an inherited pot.

    If you're diagnosed with something where your doctors say your life expectancy is no more than a year you can take the whole pension pot as a tax free lump sum, at any age. The doctors are allowed to be wrong, you get to keep the money anyway if they are and you live to be a hundred.

    A pension is an efficient way to clear or help clear a mortgage. You pay into the pension and get the tax relief and employer contribution. At any time from 55 you can take 25% as a tax free lump sum to use for the mortgage and leave the rest in the pension for retirement. The bit left in the pension will probably still be more than the amount you paid in.

    If the mortgage rate is sensible you might consider increasing the term to free up cash flow now that you can use to accumulate an emergency fund and invest for the future more easily.

    At a minimum join the pension and pay in enough to get the maximum employer contribution. Do that as soon as you can because that employer money is claim it or it's gone, effectively a given up bit of pay. No problem to move and combine pensions these days so that's not a reason not to join.
    Last edited by jamesd; 19-06-2017 at 5:24 AM.
    • Aretnap
    • By Aretnap 18th Jun 17, 2:49 PM
    • 2,621 Posts
    • 2,077 Thanks
    Aretnap
    • #3
    • 18th Jun 17, 2:49 PM
    • #3
    • 18th Jun 17, 2:49 PM
    As the employer will presumably match your contributions to the pension by not contributing you are effectively turning down free money (albeit free money that you will have to wait five years to withdraw).

    Objections asking the lines of "it's a bit late to start" or "I'll only have the job a couple of years" are effectively objections to the fact that it's only a little bit of free money. That maybe true, but a little bit of free money is still better than no free money.

    If you really can't afford to give up any of your salary now then on the surface that's an argument for not contributing, but it rather urgently raises the question of how you'll core in a few years when you no longer want to/are able to work in the way that you do now.
    • Browntoa
    • By Browntoa 18th Jun 17, 3:02 PM
    • 31,202 Posts
    • 36,900 Thanks
    Browntoa
    • #4
    • 18th Jun 17, 3:02 PM
    • #4
    • 18th Jun 17, 3:02 PM
    and the difference it may make in a top up to a basic state pension


    I'd rather cancel the critical illness cover and get the pension if it were me
    I'm the Board Guide of the Referrers ,Telephones, Pensions , Shop Don't drop ,over 50's and Discount Code boards which means I'm a volunteer to help them run smoothly and I can move and merge posts there. However, please remember, board guides don't read every post. If you spot an inappropriate or illegal post please report it to forumteam@moneysavingexpert.com Any views are mine and not the official line of MoneySavingExpert.
    • bostonerimus
    • By bostonerimus 18th Jun 17, 3:29 PM
    • 329 Posts
    • 178 Thanks
    bostonerimus
    • #5
    • 18th Jun 17, 3:29 PM
    • #5
    • 18th Jun 17, 3:29 PM
    Do a detailed budget
    Pay off any high interest debt
    Save 6 months spending to a bank account.

    If you have done those 3 things do everything you can to pay enough into an employer pension to get the maximum matching contribution.
    Misanthrope in search of similar for mutual loathing
    • Stubod
    • By Stubod 18th Jun 17, 4:17 PM
    • 366 Posts
    • 203 Thanks
    Stubod
    • #6
    • 18th Jun 17, 4:17 PM
    • #6
    • 18th Jun 17, 4:17 PM
    ..normally paying into a pension is a "no brainer" as your Company will "give" you extra money..(all be it you can't access for a while...but that's probably a good thing if you are tempted to spend it). I can accept that you may be struggling financially now...but how much more will you struggle when you stop work and have a much reduced income and no company pension to help out?
    • atush
    • By atush 19th Jun 17, 11:57 AM
    • 15,928 Posts
    • 9,668 Thanks
    atush
    • #7
    • 19th Jun 17, 11:57 AM
    • #7
    • 19th Jun 17, 11:57 AM
    Do whatever you have to do to pay into the pension.

    Take your ex to court for the money he owes.
    • justme111
    • By justme111 19th Jun 17, 12:39 PM
    • 2,614 Posts
    • 2,501 Thanks
    justme111
    • #8
    • 19th Jun 17, 12:39 PM
    • #8
    • 19th Jun 17, 12:39 PM
    I've just joined my new company and there's pension on offer.

    However, I've needed every single penny so I can pay my bills and have not been able to pay into a pension for years now.

    I'm 50. I have about 78k mortgage to pay off (so will likely be working until I'm 90!!), no other investments. I do have critical illness insurance (so I'm worth a fair bit dead not that that's much help!!) and I guess I can't see the point of 'starting now' so to speak.

    I suppose what's further complicated things is my income has been up and down over the last 8 years through various forms from temping, fixed term contracts, and a short spell with a ltd co. I'm also recovering from a £2k boiler replacement 3 days before Xmas and four months without child support from my XH meaning my income took a £1500 hit and I'm struggling to catch up. Also, this job role is supposed to be for 1 year, could stretch to 2, but again it's not a permanent role so I'd be changing pensions again in due course.

    What do people think in general about not paying/paying into a pension/??? Any thoughts gratefully received. I also wonder if I should sort out a will just in case I'm run over by a bus as I don't understand where any pension would go (I'm single since the divorce and have two children who are teens) or if the payment from the critical illness etc, where would that go if I'd not got a will?

    Thank you.
    Originally posted by halesowenmum
    People on here switch the record of " pension is a priority" no matter what the situation is. To me it looks like in your case questions about pension are secondary. If one has less money than state pension amount now after taking into account expenses one will not have in retirement then no point in additional pension.How much disposable income do you have after mortgage and children related expenses? If less than state pension than your priority is to chose whether you will try to pay off mortgage before retiring or it is non viable and you will have to rely on local authority accommodation for living till the end of your life. If former than coping while children do not earn yet is a priority , you will be sorted after. If latter then familiarising with rules for housing and crunching numbers on when to sell the house is priority.
    • mark5
    • By mark5 19th Jun 17, 4:12 PM
    • 1,138 Posts
    • 762 Thanks
    mark5
    • #9
    • 19th Jun 17, 4:12 PM
    • #9
    • 19th Jun 17, 4:12 PM
    Do whatever you have to do to pay into the pension.

    Take your ex to court for the money he owes.
    Originally posted by atush
    The ex might not owe any money, the op only says she didn't receive child support!
    • atush
    • By atush 19th Jun 17, 9:13 PM
    • 15,928 Posts
    • 9,668 Thanks
    atush
    The ex might not owe any money, the op only says she didn't receive child support!
    Originally posted by mark5

    and four months without child support from my XH meaning my income took a £1500 hit
    And this lead me to believe she is owed 4 months worth?
    • justme111
    • By justme111 19th Jun 17, 10:27 PM
    • 2,614 Posts
    • 2,501 Thanks
    justme111
    He may have taken sabbatical and went high hiking to Mongolia. Or lost the job. Or became self employed. By what she says she lives hand to mouth and concerns of high fliers who want to keep the same life style in retirement for her are far removed.
    • atush
    • By atush 20th Jun 17, 2:50 PM
    • 15,928 Posts
    • 9,668 Thanks
    atush
    He still owes it, no matter what.

    I agree, it is worrying.
  • jamesd
    How much disposable income do you have after mortgage and children related expenses?
    Originally posted by justme111
    One potentially relevant thing here is that pension contributions reduce income when working out how high working tax credit payments will be. Higher pension contributions, higher WTC.

    For some people it can greatly increase the value of pension contributions above just the usual tax relief. Still going to be a cut to income, though.
  • jamesd
    If less than state pension than your priority is to chose whether you will try to pay off mortgage before retiring or it is non viable and you will have to rely on local authority accommodation for living till the end of your life. If former than coping while children do not earn yet is a priority , you will be sorted after. If latter then familiarising with rules for housing and crunching numbers on when to sell the house is priority.
    Originally posted by justme111
    There are far better choices than those available. Mortgage payments can be reduced by extending mortgages to age 85 and beyond, while equity release can eliminate the need to make mortgage payments while keeping the home. Downsising when children are no longer living there and/or moving to a cheaper part of the country can also eliminate a mortgage and perhaps free up capital to invest to produce income.
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