38 and worried

thefellow

Hi

im 38 and have been in poor paid employment most of my days,until now

My new job is quite well paid(for scottish standards!!)

I earn £15,900 a year married with kids and a mortgage,i can afford about £100-£125 per month.

I will listen to any advice,im really worried i am going to be a very very poor pensioner.

ps have paid all my tax and insurance for the last 22 years

take care

tony

Mo'_Money

Hi Tony!

Congratulations on your new job! I'm a 26 year old single parent who is about to return to work - scary, hey! I can't really offer any help as an individual, but I know that there are literally hundreds of people who are right behind you here. I'm just going to take each month as it comes, and I think the key is to stay 'clued up'. Don't be scared!

jamesd

Do you have any form of income protection insurance (permanent health insurance) so that if you can't work your income isn't reduced to benefit levels?

Do you have life insurance to cover the mortgage amount remaining and provide whatever you want for wife and children for a while?

Does your wife have any pension contributions in her own name, credits or anything else?

First thing to do is get a state pension forecast for both you and your wife.

Once you have a state pension forecast for each of you, check whether either of you has a pension income below the tax limit and age allowance (about 7000 a year total for each of you). Any additional pension up to that amount for each of you will be tax free and that can make it a good idea to contribute to a pension for your wife as well as or instead of for you. This can save you as much as 500 a year in tax on the pension income. Also, if you die your wife will soon lose your pension income, dramatically cuttting her income, so having a pension in her name as well as one in your own name is a good way to protect her from that.

The state pension forecast will be inaccurately low until it sees the higher income from your new job, so expect it to increase a bit if you ask for one after the first full calendar year in the new job is included in the figures.

Do you have any view about whether you're happy with the unit trust (stock market) type of investing? That's typically the way to get the best long term growth in pension value but you do need to be able not to worry too much about the years when the stock market temporarily drops to half its value for a few years.:) Just remember it's for the long term and these variations happen... but some people can't do that and worry too much, so need to avoid this type of investing. Often people who are in greatest need of good growth.

A hundred pounds a month is sufficient for a wide range of pensions that should help quite a bit.

thefellow

once i find out my state pension forcast i will be back on.

I dont mind taking high risks with my pension as i say i can afford £100 -£125 we stay in a house that is rented (cheap rent on a trust estate)

so once i have the details ill be back!!!!

Thankyou


Tony

gb57

Hi Tony

I admire the fact that you are bringing up your family etc on a low income, rather than drawing the dole (much better description than "benefits", though I know it shows my age!).

You need to be careful about pensions contributions. You would think that anything you can do towards a pension would be a Good Thing, but that is not necessarily the case. People who end up with a small amount of personal or work related pension would sometimes have been better off by a long way if they had put their savings elsewhere. This is because of the ridiculous way Government pays pensions - a low basic pension, Secondary State Pension, plus Income Support (or whatever they are now choosing to call it) for people on low incomes.

Example using today's figures - Pensioner A gets state pension, Serps (now SSP) and small occupational pension - total income £120 per week. Not entitled to state help at all, has to pay, for example, council tax of £1350 a year, almost £26 per week. Is left with £94 pw. Pensioner B gets state pension & Serps, but no other pension, has income of £90 per week, State tops that up to £105 per week (Income Support), and then the State ALSO pays council tax, so Pensioner B has £105 pw. Person B on income support is also entitled to help with things like optician's bills and all sorts of grants towards home improvements to keep house warm and dry, plus concessions in lots of areas. Person B is better off than Person A, and also did not make pension contributions througout their life!

I am not saying that you should not do what you can (and yes, I do have a personal pension). Just that you have to be careful that you are not going to be one of those for whom having a pension ends up being a bad thing rather than a good thing.

Has Martin written much about pensions? If so, suggest you read all of his stuff. You need good advice from an Independent Financial Advisor (IFA) -you MUST use one that is recommended to you, some of them are little better than crooks, only interested in what they can make from you. It might sound daft but often you are better off going to one who you pay for their advice. This is not cheap, but the ones who work on a commission basis are more likely to steer you towards a pension plan that pays them the best commission, not the one that is right for you. Pensions are a minefield - you must have a pension plan that does not charge high fees, too, as they eat into your money. Stakeholder pensions are an example of a low fee pension plan. Another thing with pensions is to be wary of starting a plan where you pay in £100 every month. Commission/fees are taken on the basis that you will pay that until you are 65, or whenever. If you suddenly can't pay, they will still take all the commission/fees as though you had, therefore eating away at your pension savings.

Better scheme is to save your money in a savings account and have a pension plan that allows you to pay in what you want, when you want, so you can pay in say £1200 one year, maybe more or less the following year, without penalty. You have to be very disciplined, though.

I could go on..... I have been badly bitten with pension "advice" and know others in the same boat.

Take care, there are a lot of sharks in suits out there,:cool: good luck, but do oodles and oodles of research first!

Gill B

dunstonh

You need good advice from an Independent Financial Advisor (IFA) -you MUST use one that is recommended to you, some of them are little better than crooks, only interested in what they can make from you.

Evidence to back up your comments?

This is not cheap, but the ones who work on a commission basis are more likely to steer you towards a pension plan that pays them the best commission, not the one that is right for you.

Evidence?

you must have a pension plan that does not charge high fees, too, as they eat into your money.

Evidence? - some of the best funds and best investment options are available on the more expensive products such as full/hybrid SIPPs.

Stakeholder pensions are an example of a low fee pension plan.

Not any more. Stakeholder is a defined charging structure which makes it hard for providers to make profit from them for around 15 years. To offset that, you find stakeholders generally have limited investment funds and limited features. Most modern personal pensions offer stakeholder funds at stakeholder charges as well as a larger range of investment funds and a number of personal pensions can be cheaper than stakeholders.

Another thing with pensions is to be wary of starting a plan where you pay in £100 every month. Commission/fees are taken on the basis that you will pay that until you are 65, or whenever. If you suddenly can't pay, they will still take all the commission/fees as though you had, therefore eating away at your pension savings.

That is incorrect.

jamesd

gb57, Here are private pension calculations here for a 38 year old male earning 15900 and retiring at their state retirement age of 67, pension increasing with inflation and providing 50% pension for a wife after his death, no lump sum. All numbers in today's money.

100 a month using very cautious assumptions should produce an extra pension of 62 a week. Add in 134.75 for the couple's basic state pension (84.25 for single) and you get 208.25 (146.25) a week even without including the SERPS/S2P part. Once we add in thefellow's S2P he should be even more clearly better off with the extra retirement saving.

At 125 a month it rises to 77 a week extra. At 150 a month to 93 a week extra.

Then we can move on to whether it's best put in a pension or an ISA being used as a pension. A good set of funds, with regular equity allocation adjustment, in a pension or ISA should do better than the 7% used in this projection.

We also need to discuss a pension for his wife, since it's cheaper to provide after his death income for her by getting a single pension for both of them than by buying one with partner benefits after death. There are also tax benefits, since she gets her own tax allowance to exploit. 100 a month for him for the main pension so he can get a pension with really good fund choices and 25 or 50 for her in a stakeholder might be interesting. Or maybe a stakeholder with an unusually good range of funds for each of them. Can start accumulating in an ISA either way (and probably should).

thefellow

some cracking advice and really nice helpful people i like the sound of what youve posted jamesd

what do i do next?

jamesd

thefellow, next is checking the insurance questions I asked initially. What happens if you're injured and can't work? Die? These things probably should come before pension contributions, since they are looking after your family in the more immediate future.

What's your wife's work situation and current pension provision, if any? What does your employer provide in the way of pension, if anything?

If nothing, will your employer at least help you by doing things like salary sacrifice, which can get you 50+% more pension contributions for no extra cost other than learning how it works? There's a sticky discussion of it in the topic list.

thefellow

hi again

no i dont have income protection

my wife has no personell pension but she has a small work pension(local council)

i checked my state pension forcast it said in 2033 my pension might be £105

now my missus cant remember her password does anyone know a link where she can find or unlock it!!!!

many thanks

tony

EdInvestor

i checked my state pension forcast it said in 2033 my pension might be £105

Looks like we can rule out any extra pension saving for you then.

If you retired on this level of pension now you would be eligible for a pension credit top up to 114 quid a week, plus free council tax plus housing benefit to pay the rent if you didn't have a home.

I would throw your extra money at the mortgage.The reason for this is that it gives you a guaranteed tax free return higher than the savings rate, and over the long term, the value of your home is likely to appreciate.

This could give you the opportunity at retirement of

a)Trading down to a cheaper retirement home,thus releasing a tax free lump sum which can then be invested for income to supplement your pensions

b)Later on, doing an "equity release" lifetime mortgage again to produce a tax free income topping up your pension later in life

c)Generating extra tax free income by letting out a room to a lodger