38 and worried

dunstonh

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 disagree. Thefellow is aged 38. To talk about using pension credits (which may not exist in future) is aiming to fail.

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

Which isnt always possible if you arent in a big enough house to begin with or in an area which is expensive and you can afford to trade down. Plus do you really want to move to a cheaper house/area?

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

Equity release is an option of last resort much of the time. You shouldnt plan to use it at age 38.

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

Thats very desirable.

All the options Ed has mentioned are valid but I woudlnt plan to use any of those. They are options which you should consider when you have failed to save enough for retirement.

If you plan to fail, then you will succeed.

EdInvestor

There is absolutely no point in the OP saving in a format which will mean he is simply replacing benefits he would receive anyway.That's not failing, it's just common sense.

If he did put away 125 quid per month for 27 years to 65 @ 7.5%, he would end up with 115,918. That might be a handy lump sum to have in an ISA - the income payable would be tax free - around an extra 5,795 a year @ 5%.

But I wouldn't put it in a pension where you lose the capital and can only get an income from it, as it would be better to have it available for capital expenditure.Where a low pension and possible benefits come into the picture, things like a new car, and investment in the home to make it safer and more comfortable, money for holifdays and emergency cash are important, so capital can be the priority.

It's always possible to put some of it into a pension to pick up tax relief if things change later anyway, under the new rules so I would suggest keeping all options open at the moment.

dunstonh

So, at age 38, you think thefellow should be planning to be living on the breadline?

That isnt common sense at all.

EdInvestor

Actually I'm a bit puzzled by the OP's state pension forecast of 105 pounds a week.That seems very low if he has paid full NI so far.Is he sure there was no self employment, or other missing years?The reorganisation in S2P should produce a better outcome than that for someone on low pay I'd have thought.

dunstonh

S2P gets fiddled with so often that it isnt reliable to include it in your planning.

clairehi

thefellow wrote:

hi again


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

I suggest you check this out. If your wife is contributing to a final salary, public sector pension, this could be a very valuable benefit. Pound for pound her contributions will buy you more than contributing to a personal or stakeholder pension. Ask her scheme administrator for a forecast of benefits due to her.

It may be worth buying "added years" in her scheme if she is able to do so, with some of your spare cash. However its also important to ensure that your retirement income is split between the two of you, to make the most of personal tax allowances and in case one of you dies.

jamesd

thefellow, you can phone the Future Pension Center to ask them about how to get a new password. I think they will post it if asked.

You can also ask them about the effect of both your and your wife's state (basic and additional) pensions combined, I expect, if both of you are around when you call, so they can be sure you're both willing to discuss it with them. Remember that you need the couple's pension value, not the individual value - it makes a big difference to the better off avoiding benefits calculation.

You'll have to contact the administrators of the local government pension to find out what that will pay her.

You should specifically ask about the basic state pension part and the SERPS/S2P "Additional" part and ensure that you know how being married affects what you get for both the basic state pension for the two of you and the SERPS/S2P parts.

You should also ask them whether the higher income from the new job is included in the additional state pension calculation. I don't think it will be. Then you can ask them if there is any way for them to tell you what effect it will have.

I phoned them myself this morning and found the person rather helpful. If you ask they can tell you how much you earned in every year of your working life, at least in the UK - they did for me. The person I spoke with was also happy for me to record the call for my own notes.

EdInvestor, consider the possibility of further increases in income later in life and the pension from the wife. Assuming that he's going to be on benefits is premature at this point and not at all sensible for someone earning 15,900 a year at age 38! Why are you using single person figures when he's said he's married? Should have questioned the figure from him as well, since that was for a single person.

Your benefits assumptions are very dependent on the amount of those pensions and it seems quite unlikely that he will be better off on benefits even without making any personal pension contributions. He's likely to accumulate too much S2P for that.

Your suggestion of property has an expected growth rate below that of equities and he's indicated the acceptability of equities based on a question about willingness to accept 50% drops in value during a downturn. Suggesting a lower return probability to someone who is already not in a wonderful position is likely to reinforce that position rather than doing something to improve it.

It seems very likely that he will be significantly better off, particularly if his wife's current pension plan is quite low and he's able to arrange to exploit her full tax and age allowance to get tax free pension for her as part of their income. That's a benefit you can't get from an ISA - contributing with full tax relief, then not paying tax when you collect the money. Still worth initially accumulating the money for each of them in their own ISA, but it seems pretty likely that it will be best in a pension for the wife portion eventually.

EdInvestor

jamesd wrote:

Your suggestion of property has an expected growth rate below that of equities..

Really, is that so.

and he's indicated the acceptability of equities based on a question about willingness to accept 50% drops in value during a downturn.

Has he indeed?

It seems very likely that he will be significantly better off, particularly if his wife's current pension plan is quite low and he's able to arrange to exploit her full tax and age allowance to get tax free pension for her as part of their income.

Don't you think that you're making a few rather radical assumptions here?

That's a benefit you can't get from an ISA - contributing with full tax relief, then not paying tax when you collect the money.

I see, you'rre assuming they will both not be paying tax because they don't even get the state penion when they retire.


I'm sure the OP will get the picture after he's read all this.

:

thefellow

checked again this is what it says

31st jan 2033

basic state pension £84.25
additional state pension £21.21

£105.46

ive always worked for a company never self employed

should i just put the £125 away?do the banks do a special account for what i want?
my heads going to explode!!!!!!!!!!

oh we dont own our house its on a private estate where the rents are kept at an affordable price hope this helps

jamesd

EdInvestor, assume that they both get the full state pension. What is their total income from that as a married couple? What are their individual tax and age allowances and what portion of them remains unused? Now add in the additional state pension. How much is left unused now?