Should I, as a stay at home mum, put money into old work pension or take out new one?

NewlyFrugalMumof3

I have 2 paultry pension pots which amount to extremely little. One for 4.5 years with civil service back in early 1990's and one with PriceWaterhouseCoopers via Winterthur Life for 4 years or so. I left work 7.5 years ago to stay home with children so have not contributed since.

Would it be a good idea to contribute again to my Winterthur Life Pension or should I take out a new pension or something else?

I am 41 years old and I know that the longer I leave it the worse my retirement will be.:(

My other half has a work pension but he pays in the minimum - I keep urging him to increase his contributions but he always finds an excuse not to.

Are there anyone else out there in a similar situation that have sorted themselves out pension wise?

Would love to be pointed in the right direction.

Loughton_Monkey

Your husband must enjoy paying more tax than he needs to. Keep asking him how much he likes baked beans on toast and emphasise that he should not get too keen on Heinz, since it will be Sainsbury's Basics the minute he retires!

Seriously, though, not saving for retirement is a huge mistake, and much easier to catch up on the younger you are.

If you have no earned income yourself, you are entitled to contribute only £2,880 [net] into your pension. The minute it 'hits' the account it will be worth £3,600.

dunstonh

Would it be a good idea to contribute again to my Winterthur Life Pension or should I take out a new pension or something else?

If the Winterthur pension allows you to contribute to it then it may be a suitable option but it may not be as good as modern options.

I keep urging him to increase his contributions but he always finds an excuse not to.

Tell him that the basic state pension is just £5000 a year and ask him if that is what he really wants to live on in retirement (plus his provision)

Are there anyone else out there in a similar situation that have sorted themselves out pension wise?

Loads. Its one of the most common things that IFAs do for people.

saverjustice

Sounds interesting, as a former IFA I would like to compare my findings with someone who has an axe to grind.

NewlyFrugalMumof3

Thank you DunstonH - just received a letter this morning stating that the pension funds within Winterthur which I chose to invest in have reduced their charges from 30% to 25% - am I right in thinking that is still very high? Also do you know what other options are available, like stakeholder and other names of more modern pensions?

Thanks Loughton Monkey - is that just £2880 per annum? I wonder why that's all I can invest in my name?

To live on a pension income of say, for example, £20,000 for us as a couple, what would we need to have saved in our pension funds?

I guess the beans on toast may be a distant dream ... perhaps just toast?!;)

saverjustice

Do a Google for pension planning calculator, they make a lot of assumptions but then that is what financial planning is all about, plus opinions - some of which can be extreme.

To build up a pot which would produce £25,000 at 5% you would need £500,000. Not a figure the average person in the private sector can even dream of unless they win the lottery, your enemies are investment returns, charges, interest rates, inflation and of course time.

As Monkey said, you personally are allowed to contribute £3600 which has been 'grossed up' from £2880 by the tax man at the current basic rate of tax, as I always used to tell clients the tax regime can and will change over time.

Your husband's pension is something you need to study some more, do you know what kind it is? Defined benefit (final salary) or defined contributions (money purchase)?

If you really do want to put as much away as you are allowed you should start with a lump sum before the tax year ends or else start a monthly plan now. This government says it will remove the problem of being penalised for having a private pension, because of Pension Credits until recently I would have said that if you can't afford to put the maximum into a pension then think about an ISA, far more flexible, no 'grossed up' payments but with careful planning no tax on any income and all the money is in your estate on death.

The FSA has created a free advice service where you can have your circumstances looked at after which you will be forearmed and forewarned, apparently. It is paid for by the ever generous financial services industry.

saverjustice

Then we have the reminder that bad things can happen and smash all our plans to bits, look at Japan. There are no pockets in shrouds.

NewlyFrugalMumof3

Thank you SaverJustice. Its times like this that I think being a grownup sucks!
My OH's pension is a final salary and in October when he has been with company 5 years he can contribute more to something called Pension Plus. However, he is only earning £21K so final salary sounds grand but in his case isn't.

I will look into FSA details about my pension options. I guess my options are either put money into Winterthur pension or sort out a new one with an IFA.

Would like to find a bucket of sand, but have already had head stuck in one for too long so best act now. Although it is tricky trying to squeeze the money out of our monthly budget.

SallyG

Never ever give up on stashing some cash in a pension and getting the tax bunce.
Such nice little earners are so rare and satisfying.
I was in your situation - he was climbing the greasy career pole and on a great final salary deal - we were bringing up the next generation - but we were not together forever and it pays to be prepared for all eventualities.
Look very hard at the charges - they're liking running a nice hot bath with the plug out.

saverjustice

It simply confirms that the public sector pension schemes are unaffordable.