Only 10-12 years to retirement and only basic pension. What to do?

margaretclare

I see the situation you're in, dunstonh, the risk of a mis-selling complaint, but I can say what I feel because I'm not an IFA and I'm only giving a personal opinion based on some experience of life.

There are women out there now who were 'advised' to stop paying full NI contributions when they got married because of the mores of the time and those women are now retiring into poverty with no choice but to rely on means-tested benefits. Would you consider that whoever gave that advice is culpable of mis-selling? I would, except that it was such a widespread belief at the time, and the individuals concerned would be very hard to track down.

I cannot comprehend why anyone who has some spare means is not doing something about saving for the future because of the argument that 'there will always be means-tested benefits to fall back upon'. It's not the way I would ever want to live my life. It's not just a question of balancing pound for pound, but a matter of personal pride and freedom of choice.

Margaret

seven-day-weekend

I agree with Margaret Clare that we were advised to only pay the 'small' stamp and were told that it wouldn't matter because you would get a pension based on your husband's contributions (the same sort of argument that you hear about benefits nowadays). I did actually pay the married woman's stamp for a short while and then I changed my job and for some reason long lost in the depths of time, decided to pay the full stamp. I'm glad I did as I will get my Pension when in my own right when I am 60 (if I'd have had to wait for my husband to reach retirement age, I'd have been 64).

I now only have one years more voluntary contributions to pay to get my full State Pension in 2010 (not many extras unfortunately, as I have a small Local Authority Pension to come when I am 65).

My friend who paid the 'small' stamp gets £40 from her husband's contributions. However, if he dies before her, she will get as much State Pension as I do.

So, was it worth it or not?? I do have my LA Pension to come as well.

lilac_lady

I agree with MC - you should try to save something - even a little is better than none. BTW Andrew Carnegie also said that it was a sin to die rich so he wasn't one for hoarding his money.

nrsql

Problem with pensions is that you don't know what the conditions will be when you retire.
It's pointless saving if all you are doing is reducing benefits by that amount - but by that time maybe the situation will change.

Unfortunately I don't think there is a correct answer now - ask again in 10-15 years.

I probably wouldn't put the extra money into a pension but maybe an ISA with a view to reviewing the situation and maybe spending the money later.

EdInvestor

Emu

Do you own your own home?

This is rather important in your case, because if you don't and you fall within the pension credit net, then you also would get housing benefit to pay your rent plus free council tax.We are not talking about peanuts here, this is quite a lot of money, in addition to the extra income.

If you do have a house of your own then you can use it to generate further income and it would be worth saving in the ISA as you could get yourself into a much better situation than being on benefits even with the extra perks.

margaretclare

seven-day-weekend wrote:

I agree with Margaret Clare that we were advised to only pay the 'small' stamp and were told that it wouldn't matter because you would get a pension based on your husband's contributions (the same sort of argument that you hear about benefits nowadays). I did actually pay the married woman's stamp for a short while and then I changed my job and for some reason long lost in the depths of time, decided to pay the full stamp. I'm glad I did as I will get my Pension when in my own right when I am 60 (if I'd have had to wait for my husband to reach retirement age, I'd have been 64).

I now only have one years more voluntary contributions to pay to get my full State Pension in 2010 (not many extras unfortunately, as I have a small Local Authority Pension to come when I am 65).

My friend who paid the 'small' stamp gets £40 from her husband's contributions. However, if he dies before her, she will get as much State Pension as I do.

So, was it worth it or not?? I do have my LA Pension to come as well.

Hi 7DWE

I would say it was worth it.

One thing I remember is that when my first husband died in 1992 I was getting widow's benefit until I reached age 60, which was in 1995 (but still paying full NI contributions). Because I had a full contribution record in my own right I was given the choice of claiming retirement pension against my deceased husband's contributions or against my own. I chose the latter, and was pleased to find that I also had some SERPS for the years when I wasn't in the NHS pension scheme, mainly the last few years.

The situation now is that DH and I both receive full SRP each plus SERPS, in our own right. If we were like 7DWE's friend he'd get 100% and I'd get 60% of that, whereas we get 100% each.

Margaret

emu

EdInvestor wrote:

Emu

Do you own your own home?

Actually, I do but, at the present time, it looks as if I may have to sell in 10 years or so to pay off the remainder of a mortgage. The house will be far too big for retirement in any case, so I am resigned to having to sell and 'relocate'. It fits in with my plan to retire to the county where I was brought up so as to be nearer my sisters. I had not factored the house into the equation. This means, presumably, that I would not be eligible for help, in any case.

I tend to agree with Margaretclare. I would rather try to do the best I am able to do towards retirement than to rely on the state help. However, all the advice and comments given are proving useful to focusing my mind on the best way ahead for me at the present time. Keep them coming!

I am still keen to understand 'immediate vesting' (I think it's called). I have been unable to trace the reference to this in MSE. I noticed it some time back because a person is allowed to start this at 50. Presumably the down-side is that whatever return you get on your £3,200 (or £2,700 with rebate) is fixed for the rest of your life. However, you do get £600 or so back to reinvest elsewhere PLUS the annual return, although small, could also be saved up/reinvested against the day when it is needed as pension. I would be really grateful for comments on this as I am strangely drawn to the idea of doing this once a year for as long as I am able to do it..... however, seeing how I have 'messed up' in my money-investing in the past (made clear when I read what the more knowledgable and informed on MSE have to say here) I have no idea whether this is a sensible route or not.

dunstonh

I am still keen to understand 'immediate vesting' (I think it's called). I have been unable to trace the reference to this in MSE. I noticed it some time back because a person is allowed to start this at 50.

There is no reason for you to consider it at this time. It wouldnt be that beneficial to you either. You can prepare for it if you were to use a stakeholder pension as its exactly the same product. The only difference is that the crystallisation (commencing income) occurs immediately with the IVPPP whereas the stakeholder commences when you want it at a later date. In that gap, you would get investment performance increasing the value.

You have the house and thats good news. If you are going to end up with investments/savings over 12k then you should go hell to leather in making provision for yourself as pension credits will be reduced to very little (or nothing). A pension does mean you lose access to the capital (bar 25% of the fund value which you do get) but it will provide more income in retirement than any other option.

margaretclare

nrsql wrote:

Problem with pensions is that you don't know what the conditions will be when you retire.

Of course! No one has a crystal ball!

It's pointless saving if all you are doing is reducing benefits by that amount - but by that time maybe the situation will change.

There I disagree with you. I would prefer not to risk having to live on benefits if there was anything at all that I could do by my own efforts and of my own choice.

Unfortunately I don't think there is a correct answer now - ask again in 10-15 years.

There is no correct answer, but in 10 - 15 years' time you can have frittered away an awful lot of money which could have been put to better use.

I probably wouldn't put the extra money into a pension but maybe an ISA with a view to reviewing the situation and maybe spending the money later.

The advantage of using an ISA is that everyone gets the £7,000 a year ISA allowance and every year you don't use that is a year lost. The advantage of using a pension plan od some kind is that you get the 22% from the taxman.

People who know that I'm saving often say things like 'but what are you saving FOR - isn't it too late to be saving at your time of life? Why not spend, enjoy yourself!' Well, as I've already said, the words 'too late' don't figure in my vocabulary. There may be things that DH and I need that can't be foreseen now and which would be helped by having a little spare money. We'd never have got the roof replaced last spring if it hadn't been for our savings! 'Spend it and enjoy yourself' - people talk about going to bingo, going on a cruise, none of which appeals. We live simply, comfortably and we have all we need. We're planning for a big holiday later this summer and we don't go short of anything.

Margaret

jem16

margaretclare wrote:

The advantage of using an ISA is that everyone gets the £7,000 a year ISA allowance and every year you don't use that is a year lost. The advantage of using a pension plan od some kind is that you get the 22% from the taxman.


Margaret

I agree with you about saving.

However the advantage of using a pension is not necessarily about tax. You do get 22% from the taxman going in but you will be taxed 22% on it coming out.

Main advantages are;

1. You can't get at it which means you don't need the will power not to dip into it like an ISA.
2. If your employer pays a contribution into it too.