Lost in the pension clouds...

WispaDreams

Hi, I am 37 and have 3 children, I am a single mum. I work full time and have no private pension, nor have I ever paid into one. I do have savings, but nothin on the scale of what I'd need when I retire. Infact at the moment, if I was to be on state pensions etc it would be enough savings to prevent me claiming HB/ CTB etc. but not enough to last for long.

My question is, I know I need to have something in place (sooner the better in my eyes) however, when I last met with my IFA about 6 months ago, he said as I was under 40 and had never paid into a pension scheme, that because of some loophole, I'd be better off waiting until I was 40 to start a private pension... I have no real recollection of the explanation, though it did make sense at the time but - was his advice right and is it still right?

I can budget to within an inch of my life, but pensions are beyond me... so simple english please - and thank you in advance!

JoeCrystal

You do still need to save for your retirement one way or another. I personally do not believe that your IFA is right but that is just my opinion. I certainty have not heard anything like waiting until 40 unless he is talking about auto-enrolment where companies enrol their workers into a pension scheme over next few years.

Just wondering, does your employer operate pension scheme and do they pay into it?

Cheers

Joe

WispaDreams

Thanks Joe

Yes they do, I've recently requested details so they should be with me shortly. I don't remember him mentioning aut enrolement, but rather something about what I'd pay in in 3/4 years would penalise me in comparison to something or other... unfortunately I can't remember what the something or other was!

I am concerned about all this as it's way over my head, took me years to work out ISAs never mind pensions - I need the peace of mind to know something is in place. I've had a couple of promotions in last 6 months and would like to be doing something useful with the extra cash if I can. I have zero debt and my current savings were really intended to be a mortgage deposit and I'm almost where I needed to be with that. I do however want the day to day stuff sorted first (pensions, life insurance etc) before I even contemplate buying though.

dunstonh

There is some logic here to deferring it.

People who make small contributions for short periods can end up financially worse off on the current system. The Govt has proposed a change to the state pension and means tested benefits but they havent given any detail yet. If the change goes through then small contributions would not be penalised. If the changes dont go through then they will continue to be. So, waiting until we know more can be common sense for those in your situation if your contribution was small.

Nothing stops you putting the money to one side in your savings account and then paying a lump in if you do start one in x number of years time. Also, with all employers having to offer a scheme to you by 2017, then it may also make sense to wait to see what they do (again, assuming small contributions at this point). And again, that doesnt stop you putting money to one side until then.

soperman

Totally agree with dunstonh here. Until the future direction of the new State Pension rules is known, it may be best to avoid paying into a pension. You can put the monthly savings amount you have into a cash ISA which can be transferred into a pension plan in the future once the new rules are known and it is right to do so at that time.

xylophone

Come back when you know the details of your employer's pension scheme
in particular what type of scheme it is and how much the employer contributes.

middlepuss

soperman wrote: »

You can put the monthly savings amount you have into a cash ISA which can be transferred into a pension plan in the future once the new rules are known and it is right to do so at that time.

Good idea. Or even into a stocks and shares ISA if some of these savings will remain in the ISA until you retire.

WispaDreams

Hiya, firstly please let me say thank you to everyone that has replied, I really appreciate the time others have taken to respond.

Now a short update from today - after nagging the boss more, it turns out their pension scheme is a recommendation of a pension rather than a company one, so they pay zilch.

I currently have a stocks and shares ISA of around £20k that is fixed term until 2013, around £3k in a cash ISA and a regular savings account with approx £800 - I do save money to my ISA & savings account every week. I work full time and receive minimal tax credits and child benefit, no maintenance etc. and we manage fine - I work on the basis that I pay bills, then I pay myself a fixed amount a week for groceries, petrol, clothing & essentials then the rest is saved. Works for me.

From what's been said above, it looks like I may be doing almost all I can for now. I know this is probably a daft question as Governments never ever have timescales n if they do, they rarely stick to them, but does anyone have any idea at all of the timescale until decisions are reached with regards to changes to the pension rules etc? I mean are we talking months/ years?

I'm really trying hard to make sure I'm able to provide for my future as best I can, I lived on pennies after my divorce, saving for milk and bread at times and it's taken several years of really hard work and sharp budgeting to get to the position I am now in and I don't really want to do it again! I'd be really interested in any other advice you can/ are prepared to offer.

Thank you again, very very much appreciate your time.

xylophone

http://www.guardian.co.uk/money/2012/mar/21/budget-2012-flat-rate-pension-scheme
http://www.pensionsadvisoryservice.org.uk/future-pension-reforms/automatic-enrolment

mgdavid

it's not uncommon for companies to have more than one pension scheme; one for the staff which they pay little or nothing towards, and one for management which is often more generous. For obvious reasons they don't exactly shout about it! You mention you've had a couple of promotions recently, so see if you can discreetly find out if there's a separate scheme for management. If there is, ask to join it.
An alternative strategy might be to look to buy instead of renting (if I read your posts right), and view the property asset as your pension scheme, to be realised and lived off in retirement. Not ideal but worth considering perhaps.

TheBees

Hi hope you don't mind me joining this conversation but I'm in a similar situation in that I can't decide to start a new ISA or buy AVC's with some spare cash.
I'm 44 next birthday, female, earn about £16K a year and have a few piddly pensions from over the years worth diddly squat. I work in a school part time (not a teacher but admin) and my pension thing came through the other day saying if I retire at 65 I can expect about £4K a year!! Obviously I'd like to increase that up to about £8K.
I can afford £100 a month so should I put that in an ISA or buy AVC's?
Any advice would be helpful.
M