Planning for retirement

Conanius_2

So maybe I'm being over keen here (me 28, wife 27) but it seems to be the situation of get in there early for better options.

My wife unfortunately doesn't work due to long term illness, so she won't get a pension in our later years (almost certainly no state pension then I'd guess!!). To top things off, I'm a civil servant having my pension ripped apart. I digress.

Our situation:

- We don't currently own our own home. We are saving up a deposit to do this. This is currently not very well organised. Simply 2x £300 PCM go into 2 8% Regular Saver accounts with First Direct, and whatever is left in our account each month (usually circa £600) gets 'swept' into an e Saver account. At the end of each year I transfer this into our isa's.

- We don't currently have any life insurance. I have looked into doing this, but not got any further than having a brief look.

- We only have my pension set up.



I'm thinking we need to:

- Identify a 'pension' option for my wife
- Sort some life insurance. We want to start a family, and due to my wife's illness I want to ensure that if I die, she has no money worries/ if she dies and we have children, I can work less hours/pay for child care.
- Work out the best method of saving our house deposit.

For sorting out the pension option for my wife, we had considered buying a property and renting it out. Purely for business, and with none of this 'ooh lets buy the more expensive bath as we like the taps' when it came to any refits. Simply using it as a money making machine.

We are close to enough deposit to do this on a cheaper property that we wouldn't move into due to size etc, but is this a negative economy with us still renting? I'm not totally sure it is, subject to the properties rental income being greater than any expenditure (insurances, mortgage, etc)

Totally open to all suggestions, and interested to know others personal findings.

dunstonh

My wife unfortunately doesn't work due to long term illness, so she won't get a pension in our later years (almost certainly no state pension then I'd guess!!).

Is she in receipt of any benefits? Do you have children?

To top things off, I'm a civil servant having my pension ripped apart. I digress.

Hardly ripped apart. Just been made fairer for everyone else.

For sorting out the pension option for my wife, we had considered buying a property and renting it out. Purely for business, and with none of this 'ooh lets buy the more expensive bath as we like the taps' when it came to any refits. Simply using it as a money making machine.

Its an option but typically you need around 6-8 properties for it to work. Performance of the last 30 years is unlikely to be repeated in the short or even medium term as that was fuelled by a credit boom. It also carries quite a high risk (assuming mortgaged by to let) and can impact on your ability to borrow on a residential mortgage for yourself.

but is this a negative economy with us still renting?

anyone could make money on property in the credit boom years. Now you need to know what to buy and where and/or be good at DIY/building.

Conanius_2

Thanks for your reply.

I'll gloss over the fact you think it is fairer that my retire at 60 on a final salary being swapped to a career average, retire at state pension age makes it fairer for everyone else. What about me!?

Anyway, no, we don't receive a penny in benefits as 'she might get better one day'... many years on, and things have gotten worse. No children as yet.

Thanks for the frank nature of your statement regarding property. What are the best long term options then? My thought regarding a buy to let was that I was under the impression that pension funds these days are somewhat 'finger in the air' as to what you get back. I'm not totally sure that a fund designed to provide security should have that sort of indicator.

Mozette

Conanius wrote: »

Thanks for your reply.

I'll gloss over the fact you think it is fairer that my retire at 60 on a final salary being swapped to a career average, retire at state pension age makes it fairer for everyone else. What about me!?

Anyway, no, we don't receive a penny in benefits as 'she might get better one day'... many years on, and things have gotten worse. No children as yet.

Thanks for the frank nature of your statement regarding property. What are the best long term options then? My thought regarding a buy to let was that I was under the impression that pension funds these days are somewhat 'finger in the air' as to what you get back. I'm not totally sure that a fund designed to provide security should have that sort of indicator.

Sadly the politics of envy are very successful, and now a race to the bottom is seen as a good thing. Never mind that the pension was allegedly part of your overall pay package, and pay was reduced to account for it, and never mind an inflationary pay rise, you've got your pension etc

Well done on taking an interest in your pension at such a young age; it's a great shame that more didn't/don't.

Depending on which scheme you are in, it is still possible to buy added pension - if you can afford to - though the ever receeding pension age might make that less attractive.

dunstonh

I'll gloss over the fact you think it is fairer that my retire at 60 on a final salary being swapped to a career average, retire at state pension age makes it fairer for everyone else. What about me!?

Historically, the decent pension was a reward for service in a role that was typically low paid. However, the wages in the public sector have increased at a level higher than the private sector and it is no longer justifiable to have such a decent pension without paying a little more for it.

I was under the impression that pension funds these days are somewhat 'finger in the air' as to what you get back.

Pensions can invest in around 30,000 conventional investments. You cannot be general to so many different things. Whilst short term returns have been poor in equities, that is nothing new. With retirement planning you are not looking at short term but long term.

I'm not totally sure that a fund designed to provide security should have that sort of indicator.

A mortgaged buy to let is higher risk.

kidmugsy

It seems a bit daft to pay a rent while receiving a rent that's taxed. I'd guess that owner-occupied in the long term is a better bet, and brings no CGT exposure. So save for a large deposit and try not to buy when the market is in a bubble.

As for life insurance, what does your pension scheme offer? Some do 4xannual income.

atush

I agree, the first place that you buy should be your home. Any investments in property after that will be more of a risk (as you don't need them to live in). Property investment takes time, money and skill and isn't for novice investors as you seem to be.

As far as your wife, I am a bit baffled she is far too poorly to work, yet you are considering having children. Which I found harder than working. And much harder on my body. If she is disabled, then she should get some sort of benefits and can be helped to find a suitable job.

In the meantime, she can have a pension. you can contribute up to 2880 per year, and the govt will uplift that by basic rate tax to 3600.

Check your HR dept and ask about your Death in Service Benefits. You will have some and these can stand as your LI until you buy a house or have children. If it is worth your wife having some or not, I am not sure due to her condition as it will be expensive. But you can easily check this with a broker. I only insured my life once we had children, so there would be money to hire a nanny to look after them should something happen to me.


I am very sorry you are unhappy with your CS pension. But even after the changes it is far better than almost any other pension in Britain, and needs to be made a little more affordable given the situation the country is in. We all have to work longer, that unfortunately means you too.

Should you have wanted to buy that same pension, outside the CS in the private sector, you would need to pay at least 30% of your salary into a PP as it includes many expensive but useful things such as inflation uplifting, spousal pension, and death in service benefits.

jamesd

Even with the changes your work pension is one of the best in the country so don't let fusses put you off using it.

Beyond that, concentrate on accumulating a deposit. Forget life assurance for now, until after you have children. Forget pension for her now to get the deposit you want faster.

If you can afford a BTL deposit you can afford a deposit for a home for yourselves. Not your perfect home but one that is inexpensive and can save you money compared to renting. Which will let you accumulate the bigger deposit you need for a more ideal place more quickly. It's the sort of thing I've done: deliberately live in a non-ideal low rent area and deliberately buy an inexpensive place with a mortgage of around a year's gross pay.

A person who's receiving child benefit will get a year of contributions to the basic state pension accrued in their name. Can be either partner but it's usually the wife who isn't working. With only thirty years required to get a full basic state pension your wife will get a good way there just from getting child benefit. Plenty of time after child rearing age to pay additional contributions to get extra years, if necessary.

kidmugsy

OP, you're 28 not 50. If you disapprove of the terms of employment - e.g. pensions - change jobs. Seriously: staying in a job they really dislike rots people.

Conanius_2

kidmugsy wrote: »

OP, you're 28 not 50. If you disapprove of the terms of employment - e.g. pensions - change jobs. Seriously: staying in a job they really dislike rots people.

I really wanted to stay off this side track, but just so you can have some facts....

<The bite>

Number one, and most importantly, I love my job. I have great pride in working not for profit, but for real world benefit that actually helps change the lives of people. I have total belief in in the departments view.

Number two, and I really will keep this brief/move it to another thread, I would LOVE to see the facts and figures that say I've got some bumper deal. My takehome pay hasn't increased by a single penny since March 2009. This year was the first year my pay increased, and every single penny of that, AND MORE, was taken up by increased pension costs.

That's right, the Daily Mail got it wrong, I have had a real world numbers pay cut since 2009. To those that haven't noticed, everything else is going up in significant amounts, so each month I have less and less money available.

I work for the government, not for TFL as a tube driver striking every 30 seconds because I want some extra time off/my share of olympics money/a new coat/whatever. I earn close to 25% less than I would if I worked in private industry (I work in IT) I know this _FOR A FACT_ as I have had job offers this much more than my current salary and turned them down. This hasn't been once or twice, this has been numerous times. I turn it down due to the points in part one.

Not all of the civil service is inept fat old men in their 50's on £60k a year working 08:00-16:00 with a long lunch and early friday finish, long working breakfasts and hourly ciggie breaks (stereotype continues). I work well in excess of my contracted hours, not claiming a penny in overtime, and rarely get lunch away from the desk. Or in other words, work the exact same life my friends in major companies do (Ernst and Young, Accenture, PWC, IBM, HP, Detica, Delloite, etc).

The reason I am so passionate about my pension being damaged so badly is yes, it was bloody good, it was infact a HUGE part of me going for the role. I accepted lower pay for a superb payoff in retirement, at a set age with a set payout. With the absolute best part of the package being damaged, you can't be surprised that I am not exactly chuffed. Many are saying 'don't be so down, its still amazing what you will get!' yes, it isn't bad, but equally, it wasn't what I had when I started in the role, my pay isn't going up to cover the difference in quality of my overall 'compensation package'.

That should cover that lot off I think :rotfl:

</the bite>

Right, so back to saving some cash.

Buy to let idea

Realising that wasn't such a good idea until we have something bought and I have the skills to look after it myself. Fair one.

Life Insurance

I was under the impression life insurance premiums increased with the age you take it out, and importantly, with your circumstances (EG Children). Hence my desire to do it now. I do get a death in service benefit of 4x my salary, but that would barely cover, if indeed cover the sort of mortgage we are looking to get. With my wifes situation, I don't want her to have to sell the family home to put food on the table. From what I've seen circa £25 a month will buy a joint policy for £500,000 of life insurance for a 40 year period on a level payout.

Pensions

Lots of interesting stuff here, especially about the state pension and my wife. I had no idea she wouldn't get one without paying contributions, and I didnt know I could buy extra pension in my current scheme. I'm on Premium if that means anything to you?

This sounds very much like 30 mins/1hr with a financial advisor would be money well spent....

Conanius_2

atush wrote: »

I am very sorry you are unhappy with your CS pension. But even after the changes it is far better than almost any other pension in Britain, and needs to be made a little more affordable given the situation the country is in. We all have to work longer, that unfortunately means you too.

Should you have wanted to buy that same pension, outside the CS in the private sector, you would need to pay at least 30% of your salary into a PP as it includes many expensive but useful things such as inflation uplifting, spousal pension, and death in service benefits.

I believe that there have been several independant investigations that prove the existing scheme (Nuvos) and the previous scheme (Premium) are actually both affordable. I think it is superb that the best pension scheme is offered to Government employees, what a fantastic thing to attract a high quality workforce.... or just a great thing to tear apart when someone needs to be blamed for Labours inability to stop spending.... oops ! I did just say that didn't I !!!

I would indeed need to pay in about 30% of my salary to get a comparable pension, note my comment on how far underpaid I am in comparable roles, that'll be that bit sorted out then I guess....

Anyway, like I said in my previous post I don't want to derail the thread, I should have left out the pension comment in my first post in hindsight, but I feel passionately about this. I've seen some of the best techies we have leave because of all this, long term this will be very costly to government.