Where should I put my money?

oldtractor

Hope I can find some help here
I am starting part time work next month.( I have been a housewife for many years) £120 a week wages so I wont be paying tax or NI.
I will be saving £100 a week .
My husband works and pays Income tax at 20% rate. He's just changed jobs and gets paid more than before and we aim to save £400 to £500 a mpnth of his wages.
He doesnt have a pension, is it a good idea for him to take out a pension because of the tax relief? or just save in a ISA/NISA whatever they are called these days?
We currently have 1 months salary put away in case of emergencies and also a small fund for things like new washing machine, etc.

gadgetmind

£120 a week is a nice figure as it should *just* gain you a qualifying year for state pension.

It's worth you both getting state pension statements and seeing if you think that 1) this would be enough to get by, 2) whether you might want to retire before SP age.

Yes, pensions are a good idea for tax relief, and interestingly for you as well as your husband. You can contribute to a pension and get tax relief even though you don't pay tax!

saver861

oldtractor wrote: »

He doesnt have a pension, is it a good idea for him to take out a pension because of the tax relief? or just save in a ISA/NISA whatever they are called these days?

I always say everyone has the ability to be good or great at one or two skills, but we all can't be good at everything.

I'd be suggesting that you would benefit from some specific advice for your circumstances.

If your husband does not have a pension it would be the first port of call to be looking at. I don't know if you mean he has no pension in this new job or no pension at all, in which case it does sound awfully late to be starting.

oldtractor

Gadgetmind THANKYOU I had no idea! I am 5 years short of qualifying for the full pension I have 30 years and I believe they are going to make it/have already made it 35 years.

saver861

oldtractor wrote: »

Gadgetmind THANKYOU I had no idea! I am 5 years short of qualifying for the full pension I have 30 years and I believe they are going to make it/have already made it 35 years.

If you have 30 years now then you get the full basic state pension. Its only in 2016 they change to 35 years but then it is a higher weekly amount. You still can get more years in after 2016 but any years between now and April 2016 wont benefit your current circumstances any further for pension.

gadgetmind

Is that 30 years from a statement?

The LEL for 2014/15 is £111 a week or £5772 a year. Assuming you work 48 weeks, you'll earn £5760 so just shy. You either need not much holiday or some overtime!

There is another trick involving being self-employed on the side and voluntarily paying class 2, but there are some minor downsides.

gadgetmind

saver861 wrote: »

any years between now and April 2016 wont benefit your current circumstances any further for pension.

In some circumstances that's true, but I don't think it will be for the OP. Can you explain your reasoning?

saver861

gadgetmind wrote: »

In some circumstances that's true, but I don't think it will be for the OP. Can you explain your reasoning?

Only from the perspective 30 qualifying years gives you at least the full flat rate on the current system. By adding any more years between now and 2016 does not enhance that. There is only just over a year between now and 2016 in any case, so someone with 30 years now, wont gain any further pension on that before 2016.

gadgetmind

But additional qualifying years now *will* count towards the 35 required for the new flat rate and it's very likely that the OP will get a higher foundation amount under the new system as a result. Remember, this foundation amount is the higher of what you'd get under current system and new system.

There was some confusion as statements didn't previously show any additional years after the 30, but I believe this as been fixed.

saver861

gadgetmind wrote: »

But additional qualifying years now *will* count towards the 35 required for the new flat rate and it's very likely that the OP will get a higher foundation amount under the new system as a result. Remember, this foundation amount is the higher of what you'd get under current system and new system.

There was some confusion as statements didn't previously show any additional years after the 30, but I believe this as been fixed.

My understanding though was that the foundation amount will be calculated in April 2016 and, as you say, the higher of the two will be the qualifying amount.

So Mr A with 30 years now and Mr B with 32 years now will have the same pension under the current system i.e. £113.00 per week I think it is now. Their foundation amount will be the same ( ignoring contracted out issues etc ).

After April 2016 the clock starts ticking again for both Mr A and Mr B to get to 35 years - in other words both Mr A and Mr B both need the same number of qualifying years to get the same pension. Is that not the case?

kidmugsy

oldtractor wrote: »

I will be saving £100 a week .
My husband works and pays Income tax at 20% rate ... we aim to save £400 to £500 a mpnth of his wages.
He doesnt have a pension, is it a good idea for him to take out a pension because of the tax relief? or just save in a ISA/NISA whatever they are called these days?
We currently have 1 months salary put away in case of emergencies and also a small fund for things like new washing machine, etc.

(i) If you open Lloyds club current account and bung your savings in there you might earn decent rate of interest (up to 4%p.a.). Moreover it will let you contribute to a regular saver (£400 p.m.) that also pays 4%. Two requirements: you need to pay in £1500 p.m., which you can doubtless achieve by using standing orders to circulate money between different current accounts. And you need to have two direct debits set up that pay out every month. So you could put your utility bill DDs there. OR consider a pair of current accounts for yourself at TSB: they pay 5% p.a. on up to £2k each. OR look at the flexdirect current account at Nationwide.

(ii) Your husband also might benefit from a high interest account, but less than you since he's a taxpayer.

(iii) You should probably both be contributing to pensions if (a) you will eventually be able to withdraw the money tax-free because your retirement income will be below the personal allowance for income tax, and (b) you are both 55 or older, because then the pension money is pretty flexible: you can withdraw in an emergency. In fact, with your annual earnings of about £6k p.a. it would be best to use your pension to begin with rather than his, because in an emergency you could draw out both the 25% tax-free lump sum, and another £4k or so of tax-exposed pension income without having to pay any tax on it. (The personal allowance for tax year '15-'16 is £10,600).

(iv) Whichever of these ideas appeal, I do suggest that you try to build up your Emergency Cash first: the usual advice is 3-6 months of outgoings. Taking money out of (say) a high interest current account is usually quicker than doing it from a pension, and doesn't involve charges.

P.S. if his employer doesn't offer him a works pension, it's possible that he will be obliged to quite soon. They are desirable because he'll get the employer's contribution as well as his own.