Can't afford a pension

lottie-cat

I will try to keep this short. I have a Scottish widows pension with about 12k in it. I went in to teaching at 26 and paid in to the teachers pension for about 5 years then took a break as I needed the extra money. I'm unsure how much that has in it.
3 years on I am about to return to work after having a baby, moving house and quite a big promotion. I was hoping to rejoin the teachers pension scheme but I've just found out I will be expected to pay 10.2% which I can't afford.

Im thinking that it might make sense just to start paying into a completely different pension or maybe even the Scottish widows one, just so I have something until we get back on our feet.

Comments welcome (I'm fully aware that I probably should never have stopped paying in 3 years ago!)

Thanks!

bigfreddiel

You can afford 10.2%. You just need to go through your finances with a fine tooth comb. You are a senior teacher so it should be easy.

First cut out all wasted expenses, Netflix, contract phone, Sky TV, gym membership, car loan or lease hire car, insurance on white goods, and so on. Shop around for better deals, use a local insurance broker for car and house insurance, mine has saved me thousands over the years. Plan your shopping and cook your own meals, don't go out or get takeaways on a regular basis. Never throw out food, you can always prepare a good meal from leftovers.

This lifestyle will save you your pension payment easily.

Chech out your spending and get back here to let us all know how it goes.

Cheers fj

bigadaj

lottie-cat wrote: »

I will try to keep this short. I have a Scottish widows pension with about 12k in it. I went in to teaching at 26 and paid in to the teachers pension for about 5 years then took a break as I needed the extra money. I'm unsure how much that has in it.
3 years on I am about to return to work after having a baby, moving house and quite a big promotion. I was hoping to rejoin the teachers pension scheme but I've just found out I will be expected to pay 10.2% which I can't afford.

Im thinking that it might make sense just to start paying into a completely different pension or maybe even the Scottish widows one, just so I have something until we get back on our feet.

Comments welcome (I'm fully aware that I probably should never have stopped paying in 3 years ago!)

Thanks!

Surprised that the employee contribution is as high as 10.2%, but it's still cracking value and as a taxpayer I should be encouraging you to opt out, wouldn't get anything anywhere near from a private pension.

Your contribution is from gross pay, so depending on your marginal rate if tax it will only cost you between 6-8% of your net pay. This will be buying you a pension that is probably valued at between 25-30% of your actual salary.

robin61

There will always be something else you could be spending your money on. I think if you do not do everything you can to do this now you will really regret it later.
Small changes to your lifestyle can make a significant difference. A bit of pain now for a big gain later. As your pension payments come off your gross pay it won' t cost you as much as you are possibly thinking.

missbiggles1

I have both my own teacher's pension and also one from my late husband and I can't start to tell you the difference it makes to retirement to have that sort of secure, index linked income. I appreciate that the scheme isn't as good as it used to be but you should still thank Heaven fasting for the opportunity to join it.

ETA
Don't forget that there'll be a pension available to your partner and any child who survive you and a Death Grant of 3 x your salary which may allow you to save money on any life assurance policy you currently have.

lottie-cat

bigfreddiel wrote: »

You can afford 10.2%. You just need to go through your finances with a fine tooth comb. You are a senior teacher so it should be easy.

First cut out all wasted expenses, Netflix, contract phone, Sky TV, gym membership, car loan or lease hire car, insurance on white goods, and so on. Shop around for better deals, use a local insurance broker for car and house insurance, mine has saved me thousands over the years. Plan your shopping and cook your own meals, don't go out or get takeaways on a regular basis. Never throw out food, you can always prepare a good meal from leftovers.

This lifestyle will save you your pension payment easily.

Chech out your spending and get back here to let us all know how it goes.

Cheers fj

You make absolute sense and I completely agree with your suggestions. The issue is I'm going back 4 days a week and I have a huge car loan that I can't get out of for another year. I need a car but do plan on getting rid of this one and finding something cheaper. I have reduced my monthly outgoings as much as I can and I'm really good with food etc.

GunJack

decent cars can be had for a few hundred pounds, not thousands (my current one cost £100 nett - sold old one for £150, bought this one with full tank of fuel, so £50-worth, and paid £300 for the new one, nett cost £100 )... bite the bullet with your current one, get shut when you can, but DO NOT put your future on hold any more and get back into the TPS. You could always look to transfer your private pension into TPS for added years, would be worth looking into

atush

If you are going back to work, you will be earning more than you did on maternity leave.

So do whatever you need to do, to pay into the pension. Consider this not an option, but a necessity.

pandora205

If your pension rate is 10.2% that means a salary of >£41,500 so even allowing for that, its a decent amount to live on. There are two points to bear in mind - there is tax relief on the 10.2% (i.e. it comes off your salary before tax is paid), so some of that money would not be in your pocket anyway. The other is that your pension is in effect 'topped up' by your employer at a very good rate. You would be wasting these amounts if you did not contribute to TPS.

dunstonh

3 years on I am about to return to work after having a baby, moving house and quite a big promotion. I was hoping to rejoin the teachers pension scheme but I've just found out I will be expected to pay 10.2% which I can't afford.

It is 10.2% gross. Not net. (i.e. some of it is tax relief). As mentioned above, that contribution level puts you well above the national average earnings level.

Im thinking that it might make sense just to start paying into a completely different pension or maybe even the Scottish widows one, just so I have something until we get back on our feet.

You will be classed as an opt out. So, many providers will not accept contributions from an opt out without an adviser involved. From memory, the SW application specifically asks if you are an opt out or not.

It would be an extremely foolish thing to do as £ for £, the teachers pension scheme would romp all over any other pension scheme.

Comments welcome (I'm fully aware that I probably should never have stopped paying in 3 years ago!)

3 years out on your income level has cost you tens of thousands of pounds of lost income in retirement. So, yes.

You need to look at your budget and priorities. Paying lip service to a pension is not good enough. Paying peanuts in just so you can tick a box in your head to make you feel better means you will get peanuts back in retirement.

If you are on £41,500 a year (the minimum for the band you are in) then the contribution is going to be around £282 a month. So, what in your expenditure, during a period of very low interest rates, is preventing you from being able to afford that. As it stands, it would appear you are living beyond your means if you say you cant afford it.

LXdaddy

Sorry to sound like everyone else but...

You can't afford NOT to be in your employers pension scheme.

The deduction is from gross salary rather than nett. I'm pretty sure your employer also contributes. Anything you do outside that scheme will not be as valuable.