Going to be claiming Housing Benefit when I retire- worth having employers pension?

Silian

I recently read an article on how people in their early 40s tend to go through a retirement mid life crisis. What you are going through is very normal. The good news is that people tended to get more positive as they took steps to provide for retirement. Article is here if you are interested: http://www.moneywise.co.uk/news/2016-06-16/the-40s-mid-life-pensions-crisis?utm_source=Newsletter2016-06-17&utm_medium=Email&utm_campaign=ContentPromotion

Comstock

missbiggles1 wrote: »

Paying rent is no more contributing to society than paying a mortgage is, I'm afraid, and low earners (although not always not their fault) are nowhere near net contributors.

Even assuming the morally dubious idea that we measure people's net contributions to society purely in financial terms, that has to be one of the most economically illiterate posts I've ever read.

Imagine a factory without workers, an office without cleaners, a supermarket without shelf stackers and a landlord without tenants. Then talk to me about net contributors.

Thank you for helping me decide what to do.

jamesd

Comstock wrote: »

I'm about to be auto-enrolled into a workplace pension scheme and I have one month to opt out. ... at 42 with little savings and a low income-realistically that isn't going to change now. ... So I'm going to be claiming Housing Benefit when I retire. ... The thing is, is there any point in paying into a private pension that is just going to be taken straight back off me in HB?

At £7.35 an hour you should not opt out.

First thing to know is that pension money is available from age 55. So you are in effect giving up some tax break and employer contributions to savings that you can take out at age 55 or later. Those won't count against means tested benefits until you either reach your pension credit age (the female state pension age) or take money out. When taking money out before pension credit age only the amount you take out is subject to benefits checks against capital or income.

At any age until state pension age you can just take some of the money to top up your savings to the cap for any benefits you receive.

Past systems of benefits have had things like a savings credit that didn't reduce benefits by the amount of income. It was intended for people in your situation so that you wouldn't just lose the money. No way to know whether there will be a similar system when you get to state pension age or not, nor is there any way to know which part of the country you might be shipped to to reduce your council's housing bill, in the way some councils are now shipping those who need care homes to low cost parts of the country to save money.

Comstock wrote: »

Trust me, if there was a realistic alternative to lifelong renting, I would take it.

One possible option is to use the pension pot after age 55 and before state pension age to buy a place of your own. At 7.35 an hour there's potential to save a fair bit of money though not close to as much as those on higher incomes can do. I've spent plenty of time living on even lower means tested benefit levels than that and still saving, though not quickly.

So at a minimum yes it's worth doing because it's a way to get a nice subsidy added to your savings, particularly when the rates increase to 8% of eligible income in a few years. If you can do more than it's potentially a useful way to get closer to owning your own home. Looking nationally I've at times seen decent places going for in the £30,000 range, though more are available at higher prices.

With a little over 25 years to go until you reach state pension age it's not unrealistic to consider using pension contributions to buy a cheap place. At the 8% level and assuming only contributions above the minimum you'd get about £600 a year in the pension pot for about £300 cost to you. Ignoring growth that only comes to £15,000 but over 25 years you could expect quite a bit of growth and it's not unreasonable to think that it could get to the level where you could buy. Even more so if you can get to a low loan to value and put some of the rent towards a mortgage instead before you reach state pension age.

So yes, whether you look at it as subsidised savings or a practical route to owning your own home it's worth doing.

MPD

I would suggest it is best to contribute towards a pension for the reasons already mentioned.

If you don't you are giving up free money from your employer.
Benefits can and do change. Any money in your pension is yours and is a much less likely target for a raid, especially if you are already on low pay.

missbiggles1

Comstock wrote: »

Even assuming the morally dubious idea that we measure people's net contributions to society purely in financial terms, that has to be one of the most economically illiterate posts I've ever read.

Imagine a factory without workers, an office without cleaners, a supermarket without shelf stackers and a landlord without tenants. Then talk to me about net contributors.

Thank you for helping me decide what to do.

You were talking about your financial contributions of tax and NI so I continued with that. However, there is no way anybody (except the LL his/herself;)) would consider that paying rent was a contribution to society.

seven-day-weekend

Comstock wrote: »

Always good to meet a fellow Orwell reader.

Yes, I can certainly relate to my fictional namesake in 'Aspidistra' The film very much sanitised it, making it more of a romantic comedy with a happy ending.

But the fictional Gordon Comstock was ultimately middle class, and he always had the option of a better paying job waiting for him with his old employer. Trust me, If I had that offer I would certainly take it.

In that respect me and my namesake differ.

Anyway, thank you to you and the other people who offered sensible advice on this one. I have a little while to decide.

Another Orwell reader here, although I have only read that book once about forty years ago. Must didg it out and do it again.

atush

Comstock wrote: »

Thanks to everyone who has helped me with this difficult decision.

I will definitely be opting out first thing monday morning......

Why ask a question you dont want the answer to? you did not even catch on to the fact that you would not lose all your pension to HB as a claw back as they dont operate on a 1-1 basis? You might lose pence for each pound of income. And if you only get the statutory minimum pension contrib, you wont be getting enough income to take you out of HB if it still exists?

What do you think of the idea, that anyone who opts out of a pension might NOT BE ALLOWED to claim benefits? Could happen.

Alice_Holt

seven-day-weekend wrote: »

Another Orwell reader here, although I have only read that book once about forty years ago. Must didg it out and do it again.

+ 1. But no chance to dig it out, as the library I borrowed it from has now closed.

atush

Comstock wrote: »

I don't see what is wrong with asking if I'll be better or worse off with a particular given option.

As for suggesting it is somehow morally wrong for me to be concerned if I can get housing benefit after a lifetime of working in low wage jobs, paying tax and rent to a landlord all the time, well I suggest you catch yourself on.

I dont care about the morals of taking benefits or not, the ANSWER to your question is you will be WORSE off opting out of the pension?

seven-day-weekend

Alice_Holt wrote: »

+ 1. But no chance to dig it out, as the library I borrowed it from has now closed.

EBay? Amazon?

http://www.ebay.co.uk/itm/like/371543931737?lpid=122&chn=ps&googleloc=9045481&poi=&campaignid=207297426&device=c&adgroupid=13585920426&rlsatarget=aud-133395220626%3Apla-146652024786&adtype=pla&crdt=0