Not working, but need a pension

Nicole_2

I have recently had my third child and as it is not worthwhile me returning to work due to childcare costs, I am in the situation where I do not have any kind of pension. I am 34 and may not work for the next 5 years and even when I do, I may only earn a small part time salary. Although I don't have an income, I could put money away each month towards a pension as I feel uncomfortable not planning for retirement at all. How can I contribute towards a pension without working?

EdInvestor

Hi Nicole

You can contribute up to 3600 p.a into a pension if you want to, but you might be better to contribute into an ISA instead.

It doesn't matter which tax wrapper you use, the idea is just to accumulate a pot of assets to produce an income in retirement.

BTW, these days you can claim credit for home duties to keep up your entitlement to the basic state pension and you may want to check in with the pensions service now and again to formalise that.

dunstonh

You may also be better off paying into a pension instead of an ISA. Particulary if you have a husband and you will not get your own entitlement for the state pension but see his increased.

Nicole_2

Ok, thanks for that - how do I go about claiming for home duties?

Nicole_2

Yes, I do have a husband who gets a company pension, don't want to rely soley on his pension in retirement. I have a cash ISA already ifor the kids savings, so would not be able to open another one, so a pension for me may be the answer.

dunstonh

The things to note here are that if you do not qualify for a state pension in your own right, your husband will get the married mans pension. This will leave you with the ability to earn £7090 (in todays terms) a year without paying income tax. With a pension, you will therefore get 22% tax relief on your contributions and your income in retirement will be tax free if below £7090 (in todays terms).

You should look at your husbands retirement planning and yours together. They may be advantages to increasing your husbands retirement planning rather than doing some for you. Equally, utilising your own allowances may be best. It all depends on the scheme your husband is in.

A mini cash ISA does not prevent you contributing to a mini equity ISA so that option is still available to you. It does not have any tax relief on contributions like a pension but CURRENTLY it does not have any personal tax liability on income withdrawn when investing in traditional income generating funds (like gilts and corporate bonds).

rosielx

Child Benefit can help to protect your state retirement pension if you stay at home to look after your child. For every complete year that you get Child Benefit but don't pay enough National Insurance to count towards the basic pension, you automatically get "Home Responsibilities Protection" which means that the year will be credited as counting towards your pension.

Home Responsibilities Protection
What is it? Can I get it? What else should I know? How do I claim? How do I claim if I am a foster carer? When do I need to claim? What happens if? More information Other help.

What is it?
Home Responsibilities Protection (HRP) is not a benefit, but a scheme which helps you protect your basic State Pension.
You may also get extra pension through State Second Pension.
If you do not work or your earnings are low and you are caring for someone, you may be able to get Home Responsibilities Protection.
From April 2003, HRP is also available to registered foster carers.
Can I get it?
Do you get:

Child Benefit in your name for a child under the age of 16, and you have told us your National Insurance number? (This link will take you to the Department for Work and Pensions website.)
Income Support and do not need to register for work, because you are caring for someone who is sick or disabled? (This link will take you to the Jobcentre Plus website.)
If you receive one of the above, you should get HRP automatically.

Or are you:

regularly spending at least 35 hours a week looking after someone who is getting Attendance Allowance , Disability Living Allowance at the middle or highest rate for personal care, or Constant Attendance Allowance? (This link will take you to the Department for Work and Pensions website.)
a registered foster carer throughout a full tax year and are not receiving Child Benefit and are not in paid work, or do not earn enough in a tax year for it to count towards the basic State Pension (below £4,004 in the 2003/04 tax year).
If YES to one or both of the above, you should apply for HRP.

What else should I know?
If you get Carers Allowance you will get NI credits and will not usually need HRP.

If you are a woman, you cannot get HRP for any year you are entitled to pay reduced NI contributions for married women and widows, while you are working.

HRP also helps protect Bereavement Benefits for your husband or wife. Information about both of these benefits is available on the Deparment for Work and Pensions website.)

How do I claim?
To claim, contact us to request a copy of the leaflet - How to protect your State Pension if you are looking after someone at home (CF411).

It is important that we can be sure of your identity when you make a claim. We may need to ask you about your background and look at any official documents you have to support the information you give.

Extra Pension help from 2002. From April 2002, the State Second Pension reformed the State Earnings-Related Pension Scheme (SERPS). In particular, for the first time, people who do not work, or who earn very little, may be able to receive extra pension, if throughout a qualifying year, they are:

awarded Child Benefit for a child under age 6
entitled to Carer's Allowance or
getting HRP because they are caring for an ill or disabled person.

For more information, see Additional State Pension.

How do I claim if I am a foster carer?
If you are a registered foster carer you also need to fill in form CF411 and also show that you have been a registered foster carer throughout the tax year from 6 April 2003 to 5 April 2004. You need to provide a letter of confirmation from the local authority or agency you work for, confirming that you have been an approved foster carer throughout the full tax year.

When do I need to claim?
HRP has been available for full tax years from April 1978.

If you are claiming HRP for years you have spent caring for someone with a long-term illness or disability between April 1978 and 5 April 2002, you can claim at any time up to State Pension age. But it would be best if you did not wait too long before claiming as it usually becomes more difficult to remember details of what you were doing as time goes by.

Since April 2002, a new rule has been in force. This means that, from April 2002 onwards, you must claim any HRP you need to within three years of the end of any tax year you spent caring for someone with a long-term illness or disability.

This time limit only applies to caring which takes place during or after the tax year 2002/03.

If you are awarded HRP automatically, for example through Income Support or Child Benefit, the new rule does not apply to you as you do not need to make a claim.

If you are a registered foster carer, you can fill in form CF411 at any time after April 2004 if you have been approved throughout the 2003/04 tax year when HRP became available.

What happens if?
I go into hospital or someone I claim for goes into hospital?
You must tell us as soon as you go into or come out of hospital. You must also tell us if someone you get benefit for goes into hospital.

I go to live abroad or visit?
Let us know as soon as you can that you are going abroad. You can get more information about social security agreements with other countries on the Department of Work and Pensions website, or more information about living overseas on this website.

I go into a residential centre or a nursing home?
Your HRP may be affected if you or the person you care for go into care or a home.

http://www.thepensionservice.gov.uk/atoz/atozdetailed/homeres.asp

margaretclare

Hi

This is a very detailed and useful reply. If the OP had worked for any time before becoming a full-time mother then she will have paid NI contributions and therefore should qualify for Home Responsibilities Protection. She'll then qualify for state retirement pension in her own right and not as part of the 'married man's pension' via her husband. She's well outside of that age-group who were allowed to continue paying the reduced rate NI contribution for married women.

If the OP can afford it she might like to consider a stakeholder pension plan. These were set up to encourage saving for retirement among the low-paid and among the unwaged. You get a 22% contribution from the taxman e.g. if you pay in £78 the taxman tops it up to £100. Try this site: https://www.adviceonline.co.uk/pensions or https://www.thepensionservice.gov.uk/resource_centre/stakeholder-pensions-emp.asp -

Best wishes

Aunty Margaret

Nicole_2

Many thanks, this has given me a lot to work on and start thinking about! The links are useful and just shows how many things I potentialy may not be aware of!