A new start

woody1481967

Hi
Where to start!
I am 52 years old, have been bankrupt twice due to poor budgeting and overspending and unfortunately don't own my own home. I have 4 children, 21/19/16/13. I have opted out of an auto-enrolment pension scheme my employer offers as things are tight financially.
My question is how do I start planning for my retirement and my children's future if the worst happened to me. I really don't have a clue where to start and would be so grateful for some basic tips on how to get started.
Thanks in advance.

JoeCrystal

For a start, join the auto-enrolment pension scheme. You lose more money overall as you lose the tax relief and the employer's contribution on top. Do you know how much contribution your employer will pay in?

Let say you got normal auto-enrollment where you pay 5% and the employer pay 3%.

Assuming your gross contribution is £100, your pension pot will then get £160 (£20 tax relief + £60 employer) to put it. If you opted out, you would only see £80 per month instead. It is an excellent way to double your money to speak.

Do you not possess any pension provisions at all (apart from state pension)?

woody1481967

Hi JoeCrystal
Thanks for your reply.
So on a salary of say £50k you would contribute £208 per month?

atush

No, i'd contribute more. 50 K is a lot of money. Does their mom work? What is her pension like?

JoeCrystal

woody1481967 wrote: »

Hi JoeCrystal
Thanks for your reply.
So on a salary of say £50k you would contribute £208 per month?

Since you are only three years away from accessing your pension pot potentially, I would put much as possible to get all the tax relief on it. Each person's situation is unique. If it were me personally, I would contribute enough to lower my net pay to £1,800 per month, which is an amount I can live on.

atush wrote: »

No, i'd contribute more. 50 K is a lot of money. Does their mom work? What is her pension like?

Necessarily not, I am assuming it is a single parent here, and £50k may not go far in the grand scheme though if you are paying high rent and taking care of two children on your own. I do agree it is a lot of money though!

Albermarle

So on a salary of say £50k you would contribute £208 per month?

Under auto enrolment legislation , yes this is the minimum you would pay .
As explained above , more would actually go into your pension - about £330 in your case.
So £4k pa until you stop work + hopefully some investment growth .As said above ideally you need to contribute more , but if you can not then at least joining the auto enrolment scheme is a step in the right direction . Also some employers pay more than the statutory minimum of 3% - if so even better.

My question is how do I start planning for my retirement and my children's future if the worst happened to me.

Building up a pension will help you in retirement, and if the worst happens your children can inherit any pension money left ( it's not lost when you die for this type of pension )

Malthusian

Albermarle wrote: »

Under auto enrolment legislation , yes this is the minimum you would pay .
As explained above , more would actually go into your pension - about £330 in your case.

£292. You've forgotten that you don't get pension contributions on the first £6,136 of earnings if the employer is using auto-enrolment. This is why nobody relies on the auto-enrolment minimums unless they want to be poor in retirement.

Notepad_Phil

woody1481967 wrote: »

So on a salary of say £50k you would contribute £208 per month?

You pay in as much as you can - for you that might be £208 if that is all that you can afford, but if you can afford to put in more then put that in.

Now I realise that you'll probably won't be able to put this amount in, but to give you a little flavour of what you're looking at, a very rough rule of thumb on pension savings would indicate that if you've very little in current pension savings then at age 52 to have a 'comfortable' retirement you should put away 26% of your gross salary every year into pension savings until you get to state pension age - this percentage includes your employer contributions.

How much do you think you can afford to put away for your retirement?

The difference between the 'rule of thumb' and what you can likely afford is just there to give you an indication of the difficulties that you face - but the sooner you face them the better the end result will be.

Have you checked your state pension forecast https://www.gov.uk/check-state-pension? That will hopefully give you at least a little help in retirement and you should make sure that you get a figure so you know where you will be and how many more years you'll need to contribute to national insurance to hopefully get the maximum possible. Don't just assume that because you've worked for 30 years that you'll get the maximum - it only works like that for someone starting off in the new system.

Brynsam

Malthusian wrote: »

£292. You've forgotten that you don't get pension contributions on the first £6,136 of earnings if the employer is using auto-enrolment. This is why nobody relies on the auto-enrolment minimums unless they want to be poor in retirement.

You are right that the legal minimum need not include the first £6,136, but many employers using auto enrolment are paying contributions based on full basic salary, not just band earnings.

Far too many people are relying on auto-enrolment minimum rates. Even if the whole salary is pensioned, relying on auto-enrolment when the %age contributed is so low is why many people are destined for a financially uncomfortable old age.

Brynsam

woody1481967 wrote: »

My question is how do I start planning for my retirement and my children's future if the worst happened to me.

Does your employer offer death in service life cover - and if so, are you are sure you are included, given that you have opted out of the pension scheme? Even if you are included, any life cover may be a lower multiple of salary for anyone who has opted out of the pension scheme.

Otherwise your starting point with 4 children is surely to get some life cover, at least until the youngest reaches the age of 18.

p00hsticks

Brynsam wrote: »

Otherwise your starting point with 4 children is surely to get some life cover, at least until the youngest reaches the age of 18.

I'll second this. And also make a will if you haven't already, or at the very least ensure you have clearly specified who you would want to take on guardianship of the younger children if anything happened to you tomorrow.