Serious Question about if paying into a pension is worth it..?

soffie

Little bit of a back story but hubby works full time and so will have 30+ contribution credits. I however havent ever worked full time and only contribution credits ill have are 12 from the weekly child benefit we get.

I was very shocked to see if your on Benefits, ie universal credit u get pension contribution credits, like very shocked, basically it is people like me who will suffer for being stay at home/part time and mostly living off hubbys wage..

So, serious Question should he stop paying into a pension and instead we use money to pay for my voluntary contributions and not use his pension fund? His forecast at the moment at most comes out at £6000 a year which as we know current pension rates are £175 a week each if youve got enough credits and unless im wrong 0 if you dont have enough credits?

I dont want to be worse off then people who perhaps havent paid in etc.. so on that basis are we best to Quit the private pension and put money into making sure we both have a state one?
Serious Question. Thank you

molerat

Have you actually had a pension forecast ? SP is not £175 or £0, it is on a sliding scale according to the number of years you have. You only get £0 if less than 10 years held. Stopping his pension to pay your voluntary contributions is unlikely a sensible move, if anything happens to you then he would be up somewhere without a paddle. The SP is like an inverse life insurance policy - it only pays out if you are alive ! How old are you ? Get that pension forecast and see what it shows, look for any cheap gaps to fill. Post up here exactly what it shows and you will be pointed in the right direction.

Linton

Assuming your husband has a DC pension:

£ for £ paying voluntary NI is a much better deal than paying into a pension:

£780 net=£975 gross for 1 year Class 3 NI pays £168.60/35=£4.82/week inflation linked
£975 gross paid into pension matched by employer=£1950 pays approx 1950X 3.5% /52=£1.31/week inflation linked

If you husband has a DB (final salary) pension the numbers would be different and depend on the scheme.


How much is your husband paying into his pension now? Can he pay both?

soffie

molerat wrote: »

Have you actually had a pension forecast ? SP is not £175 or £0, it is on a sliding scale according to the number of years you have. You only get £0 if less than 10 years held. Stopping his pension to pay your voluntary contributions is unlikely a sensible move, if anything happens to you then he would be up somewhere without a paddle. The SP is like an inverse life insurance policy - it only pays out if you are alive ! How old are you ? Get that pension forecast and see what it shows, look for any cheap gaps to fill. Post up here exactly what it shows and you will be pointed in the right direction.

Thanks, i am 30 at the moment and husband is 31. I have 4 years contributions to NI. We are due a baby and will be self funded (not universal credit etc). It appears I will get 12 years NI contributions when we claim child benefit, which i will regardless of if he has to pay it back in tax, just for the NI contributions alone...
I was just a bit shocked and horrified at how the system is set up to protect those on benefits but not those like me who are working (but part time)
Do i get NI contribution credits even if i didnt pay any? I ask because i have a years worth of contributions for last tax year even tho i didnt pay any?
When we looked at hubbys pension forecast not too long ago it was only worth about £6000 a year. Which is naff.
I just wondered if nearer the time, yes admittidly i am talking when we are 50+, we stop the private pension focus on my NI voluntary contributions if i havent got enough/havent gone full time as it may be more worth our while?
Thanks. I will double check his pension forecast now tho again to be sure of figures.

soffie

Linton wrote: »

Assuming your husband has a DC pension:

£ for £ paying voluntary NI is a much better deal than paying into a pension:

£780 net=£975 gross for 1 year Class 3 NI pays £168.60/35=£4.82/week inflation linked
£975 gross paid into pension matched by employer=£1950 pays approx 1950X 3.5% /52=£1.31/week inflation linked

If you husband has a DB (final salary) pension the numbers would be different and depend on the scheme.


How much is your husband paying into his pension now? Can he pay both?

Cant afford to pay both no. he pays 5% of his wage at the moment.
I feel its quite a messed up system that we may in future have to consider stopping paying into a private pension to make sure we have as much as other people who may/may not have contributed in and instead milked the system. Ah sorry for the rage.
But yeh tho this is years away to be thinking about, it was a bit of a shock when i read this about NI contributions today and if Government remains with its way of thinking we maybe stopping Private pension when he is 50 to pay for me to have NI contributions. (so messed up)!

xylophone

https://www.litrg.org.uk/tax-guides/employment/what-national-insurance-do-i-pay-employee

If you have earnings above the lower earnings limit (£118 per week or £512 per month for 2019/20) and below the primary threshold (£166 per week or £719 per month for 2019/20) you will not have to pay any Class 1 NIC. Your NIC record will be credited, however, as though you have paid Class 1 NIC. These are called NIC credits. These may earn you entitlement to contributory benefits and the state pension.

https://www.gov.uk/child-benefit/what-youll-get

You may well return to work when your family commitments permit.

Your employer will have to offer a pension scheme

When we looked at hubbys pension forecast not too long ago it was only worth about £6000 a year.

https://www.yourpension.gov.uk/how-much-might-my-state-pension-be/

You both have 36 years + to make/be credited contributions...

Linton

soffie wrote: »

Thanks, i am 30 at the moment and husband is 31.

31 is far too young to comeout of an employer pension scheme. The early years are the most valuiable ones because of the lengthy time period when they will be making investment gains. My previous commernts were based on the assumption that you already had the 12 years NI credits and so were much older.

I have 4 years contributions to NI. We are due a baby and will be self funded (not universal credit etc). It appears I will get 12 years NI contributions when we claim child benefit, which i will regardless of if he has to pay it back in tax, just for the NI contributions alone...
I was just a bit shocked and horrified at how the system is set up to protect those on benefits but not those like me who are working (but part time)

People are on benefits preumably because they cannot work. If you dont get your full 35 years NI that will be a life-style choice you make.

Do i get NI contribution credits even if i didnt pay any? I ask because i have a years worth of contributions for last tax year even tho i didnt pay any?

Yes. NI credits are the same as the real thing.

When we looked at hubbys pension forecast not too long ago it was only worth about £6000 a year. Which is naff.

Dont take the pension forecasts seriously - they are based on very pessimistic assumptions.

I just wondered if nearer the time, yes admittidly i am talking when we are 50+, we stop the private pension focus on my NI voluntary contributions if i havent got enough/havent gone full time as it may be more worth our while?

That would make more sense than not paying into a pension whilst still young. Why dont you plan to work? Given your 12 years credits you would have plenty of time to build up your NI and have no need for voluntary contributions.

soffie

Hi i dont intend to not work but may only work part time instead of full time as it will depend on family situation and my health as before its stopped me short of being full time.
I suppose it is very much premature thinking and not something to worry about until we hit 50, then decide about paying (or not) voluntary nics.
We dont get help from gov and wont ever as hubby earns too much and because we have our own home/mortgage.
I suppose i have become more aware of financial situation with a drastic change and baby being due soon, but you are right there is no need to think about this now - hubby has said same. We have close to 20 years before we need to decide which option maybe financially better for us. If when we are 50 it works out better to pay my NICs he will stop private pension payments.

Dox

soffie wrote: »

I suppose i have become more aware of financial situation with a drastic change and baby being due soon, but you are right there is no need to think about this now - hubby has said same. We have close to 20 years before we need to decide which option maybe financially better for us. If when we are 50 it works out better to pay my NICs he will stop private pension payments.

In 20 years, who knows what the state pension system will look like? Focus on something a bit sooner and considerably more appealing - becoming parents!

LHW99

If you already have 4 (or 5?) years contributions, and then get 12 years credits for child benefit, that would be 16 years in total, so above the minimum 10. Then, maybe you would have a second child a few years later, that might give you an additional few years - perhaps bringing your record up to 20 years. Do a further 10 years work, at a salary that is above the minimum NI limit - you would have close to 30 in all, so maybe there won't be a need to make voluntary contributions in the end.
Keep an eye on things, but don't panic now IMO

Thrugelmir

soffie wrote: »

When we looked at hubbys pension forecast not too long ago it was only worth about £6000 a year. Which is naff.

Maybe so. However if you wish to have a comfortable retuirement it requires years of saving. The earlier the better.