No pension, should I worry about this?

WillowCat

MX5huggy said:

My question is (and it is a question because I don’t know the answer). 

Are you pay or getting enough NI or NI credits for your state pension qualifying years to be ticking up? 

On the profit mentioned class 2 NI contributions are due. In any case UC gives class 3 NI credits.

Dazza1902

If a person is on some form of benefits , saves for a tiny additional pension would that then prohibit/reduce claiming  benefits on retirement.
From anecdotal accounts it seems you either lift yourself well above state pension income, or don't bother. I'm sure somebody on this forum knows the answer , quantifying it maybe difficult though.

changing_ways

Although you should be able to have personal pension payments included in your UC calculation in the same way as an employer scheme, it may not be straightforward in practice. It seems like the UC system isn't designed to cope with it.

This thread on the benefits board is relevant. https://forums.moneysavingexpert.com/discussion/6001734/universal-credit-and-private-pension-contributions .

changing_ways

Dazza1902 said:

If a person is on some form of benefits , saves for a tiny additional pension would that then prohibit/reduce claiming  benefits on retirement.
From anecdotal accounts it seems you either lift yourself well above state pension income, or don't bother. I'm sure somebody on this forum knows the answer , quantifying it maybe difficult though.

It's almost impossible to quantify. The benefits system may well change by the time a person retires, plus an inheritance could affect income related benefits depending on the amount. 

MEM62

No pension, should I worry about this?

It depends on your outlook and expectations for your post-working years.  If you are happy with the prospect of spending your retirement close to the poverty line then there is nothing to worry about.  Otherwise, you need to look at what provisions you can make for your old age.  Anything you can squirrel away is better than nothing.    

WillowCat

Dazza1902 said:

If a person is on some form of benefits , saves for a tiny additional pension would that then prohibit/reduce claiming  benefits on retirement.
From anecdotal accounts it seems you either lift yourself well above state pension income, or don't bother. I'm sure somebody on this forum knows the answer , quantifying it maybe difficult though.

It depends, there are many variables and people need to make their own calculations based on their own circumstances.

The first thing to ask is will you be renting in retirement?  If not, a single person with a full state pension and no disabilities would not be entitled to much in the way of benefits as they are already at about the pension credit level, so any small amount of pension is a bonus.  A couple both with full state pensions are considerably above pension credit level.

If you will be a renter, then it's more complex.  If you were to keep your private pension until you get to state pension age, then buy an annuity, then yes, you've basically thrown your money away as the pension is taken into account for benefits pound for pound.

However now it's possible to have access to pension money in the ten years before retirement, and in a flexible manner, then it can make life much more comfortable at that time.   In addition, many people are entitled to benefits while younger, while raising children, and not later on once they've left home.  

You can take a lump sum of pension and have it treated as capital, provided it is a 'one off' or if you take multiple lump sum's they mustn't fall into a pattern (such as taking the same amount once a year).  You can have £6k of savings/cash before UC is affected, plus you can pay off debt.

So, say at 55 (or later at 57 when rules change) if you are still on UC and you've got £2k of credit card debt and pretty much zero in your bank account, you could pull out £8k of pension, pay off the credit card, and slowly spend the other £6k improving your quality of life.  Repeat at odd intervals until you get to state pension age.

This is especially helpful for those who are late 50's or older and who have found themselves made redundant recently, as they may, sadly, never get another job and the basic UC amount is a pittance if you don't have dependent children or health condition.  

Dazza1902

If a person is on universal credit, is that benefit so generous as to allow meaningful pension contributions ??
If not surely the pain of somehow saving for retirement out of benefits to indeed jeopardise those benefits pound for pound would make it a pointless excercise ?

Dazza1902

Especially for renters

WillowCat

Dazza1902 said:

If a person is on universal credit, is that benefit so generous as to allow meaningful pension contributions ??
If not surely the pain of somehow saving for retirement out of benefits to indeed jeopardise those benefits pound for pound would make it a pointless excercise ?

How generous UC is depends purely on individual circumstances.  My partner is disabled and I'm his carer so we benefit for additional premiums (elements in UC terms) to account for that.  I also work.  As we own our home, the first £512 per month of earnings are not counted by UC, and the rest of my earnings are tapered - for every pound over that, UC is lowered by 63p.

We find that we have enough spare cash (he is also in receipt of PIP) that I can afford to put away £400 per month into my pension - which of course is then uplifted to £500 by tax relief.  My UC is raised by £252 by that contribution meaning it's cost me only £148 per month.  If my company operated salary sacrifice I'd benefit from no NI too so the benefit would be even higher.  

Before anyone throws their hands up, both my partner and I would much prefer that he was fully fit for work, and we would be much, much better off if we were both bringing in a full time wage.  But UC/PIP can give a decent lifestyle and allows the disabled to have some dignity.

I often also see people with children (which again adds extra elements to UC) making decent pension contributions (I'm a benefits adviser ironically!) In the main, they are people who are unlikely to be benefit claimants once retired, but whose circumstances mean they are entitled to a top up when the children are young.

WillowCat

The other thing to recognise is the way UC is calculated.  Individual 'elements' based on circumstances are totalled up to give the amount the government says you can live on.

Earnings then start to reduce that amount (but you still get your earnings in full)

Pension contributions reduce the amount of earnings that reduce the UC.

So even making the contribution, you still have more total income (UC plus earnings) than you would have if you didn't work and relied on UC alone.