I just can't get my head round it all - HELP!!

[Deleted User]

Hi, I'm wondering if someone can help me, or at least push me in the right direction!

I have been reading, watching videos etc, to try and learn about which pension may be suitable. However, I've now fallen into the trap of not knowing what is best because I've heard so much information, and I'm worried about making the wrong decision. My Husband is Self Employed and hasn't been in a position to pay into a pension previously, but has recently 'invested' in a big item with a view to that being the start of his retirement planning.

I have struggled in recent years with my memory, and various other life events which has hampered me also.

I don't go out to work, and I receive Carers Allowance. 

We have no debt (luckily!) and we overpay our mortgage. We have about about 15/20k in (rubbish) standard bank accounts. If pension is the best way, I was going to put maybe half of the savings into my pension straight away.

My reasons for thinking Pension rather than anything else is because we're mid-40's and realise that to invest we'd have to lock our money away for at least 5 years anyway and I'll get the 20% extra on the pension contributions - I don't know if I need to change my mindset or something else, but I need to get it sorted sooner rather than later! 

2nd_time_buyer

Do you have any other pension provision?

In the short term, having a decent cash buffer in savings is probably the highest priority.

...then drip feeding into pension when you are sure you won't need the money for anything else.

xylophone

I don't go out to work, and I receive Carers Allowance. 

Do you have "relevant earnings"?

Read https://www.pruadviser.co.uk/knowledge-literature/knowledge-library/tax-relief-members-contributions/

Had you considered 

https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/personal-pension-account

Perhaps a Target Retirement Fund might suit?

kidmugsy

If you have no earnings (you haven't quite told us) then the most you can contribute to a pension is an annual £2,880 (net) = £3,600 (gross).  If you feel that you can afford that then it's probably the most tax-efficient thing you can do.  

With one proviso: check whether you are going to be entitled to the full state pension. If not it will probably be a better bargain to buy more entitlement. 
https://www.gov.uk/check-state-pension

I don't know how Carers Allowance interacts with state pension: perhaps someone else can help us?

[Deleted User]

2nd_time_buyer said:

Do you have any other pension provision?

In the short term, having a decent cash buffer in savings is probably the highest priority.

...then drip feeding into pension when you are sure you won't need the money for anything else.

Well, I have a very small amount in a Virgin Stakeholder Pension (Virgin Money Pension Growth Fund 3), that I think my Dad started about 8 years ago before he died. It's literally about 1k. I also worked in a Bank for a couple of years in the late 90's, so there won't be anything in that either.

I realise that seems mad, but we've just not had the funds to enable us to save. Until now.

How much of a buffer would you suggest - a % or so many months of expenses?  

2nd_time_buyer

It would definitely be worth chasing up to see what if anything you have in the bank pension. It might be more than you think.

As kidmugsy said it is likely to be more cost effective to try to maximize your state pension if necessary by making catch-up contributions. Have you checked your state pension entitlement?

In terms of what buffer you should have, it is obviously a personal thing. Enough for a big essential purchase like a car/roof or enough to get by for 6 months out of work is what I have budgeted for.

[Deleted User]

Sorry Xylophone, I can't quote you as I'm a new member.

I don't have any other earning at all.

It sounds like the Virgin one is similar to the Vanguard Targeted Fund, but the Virgin one starts to reduce risk 10 years before retirement. 

I'll bookmark the pages though and try to digest them.

[Deleted User]

That's what I was thinking, re: tax efficiency, kidmugsy

I have full state pension entitlement, as I checked that as soon as I tried to get my head around it all.

Because I get Carers Allowance, I get Pension Credits automatically, thankfully.

german_keeper

kidmugsy said:

I don't know how Carers Allowance interacts with state pension: perhaps someone else can help us?

Its an overlapping benefit. When SP goes into payment, if the conditions of entitlement are still met, Carer's Allowance becomes entitled not payable. I think there can be some advantages to retain the entitlement but I left Invalid Care Allowance, as it was called back then, in 1998 so I can't remember specifics.

2nd_time_buyer

That is good news regarding your state pension. Obviously worth checking for your husband too.

Two full state pensions is considered enough for an "essential" retirement according to the which survey.

https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

So no reason to dispair and anything more you can put in will make retirement more "comfortable".

[Deleted User]

2nd_time_buyer said:

It would definitely be worth chasing up to see what if anything you have in the bank pension. It might be more than you think.

As kidmugsy said it is likely to be more cost effective to try to maximize your state pension if necessary by making catch-up contributions. Have you checked your state pension entitlement?

In terms of what buffer you should have, it is obviously a personal thing. Enough for a big essential purchase like a car/roof or enough to get by for 6 months out of work is what I have budgeted for.

I'll chase the Bank Pension up, but I'm sure it was only just into double figures per year, last time I checked.

Ok, that's not too bad then. I was thinking along those lines, but wasn't sure if there was anything else I'd missed.

It's so frustrating as it's all beyond our control. If I have extra left once all the above has been accounted for, is it worth doing anything with it, or should it just stay in the standard bank accounts. 

My Husband was trying to focus on me putting as much away as possible because he'd recently purchased something, but is it going to be better to put it into his pension?