Mortgage Free But No Pension

kidmugsy

barnstar2077 said:

kidmugsy said:

You are younger than 40 so open a Lifetime ISA (LISA). 

As they already own their own home wouldn't a pension be better than the LISA, because you get the same bonus 25% but it could be accessed earlier?

I'd say not.  The LISA is more flexible before age 55 (or 57, or whatever it will be when the OP reaches her late fifties) because you can get the money out with a modest penalty. 

For the gap 55 (or 57 or whatever) to 60 the pension is accessible but the OP would presumably have to pay basic rate tax on any amount she withdrew beyond the tax-free lump sum.  Even if Basic Rate stays as low as 20% that is still a bit of a sting.  But then at 60 the LISA money can be withdrawn tax-free or left to fructify.  Happy days!  And, if the OP is crafty, she might even direct that LISA money into pension contributions and gain a second round of tax "mitigation".  Yippee for LISAs, say I.

Tassie_Devil

stef_saving said:

DairyQueen said:

Has your OH checked his state pension forecast? Is he paying Class 2 NI contributions? If not, I suggest he gets right onto it. 

Probably a good idea to check your SP forecast too. 

Good tip - I didn't know I could do this! Just checked and mine is £9,371 per year and I would imagine his would be too, as he's always paid NI. Probably a stupid question, but will this increase with inflation or is this the actual figure I will receive? A joint income of £18k with no income tax on it in today's money sounds pretty reasonable to me!

I may be missing something, but how can your SP forecast be £9371 when you're only 38?

barnstar2077

Tassie_Devil said:

stef_saving said:

DairyQueen said:

Has your OH checked his state pension forecast? Is he paying Class 2 NI contributions? If not, I suggest he gets right onto it. 

Probably a good idea to check your SP forecast too. 

Good tip - I didn't know I could do this! Just checked and mine is £9,371 per year and I would imagine his would be too, as he's always paid NI. Probably a stupid question, but will this increase with inflation or is this the actual figure I will receive? A joint income of £18k with no income tax on it in today's money sounds pretty reasonable to me!

I may be missing something, but how can your SP forecast be £9371 when you're only 38?

I would assume that includes continuing to work and paying NI. 

43722

Good on you for clearing that up. Good luck with the other aspects of your planning.

TheAble

With a combined income of nearly 60k and no house payment (well played on that btw) you ought to be able to put away quite a bit into a pension I would have thought? That's a fair chunk of disposable income. 

Emmia

eskbanker said:

stef_saving said:
Probably a stupid question, but will this increase with inflation or is this the actual figure I will receive?

Better still, it'll increase via the triple-lock mechanism, as per https://www.gov.uk/state-pension

The basic State Pension increases every year by whichever is the highest of the following:

• earnings - the average percentage growth in wages (in Great Britain)
• prices - the percentage growth in prices in the UK as measured by the Consumer Prices Index (CPI)
• 2.5%

I'm sceptical the triple lock will persist for the next 30 years - with an ageing population that is also seeing falling birth rates I'm really not sure it is affordable long-term.

Put it this way, I'm a similar age to the OP and I'm not banking on there being any state pension at all when I retire.

stef_saving

TheAble said:

With a combined income of nearly 60k and no house payment (well played on that btw) you ought to be able to put away quite a bit into a pension I would have thought? That's a fair chunk of disposable income. 

Thank you - yes, it definitely feels doable. It's the first year after quite a lot of changes (we've only just paid off the mortgage, but I've also just got a sizeable pay rise, as my previous job was on lower pay and part time). We are able to manage on my salary quite comfortably, which leaves pretty much all of my husband's (less predictable) income for savings and investments. His income tends to be paid in larger, more sporadic chunks, so for example he just had £8k come in (after putting tax & NI aside), but that could well be half his income for the year, we just don't know. That's what prompted me seeking some advice.

So based on what people have said here, the plan for that £8k will be:

£1k to bolster our emergency fund
£2k into a savings account to put towards a car, which will need replacing in the next couple of years
£3k into 2 x junior ISAs for the kids
£3k into a targeted pension for my husband like the Vanguard one (although more research needed on this)

MX5huggy

£1k to bolster our emergency fund

OK

£2k into a savings account to put towards a car, which will need replacing in the next couple of years

OK

£3k into 2 x junior ISAs for the kids

Why? Unless you have used up your own ISA allowances (£20k each) then why lock money away till they are 18 and then horror of horrors it’s theirs to spend on what they want (could be drink and fast cars and waste the rest). If you’re going to say the rates are better on JISA accounts they are for Cash ISA but long term saving should be invested is S&S ISA’s. use your own ISA to buy the same investment. You then have the money for when you think they need it or if you need it. Having said that your Mum or was it MIL could put money in JISA direct as a gift, within limits this will avoid IHT and won’t fall foul of deprivation of capital rules.

£3k into a targeted pension for my husband like the Vanguard one (although more research needed on this)

Don’t research it any more just open it with Vanguard and choose Life Strategy 60, 80 or 100. It’s cheap, maybe not the absolute cheapest but the fees will be under £15 for the year. Do your research after you’ve invested. The only thing you have done is locked that £3000 plus the tax relief on it so £3750 in to being in a pension for the next 20 years. Vanguard charge no fees if you want to change product with in Vanguard or move it all to a different provider. 

stef_saving

Sea_Shell said:

Can you clarify something with regards the home(s) that are mortgage free.   Sorry If I missed it upthread...

Does MIL live with you, in a mortgage free home, owned solely by you and your husband?

Where was she living before?   Has she sold her previous home to come and live with you, or have you sold up and moved in with her?

Did she help you pay off the mortgage?

Hi there,

To answer your questions:

Yes, my MIL has lived with us for the past six months due to a combo of Covid and dementia. It is likely that she will continue to live with us for the foreseeable future, unless a time comes when we are unable to meet her care needs at home - this is not a decision that is motivated by finances. Home owned solely by me and husband.

She previously lived in her own home and still owns that home, which is something to be resolved over the next few months. We haven't merged our finances at all and don't plan to.

We paid off our mortgage early due a combo of my husband having saved up a large deposit (he continued to live at home for the first ten years of his career), reasonably low house prices when we bought ten years ago (relatively speaking!) and then being pretty frugal and throwing every spare penny at the mortgage, because we knew we didn't have a guaranteed high income going forwards (I work in the charity sector, my husband works in a dying industry). 

stef_saving

Why? Unless you have used up your own ISA allowances (£20k each) then why lock money away till they are 18 and then horror of horrors it’s theirs to spend on what they want (could be drink and fast cars and waste the rest). If you’re going to say the rates are better on JISA accounts they are for Cash ISA but long term saving should be invested is S&S ISA’s. use your own ISA to buy the same investment. You then have the money for when you think they need it or if you need it. Having said that your Mum or was it MIL could put money in JISA direct as a gift, within limits this will avoid IHT and won’t fall foul of deprivation of capital rules.

£3k into a targeted pension for my husband like the Vanguard one (although more research needed on this)

Don’t research it any more just open it with Vanguard and choose Life Strategy 60, 80 or 100. It’s cheap, maybe not the absolute cheapest but the fees will be under £15 for the year. Do your research after you’ve invested. The only thing you have done is locked that £3000 plus the tax relief on it so £3750 in to being in a pension for the next 20 years. Vanguard charge no fees if you want to change product with in Vanguard or move it all to a different provider. 

Thanks for this. Yes, the pension sounds like a no brainer. 

On the JSAs - haha yes you're probably right and we certainly haven't used up our ISA allowance, so this is probably a better bet. On the 'gifts' into JSAs, this is something we have considered, but some feedback here suggests that this is possibly unwise post dementia diagnosis.