Help with lack of pension quandary

Dazed_and_C0nfused

Waspyyy said:

ColdIron said:

Waspyyy said:

IvanOpinion said:

You seem to know where the problem is, your level of spending.
Ideally you should be putting nearly £20K of a £70K salary into the pension to avoid 40% tax

Ok so this is to avoid the higher rate I get charged on over whatever it is now (£50k?) tax?

With that £20,000 you could

1. Give HMRC £8,000 every year
2. Put £8,000 into your pension every year

I am 42 with no pension

Option 1 does seem to suggest itself and with salary sacrifice you won't have to lift a finger

Sure, yes in the future I get that back but it's still 700 odd quid a month I haven't got so ain't gonna happen any time soon (maybe after when youngest son goes to school). Appreciate explaining this though, I hadn't realised this before 

Look at the top slice of your income, the £10,000 from £60k to £70k.

As it stands you get £5,800 of that after 40% tax and 2% National Insurance is deducted.

If you sacrifice that £10,000 info your pension you have £10,000 to invest but only lose £5,800 take home pay.  Not a bad return before you've even started investing!

And some enlightened employers even add their own NI saving (from you not being paid the £10k) to your pension so you could end up with more than £10,000.

AlanP_2

Waspyyy said:

Marcon said:

Waspyyy said:

gravel_2 said:

If you don't mind me asking, oin a household income of >£170k are there good reasons you are sitting with £30k of (seemingly expensive) debt and spending more than you earn?

You have asked a pension question but I think this is first and foremost a budgeting issue?

Sorry yes going off topic...I have the answer I need re pension, seems advice is to pay in rather than pay off debt

In answer to your q:
- very bad with money
- never had chance to save throughout working life
- was a contractor for many years, not the goldmine everyone makes it out to be (and see 1st point)
- caught in the £100k trap of zero benefits for the earner or their partner (not expecting violins here but in some of the more expensive parts of the country £100k does not make you as rich as people imagine, and this arbitrary rule affects me who doesn't even earn the £100k)

Thanks all for your help

Sorting out a pension strikes me as on a par with moving the deckchairs on the Titanic! If you are carrying expensive debt when your household income is over £170K, there's something seriously amiss. Are you and your wife both 'very bad with money', or simply not working as a partnership to sort out the debt problem? Some outside intervention, whether from a debt advice charity or a regulated (independent) financial adviser, could really pay dividends in both the immediate and long term.

Waspyyy said:

LHW99 said:

Waspyyy said:

IvanOpinion said:

You seem to know where the problem is, your level of spending.
Ideally you should be putting nearly £20K of a £70K salary into the pension to avoid 40% tax

Ok so this is to avoid the higher rate I get charged on over whatever it is now (£50k?)

Does this work only if I directly pay into workplace pension or can I pay into private SIPP to avoid the higher tax?

If you pay into a private SIPP, the provider claims 20% basic rate relief, then you apply to HMRC (via the Governemnt Gateway) and hat happens is your tax allowance bands (effectively) get increased so you don't get charged the highest tax rate on as much (any) income.

It sounds as if your wife has some ideas, and its usually best to plan retirement as a couple. Why not work out what you would have between you (2 full state pensions would give you over £20k towards your retirement income).

Also, if you do have children, even if you are earning above the child benefit limit, a) putting more into your pension could get you to the point where you can have child benefit paid and even if you don't put in quite enough for that, you should make the application, but choose not to have it paid. That way, if it is in your wife's name she wil be earning credits towards her state pension if not earning.

Private SIPP route sounds insanely complicated, workplace sounds much easier thanks

£20k is still not a lot ;-) . Wife has a workplace pension so wants me to sort out my own. Which is fair.

Child benefits etc, she earns more than me (over 6 figs) hence we are entitled to absolutely zero, zilch, nada, inc the free nursery hours. We have 2 kids, one still at nursery (until 2026) so this is another reason I am so squeezed - £400 p/m on nursery is killing me

The SIPP route isn't 'insanely complicated' - you just need to get to grips with a few basic procedures. Nothing like as bad as you fear, but shying away from even investigating the option isn't a great sign.

If £400 a month on nursery fees is 'killing you', why isn't your wife helping more? No, I'm not asking for an answer here - just flagging that it's another sign that the pair of you aren't working in tandem, which is surely what a marriage/parental partnership is all about?

Wouldn't say she's a wizard but has no debts and has been good at saving. She has said we can talk about the issues but tbh we've never really talked about finances in 20 years outside of paying bills and stuff, taking turns to get dinner etc, I find it odd that working couples would talk that much about money and not just stick to their own cash. Certainly wouldn't want to talk to her about it if I didn't have these issues, it's a bit embarrassing really.

SIPP - ok I'll keep in mind thanks, still not convinced it isn't a massive headache 

We're about 20 years older than you, so you could say we are a generation behind so our attitudes may be different but the the bit i have emboldened seems the odd bit to me.

We've always approached finances jointly with joint bank accounts etc. At times over 40+ years of marriage we have both been the higher earner at different times - so what, the family money was the family money.

Some savings accounts and obviously pensions are in individual names but all are part of the overall asset balance we have between us.

For example, my wife works, I've retired. I have withdrawn money from my pension at an effective 15% tax rate (25% tax free, 75% at 20% basic rate tax) which has been used to fund pension contributions for her that attract 40% tax relief which makes us BOTH better off.

My advice is stop being embarrassed and start working as a team.

MallyGirl

Absolutely - it is really beneficial to work out finances as a family unit. We got a bank account style offset mortgage before we got married and it made no financial sense to keep finances separate to get the best out of that. I was the higher earner, then I went on maternity and then came back part time. We just put the salaries in the joint account and spend what is needed. It will be so much better if you can be open and honest about finances.

gravel_2

Whether you act like it or not your finances are combined anyway. If you talk more about it, and if necessary she helps the household meet the financial obligations then you will share both the benefit and burden.

robatwork

If you don't discuss your finances with your wife (you do realise as a married couple your finances are inextricably linked anyway?) you have far bigger problems than your pension and "bad with money". 

This is a bit off topic but you're here for the wisdom of the moneysaving community, and there's my wisdom. If a couple aren't financially compatible and open, then they're not a viable couple imho.

Auti

Just an idea but why not have a separate bank account that you both put money in to cover bills including childcare plus 10% to cover unexpected. So basically you sit down together, add up all the household bills and childcare plus transport to work, then add 10% and then divide in 2 to get each share. That amount goes in the new, joint, bank account for necessary life living bills. 

It is a start and whilst not perfect might take some pressure off. Children living as part of a partnership (whether biological or not) are looked after by both so costs bourne by both - just my opinion 

gravel_2

It can be even fairer to split the household costs based on take home. That's what our household does and it works well. One in the partnership just has to accept they will pay a higher share.

barnstar2077

It is great that you want to get your finances back on track, and without much effort you could be laughing!

I would start by writing down every monthly bill that you have.  Adding them up and then subtracting the total from your monthly income will show you what you have to play with.  This will show you if you have too many expensive bills and subscriptions.  If you do, then work your way through every bill one at a time and try to reduce it by shopping around (comparison websites are great for this!) and also knocking on the head things that you don't really get value for money out of.

If on the other hand, once you have added up all of your bills, it looks like you should have thousands of pounds left over then it will show you that you are spending too much on keeping yourself entertained (assuming that you would like to save more.)

Once you have this information the world is your oyster!  As once you know how much money you should have left over at the end of the month you can start to make that money work for you, instead of feeling like all you do is work for money!

I used to spend so much money on toys, games and gadgets that it is embarrassing to me.  What helped me change my ways was realising that the life I was living wasn't actually making me happy and that what I really value in life is my free time, and being able to spend that time with friends and family.

As others have suggested, I would also lean towards a frank conversation with your wife, not just about finances, but about what really makes you both happy and what your long term goals are.  Early retirement, more holidays etc.

Above all, don't beat yourself up about it, plenty of people struggle with their finances, but not many people make an effort to sort it out, so you are already a step up on many others!

22225

£400 per month on childcare is very cheap. Surely not full time nursery? Does your partner actually pay for the bulk of the childcare?
Where I live it's around £100 per day per child. So perhaps your other half is contributing towards that? Or maybe your parents look after the kids.
On your salaries you could have such a good life if you could improve your budgeting. You could be so secure. It wouldn't take long to sort out that debt if you really went for it. But you would have to make sure you didnt rack up more.
I think pension money may also be protected if you went bankrupt? Could be wrong

Waspyyy

22225 said:

£400 per month on childcare is very cheap. Surely not full time nursery? Does your partner actually pay for the bulk of the childcare?
Where I live it's around £100 per day per child. So perhaps your other half is contributing towards that? Or maybe your parents look after the kids.
On your salaries you could have such a good life if you could improve your budgeting. You could be so secure. It wouldn't take long to sort out that debt if you really went for it. But you would have to make sure you didnt rack up more.
I think pension money may also be protected if you went bankrupt? Could be wrong

Ha, no this is my share of it, wife pays about 500 I think. If only it was just £400! Already have in-laws for 2 days