Looking for some advice please

Alisonpennypincher

Hi,

Please be gentle with me, i am new to this board, although have been on MSE for quite a while!

I am a SAHM, husband works full time, sadly FIL passed away suddenly before Christmas, as a result MIL has offered to pay us £500 per month to invest for the next two years.

We have two options on the table at the moment,

1) Pay all money into DH's company pension (that we dont have at the moment) the company would pay 2 % of monthly wage in.

2) Pay £300 a month into the pension, and £200 a month into our Offset mortgage account, current O/S mortgage balance is in the region of 30k.

I'm not sure what to go for, to be honest i get confused about all the tax relief and how much it is all worth in the long run:o.

So please, any advice i would love in idiot style!

TIA
APP

Ian_W

I don't think you've given enough info for anything too definative, Alison, but a couple of thoughts:
1) How much does he have to pay into the pension to get the co's 2% contribution? Free employer money more often than not makes a pension more attractive than other savings/investment options particularly as his contribution gets tax relief.
You'd need to post more details of the pension to get a surer answer.
2) What interest rate are you paying on the mortgage and do you need to save on the interest payments for your general living expenses?

Alisonpennypincher

Thanks,

I hope this helps,

DH can pay 1% of his monthly wage or a minimum £20 into pension for the company to pay in. MIL wanted us to pay all £500 into this to give us a good start on the pension as we have nothing at all at the moment, (although both only 29 and 32 so a while to start)

Mortgage is on 6.49% I think, but putting £200 PM in would double (almost) our current payment, and yes things can be tight at the end of the month, so this would help in the long run. It also means if we can reduce the balance we may be able to look at moving to a bigger house in the future, which we just could not afford at the moment, (we have lots of equity in this house £100k+ but could not afford mortgage repayments on a larger mortgage so the only way is to reduce this mortgage to get more equity)

HTH a bit
APP

Retired_I.F.A.

Alison, have you ever tried writing in English?

"MSE" "SAHM" "FIL" "MIL" "DH" "TIA" "APP" "HTH"

Dithering_Dad

Retired_I.F.A. wrote: »

Alison, have you ever tried writing in English?

"MSE" "SAHM" "FIL" "MIL" "DH" "TIA" "APP" "HTH"

MSE = Money Saving Expert (This Website)
SAHM = Stay At Home Mum
FIL = Father In Law
MIL = Mother In Law
DH = Dearest Husband (or Darling Husband)
TIA = Thanks In Advance
APP = Alison Penny Pincher
HTH = Hope That Helps

It's not Rocket Science, Brain Surgery or SAP Payroll Configuration is it?

TTFN.
DD

cloud_dog

APP

This is a bit of a dilema. By the sounds of it you could do with the money helping you now, i.e. mortgage (over)payments etc BUT...........

..(although both only 29 and 32 so a while to start)

- Noooooo

a) it is never too early to start contributing to a pension (considering other factors)
b) there will always be reasons why you can't start contributing to a pension. People will always live to (sometimes beyond) their means.

One thing that confuses me...

current O/S mortgage balance is in the region of 30k.

and yet you also mention that

..and yes things can be tight at the end of the month..

Is your income very low, or do you have other financial commitments that eat up your disposable income?

The reason I ask is that you may be better off using the money to reduce / clear other debt? This is on the understanding that you will contribute to pensions in the near future.........promise?

cloud_dog

Dithering_Dad

I'd look at sorting out your pension provision - as cloud_dog mentions it's never too early to start and at 29 & 32, you're actually starting it a bit late.

My view with pensions is that I don't mind struggling along at the moment with mortgage payments, bills, etc. because I'm young, strong and healthy and can always bring money in - even if it means working in a bar, stacking shelves, labouring on a building site, etc. However I don't want to be struggling financially when I'm old, frail and perhaps suffering from health issues!!!

Alisonpennypincher

Thanks,

Hubby earns in the region of 18k a year, we do not have any debt apart from our mortgage, if we can't afford something we dont buy it.

We have not been able to pay into a pension before as we cant always guarantee the spare cash each month.

Dithering Dad thats a good point about good health now and health issues later on, i hadn't thought about it like that.

At the moment, it seems that it is vital to get a pension going and pay in as much as possible, so that may be the way to go.

All thoughts and input greatly appreciated

APP

Dithering_Dad

Alisonpennypincher wrote: »

Dithering Dad thats a good point about good health now and health issues later on, i hadn't thought about it like that.

You just never know what's around the corner - we might think we have years to sort out our retirement, but then an accident occurs and we can't work anymore and suddenly we're left to retire/survive on the state pension.

As you can see I do tend to look on the "worst case scenario" end of life, but I feel happier knowing that if I had an accident tomorrow, the £80k I have in my pension pot already would grow over the next 20 years and provide me with an "OK" retirement.

Traditional pensions are also not used for means tested benefit - so if I had the equivalent amount of money in ISAs for my retirement instead of my stakeholder, the government would make me spend all that retirement money before I received any benefits and I'd be back surviving on that state pension!

EdInvestor

I would only pay into the pension the minimum amount needed to get the (rather mean) max company contribution, putting the rest in the offset account where it is accessible if needed.

It's worth noting that the OPs husband will be accruing two state pensions at work and they should both get forecasts later on in the year (the system is currently down) on what they can expect from state pensions. The OP will be accruing conts while at home looking after children and may have S2P entitlements from previous jobs as well.

While it's never too early to start saving, it's no longer necessarily good to do it in the pension wrapper as the rules have changed: before, if you didn't use your annual tax free pension allowance, you lost it.These days it's the ISA allowance you lose, the pension can be topped up any time.

It's worth getting the free money (just): let's hope this gfoes up when the personal accounts start in 2012.