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Come and talk to me about your pension

(31 Posts)
Paintyourbox Tue 20-Nov-12 15:37:38

I don't have a pension yet (I'm 26) and the scheme my company have isn't that great (they don't make any contributions) and it is not based on my final salary.

With that in mind I am going to try and "do it myself" so I'd like to ask you about your pension plan.

How much do you save per month? How does it all work? I sometimes think just stashing cash in ISAs or a buy-to-let property may be the way forward but not very sure!

Gladyss Sat 08-Dec-12 00:08:51

Having paid pension most of my working life 32 years I find that putting money for someone elses control is somewhat of a gamble. Lots of things can happen during your working life but when you put your money into a scheme the benefit is you have your employers contributions. But the returns and conditions are limited. I had 6 months training as financial consultant and the only people who appeared to have life under control were those who invested in property-paying their mortgage off early or those who have bought property for buy to let. That way the asset value remains, Of course the government may bring in a property tax which may undermine the benefit of this. I think the benefit of the old final salary schemes are largely a thing of the past,unless you are working for a government dept of course, and the money purchase schemes are very much changeable and very few will give you a guaranteed income, But you are wise to consider saving for the long term

Notmadeofrib Fri 07-Dec-12 10:23:09

well he may have only been contracted out for a period of his working life (it hasn't always been possible and now it's stopped), so ensure the state second pension is included.

Good luck!

LostandLonley Fri 07-Dec-12 09:45:31

Thank you Notmade , very helpful , have contacted an IFA for set fee consultation. Looks like he has contracted out from the paperwork I found, also found among the paperwork Gov Gateway State Pension Forecast user I.D. dated spring of 2011. So would appear he had being doing HIS sums before he left! Hmmph!

Notmadeofrib Wed 05-Dec-12 19:25:30

Well I would suggest that the valuation you have is good enough to haggle with. Unless there is another massive financial crash the value will vary but unlikely to be that much different (I'm talking over 10%). Unless he realises that his pension is an asset 'with handcuffs', I'd go pound for pound offset as an opening offer, but don't be surprised if that is NOT the advice he receives.

He can take 25% as tax free cash, but then he will have choices as to how to take the pension itself: annuity, drawdown being the main options. That tax free cash is obviously an asset that is £/£ something you can measure.

An annuity is a commitment for an insurance company to pay an income for life. No longer is this allowed to be gender specific (crazy but there we go). You can buy a guarantee 5 or 10 years or 'risk' the lot. You can get estimates about the income he could generate from his pension pot off the internet.

His fund is large enough to stay invested in the stock market however and not take an annuity. He could do so and take an income from the fund (certain rules as to how this is calculated), but the ability to strip it of it's assets is not an option (unless you have £20,000 of secured income).

Don't forget that he will have earned SERPS, graduated state pension & S2P during his working life and you are also entitled to some of this (this can easily double a state pension if he's not been contracted out) I would suggest a BR19 (estimate of state pension entitlement) is also a good idea here. This is a valuable asset.

www.direct.gov.uk/en/Pensionsandretirementplanning/StatePension/StatePensionforecast/DG_10014008

HTH

LostandLonley Wed 05-Dec-12 15:55:56

His "intention" was to sit down and discuss. The reality is all requests for mediation etc ignored, so I am trying to do a lot of the groundwork to save money. If I can calculate the pension , I will be in a better position to haggle, so to speak.

Notmadeofrib Wed 05-Dec-12 13:29:56

Well offsetting IS something that can happen, but it may not be quite as straightforward as "you have the pension, I'll have the house".

I really think you need advice as I can make some suggestions, but I'm not a practising divorce lawyer so really that means I'm guessing.

Have you tried talking to your ex about what you would like?

LostandLonley Wed 05-Dec-12 09:57:30

The links also useful thanks.

LostandLonley Wed 05-Dec-12 09:45:09

Thank you, as I understand, this is a money purchase scheme where a pension is purchased/set up upon retirement,(a lump sum of 25% can be taken at this time) thats why I thought i could offset against the home, have I got this correct? The house value is approx £320,00 (no mortgage). I cashed in my pension when I had my child. So this to be taken into account. So I am not sure how much I need to raise.

Notmadeofrib Tue 04-Dec-12 16:54:51

That's worth taking advice for!

The law states that 'equality of outcome' is what is to be achieved and anything other than a straight pension sharing order, you might find a tricky thing to negotiate (and in reality pound for pound an investment and a pension are not exactly equal)

This is a very interesting site from the family law society and covers exactly your issue, so take a look:

www.resolution.org.uk/editorial.asp?page_id=476#pageTop

Here are a few other sites: www.divorceaid.co.uk/financial/help/advisers.htm

And specialist IFA (nothing to do with me, but worth a chat I would have thought) www.thedivorceifa.co.uk/

How much do you need to raise?

LostandLonley Tue 04-Dec-12 13:33:13

Hi Thanks for replies, has taken a few days to find paperwork, apologies for not posting sooner. Pensionable salary upon retirement june 2020 shows as £61,000. and total of all accounts reads as £203,647. 61 .
Currently work part time and looking for extra hours but this has to fit in with caring of elderly parent. Can raise small mortgage but was looking to offset in reality. Does this information help X & NMR?

Xenia Thu 29-Nov-12 13:13:41

An asset which generates money you may never have when you are old is not the same as the cash value of equity in a house. The court might order this if children need to be housed but if not then the husband need never agree to take this hope of pension income if he lives long in return for his wife having all the real cash.

You are right that a fifth is not always going to be the sum. It will also depend on life expectancy and how far you are from retirement etc.

I just think far too many women think the husband's pension is a huge cash asset they can neatly set off pound for pound against the equity in the house. I thought a rough figure for cash value was about a fifth of the capital value of the pension fund and you could net off on that basis but only if he agrees (he might for example know the men in his family die at 60 so have no interest ni keeping pensions at all or realist Government change the rules or tax them to the hilt or in effect confiscate them so say - hang on - we will jsut do a pension sharing order and share the house equity.

Notmadeofrib Wed 28-Nov-12 13:54:57

So I think pension valuers in doing a cash equivalent woudl take its cash equivalent value as about a fifth of the pension pot so about £60k in that example.

I'm really not sure you are correct with this Xenia. I have (a while ago now) attended a seminar on pension split/earmarking/off-setting, in divorce and not at any stage did this come up. My main experience is with defined benefit schemes and I can assure you that cash equivalent transfer values (CETV'S) are used. Equality of outcome is what the court will focus upon and so this may not mean a 50/50 split, but this is common.

I have also had to provide valuations to solicitors for divorce proceedings and this has never been an issue.

HOWEVER, I am not saying this is not a (vaguely) valid argument (although 1/5 is outlandish IMHO) and not one that a solicitor could focus upon and to great cost.

I've had a quick look for my notes, but to be honest the fact that a money purchase fund represents a value, this is just seen as a value that you could offset (or split and put into another pension for a 'clean break')

How much are we talking here? A valuation statement from within a couple of months will give you a good idea of the value of the asset.

Xenia Wed 28-Nov-12 10:53:27

Yes you can IF but only if he agrees and he may not. Also he cannot take the pension as cash so if the pension pot is say £300,000 then he might be entitled say to £15k a year p ension from that = it is not the same as a £300,000 savings in a bank. So I think pension valuers in doing a cash equivalent woudl take its cash equivalent value as about a fifth of the pension pot so about £60k in that example.

Also he may need cash to buy a house and to house his children when staying with him so keeping his pension which he may never live to draw might not be any use to him. so he has no obligation to agree to a pension for equity thing.

Coudl you not work full time like most of us? I had to take on a mortgaeg of over £1m to buy out my husband on divorce.

LostandLonley Tue 27-Nov-12 22:38:04

Thank you Notmadeofrib & Xenia, yes, trying to calculate our joint assets as we are about to divorce. I thought I read somewhere on MN that I could offset his pension towards the value of the house, I currently work part time and would not be able to raise a large mortgage, and trying to hold on to the marital home.

Xenia Tue 27-Nov-12 12:24:03

I think landL is indeed talking abotu divorce. A pension pot is not cash. It is worth nothing like cash you and he might have in the bank. It is perhaps worth say one fifth of its cash value in looking at who gets what in divorce or you could just split the pension in two and have half each.
Your husband might be able to take his pension at 55 and keep working if the pension is separate from his job and when he does take 25% as cash and give you that cash as another otpion. Also if he hasn't much of a pension - many people don't - it may not be as vajulable as the equity in the hosue you are splitting between you. Also if it is not worth much the very expensive costs of pensions valuation on divorce may not be worth incurring.

On the original question it is certainly wise to try to save throughout your life. If your employer though is not contributing and given the state seems to be saying if you don't save then in retirement we will make your income up to £200 aweek and if you haven't saved we won't it does rather remove the incentive for some people at the lower end of the income scale and they keep changing pension rules too.

Notmadeofrib Mon 26-Nov-12 19:45:56

lostandlonley I'm not sure I understand your question, but are you talking in the context of a divorce? If so the value of the pension will be added into the valuation of all assets. Depending on what type of pension he has (it sounds like a money purchase plan) the valuation will be taken at a point in time and then that serves as the valuation going forward (I’m not a IFA divorce expert, but I would expect that unless this varied significantly then it would be a win/lose situation depending on the markets or your willingness to challenge this, but I’m happy for someone to correct me here). For the mortgage I would take the a value and not worry overly about any short term movements unless there is another 'crash' of global markets (assuming he is suitably diversified).

LostandLonley Mon 26-Nov-12 12:34:21

I am trying to work out my husbands pension pot but find it all very confusing as linked to shares etc, he is only 9 years away from retirement and has been with the same company for 30 years .I would like to offset this against the house as i want to remain in the marital home. Who can i give this information to ? That way I might have an idea of how much mortgage to raise if any.

CogitoErgoSometimes Fri 23-Nov-12 07:54:22

I find the 'This Is Money' site has some useful information. MoneySavingExpert.com ditto. The BBC R4 Money Box programmes often feature pension information... try the 'listen again' function. You could even check out the Alvin Hall website. But if you get a recommendation for a good IFA - and I class 'good' as one that doesn't suggest a financial product more than once but knows when to take no for an answer! - they can really give you specific information related to your circumstances.

nannynick Thu 22-Nov-12 15:43:26

Thanks Cogito. It is time I went to see a IFA again, but is that necessary, are there any good books/websites about this sort of thing?

CogitoErgoSometimes Thu 22-Nov-12 15:38:39

You don't know. This is where advisors are useful. You have to work out what you can afford, what risk you're prepared to take, what your priorities are, and all that's going to change as you go through different phases of life. I'm late forties, for example, and I'm in a position where I have enough spare cash to have a few options in front of me so I'm splitting it between pension, savings, investments etc. 20 years ago it was still a stretch to pay the mortgage with very little left over for anything else. Ten years from now I'll probably be converting as much as possible into cash because I'll be that much closer to retirement and won't want as much risk. That's the kind of judgement call you can only make for yourself but with good advice.

nannynick Thu 22-Nov-12 15:04:26

CogitoErgoSometimes - Yes, gives things like plan value like £9400, yearly pension forecast £660.

The rate of return seems very low but I guess so is the pension pot, it's all relative.

How do you know if it's worth putting money into a pension, or if it's better to have that money available to spend in a time of crisis?

Notmadeofrib Thu 22-Nov-12 12:14:45

if you pay into a pension scheme then in most cases that will only provide a pension for you and possibly your spouse from when you retire until you die. When you die all the "asset" dies with you

Wrong, wrong, wrong! There are many ways that this can be made to be untrue even for annuities, so please do not tell people this. The size of your pot plays a part, but the asset can live on. It is true to say that various options give a greater or lesser degree of flexibility and some have a cost attached to them. It is not a clear cut or as drastic as your statement suggests.

Advice from a well qualified IFA with a special interest in retirement planning is the best thing you can do.

CogitoErgoSometimes Thu 22-Nov-12 10:31:55

@nannynick... have you asked your pension provider for a statement and a forecast?

nannynick Thu 22-Nov-12 09:41:53

Keep nagging payroll about the new government scheme. I work for a very small employer so I don't think I get the government scheme until 2016.

I've had a small personal pension for 12 years and I don't really understand it. I pay in about £50 a month (including the tax bit the government adds) so my pension pot grows slowly.

I try to have a range of assetts, such as being a home owner (well I have a mortgage but in 13 years that will be paid off if things don't change), Have Cash ISA, some premium bonds, some small investments in fixed term corporate bonds. I have not dabbled in the stock market, though perhaps I should by having a stocks/shares ISA.

I feel that money going to a pension is lost - you can't withdraw it in a time of crisis. So I like having money I can get hold of but interest rates are terrible at the moment. Hard to know what to do.

Are you already filling your Cash ISA each year? If not, I would do that first, then do pension (if your employer adds some contribution).

Seeing an IFA may help but pay them for their time so you don't feel you have to take their advice and any products suggested.

CogitoErgoSometimes Thu 22-Nov-12 09:03:28

I think it helps to separate the planning between the things that provide an income and those that are a realisable asset. You could, for example, go heavily on investments and rely on dividends as your regular income.... would have been a risky strategy if you'd retired in the last few years. You could build up a fund of bonds and other cash deposits and live off the interest... also would have come unstuck in the last few years. You could buy properties and use the rental as your regular income... neatly combines realisable assets with income but there are set-up and ongoing costs. A pension pot traditionally buys an annuity which provides a guaranteed income but which dies when you do. There are others, of course. They've all got pros and cons

Keep nagging payroll.

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