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to be worried sick about pensions at only 33 and to ask if there are any MN who know about stuff like this?

(33 Posts)
MoomieAndFreddie Thu 01-Nov-12 16:08:47

or can anyone point me in the right direction as to where to get this kind of info.

i am 33 and have no pension, i worked FT from 18 to 26 but gave up work when i had my DCs at 26 and 29. i am mostly a SAHM but have started up a very small business, which isn't making any much of a profit as yet. mainly cos i work when i feel like it tbh blush is that really bad of me? I just love being with the DC and generally having a slower pace of life than i had when i was working.

DH earns enough so i don't really need to work (we are in the midlands so cost of housing etc fairly affordable). we actually have a pretty comfortable life tbh. he has a company pension but that won't pay out much, about £70 a week or something?

I have been thinking of paying into a private pension but what I want to know is what happens when I reach retirement age, how does it work? is whatever I have earned through a private pension deducted from my state pension? for example if my theoretical private pension paid out £50 a week, and the state pension was, say £100 a week, would I get £150 a week, or would I be means tested because of my private pension and only come out with £100? and do you get housing benefit or do you have to pay your rent out of the pension? because surely most peoples rent is higher than anything theyd get from a pension anyway?

if that makes sense?? and have no idea of the actual figures so the figures i have given are just for the sake of discussion blush

and people are saying there may be NO state pension in a few years anyway so what will happen to the people who haven't got private pensions? will they just be left with nothing? confused

sorry for rambling thread...as you can see i don't understand this kind of stuff at all, but have been stressing about it, so hope someone can make this a bit clearer for me.

CogitoErgoSparklers Thu 01-Nov-12 16:21:27

This might be better on the money board. What you're talking about is 'retirement planning' and that can take many forms. You could choose to save in the form of a pension, cash deposits (cash ISAs), bonds, stock market investments or assets such as property. Lots of options.

First thing to say is that no-one has plans to phase out the state pension in the foreseeable future but the age at which we can draw it may well increase. Any income you get from a private pension (or investments or interest on savings) when you retire is added to your state pension and, if the total takes you over the personal allowance, you pay tax on it same as everyone else. If your total income from private and state pensions is below a certain threshold you would potentially qualify for pension credits, housing benefit or whatever is applicable at the time.

If you want to find out more about retirement planning it is worth talking to an Independent Financial Advisor.

mumblechum1 Thu 01-Nov-12 16:23:12

This is one of those things I think about at 3 am occasionally, the rest of the time I stick my hands over my eyes and sing lalala

CogitoErgoSparklers Thu 01-Nov-12 16:27:37

Should add that the state pension is not means-tested. The amount awarded depends on the NI contributions (or equivalent) you have made during your working life. Any additional income you earn in retirement, whether from investments, a pension, paid employment, dividends or whatever doesn't affect it.

I worried sick about it all the time, so you aren't unreasonable in thinking about it.

But no, your private pension is on top of the state pension. And so are any company pensions you might get if you ever return to the workplace.

x2boys Thu 01-Nov-12 16:34:47

if your husband earns enough to keep you all are you sure his pensdion wont be considerabley bigger i work for nhs and have always paid into a pension,my husband works for a warehouse and does nt [ i think they are bringing in rules where every employee has to have a company pension] but even if my husband never pays intio a pension theoretically we will be fine i will get a large lump sum and about half of what i take home /month that i do now however our outgoings would be considerably lower by then no mortgage, loans kids grown up

And I know what happens if there are no state pensions. (And I doubt there will be any left when we get to retirement age). Many countries don't have much provision for the elderly. You live with your children and they support you. And god bless you if you don't have children sad.

CogitoErgoSparklers Thu 01-Nov-12 16:41:00

State Pension Gov.UK

If you follow this link there's a lot of information about state pensions including how to get a pension statement advising how much you're likely to get. The current maximum for an individual state pension with full contributions is £107.45/week. So if you tot up what that would mean for you as a couple and add on the £70/week company pension.... bearing in mind that your outgoings will be less when you retire.... how does that sound as an income or could it be a struggle? If the latter that's the time to talk to an IFA about your options for making retirement more comfortable.

33 means you have another 35 years before you retire. Every £1 you save now will attract 35 years of interest. Well worth thinking about it.

ChessieFL Thu 01-Nov-12 16:44:44

You really do need to speak to an independant financial advisor about the best thing for you.

State pensions are not means tested, so any private pensions you have are paid on top of the state pension.

However as others have said, private pensions are taken into account when looking at other means-tested benefits such as pension credit. If you're only going to have a small private pension, it might end up being equivalent to what you would get in benefits anyway. BUT - that's on current rules and who knows what may or may not be available in 30-odd years time.

I don't know much about housing benefit but I assum it's means-tested so any income you have, including state and private pensions, will be taken into account when assessing if you qualify for housing benefit.

My personal advice, for what it's worth, would be to save what you can because you just don't know what will be available from the state when you retire.

agnesf Thu 01-Nov-12 16:48:38

I would recommend going to see an Independent Financial Advisor. They can explain all of this stuff to you and the one we see - advice is free - she earns her money from commissions on any investments/ pension contributions that we make through her. There are other ones that you can pay for but have never been down that route. Our IFA is lovely friendly and I don't feel we have been sold unnecessary stuff. She sees me and my husband so can make recommedations based on both of our situations.

Do not talk to a financial advisor provided by your bank as in my experience they are only interested in selling you the bank's products.

You could also read this book:

Which Guide

I haven't read it but I always find Which stuff really clear and easy to understand so it could be a good place to start.

ChessieFL Thu 01-Nov-12 16:51:08

agnesf - a financial advisor provided by a bank is only able to sell that bank's products!! They are not able to offer anything else to you. Only a genuinely independant financial advisor who is not linked to a bank/building society/insurance company will have access to the full market.

TalkinPeace2 Thu 01-Nov-12 16:54:22

)))))))Pensions((((((((((
And I say that as an accountant.
Anything that is defined contribution (ie not based on your final salary) is going to turn into a financial time bomb within ten years.

OP
Start saving for your old age.

ISA - yours, your husband's, your kids : full allowance, every year

Savings accounts : put as much as you can tax free into your children's savings accounts (think of it as their house deposits now) - the limit is that they must not earn more than £100 in interest on normal savings in a year.

Savings accounts : make sure that you and DH swap accounts around so that any savings you do have are taxed at the lowest legal rate

Other investments : tangible things you clearly understand - I like woodland and its coppice rights

Only once you have done all that do you start handing fees to sharks in suits for a pension fund
and ignore the hoo hah about the tax break. Unless you are in the 40% tax band, the fees they take will be greater than the tax break
(my endowment fund took fees of 3% out every year even when the fund fell in value ... by half)

CogitoErgoSparklers Thu 01-Nov-12 16:55:23

Didn't agnesf say 'do not'... referring to bank advisors? confused

ChessieFL Thu 01-Nov-12 16:57:32

Cogito - Agnes said that they are 'only interested' in selling their own products. I was just pointing out that that's all they can do, it's not just that they're not interested in other products which was implied by what Agnes said. Just trying to clarify!!

TalkinPeace2 Thu 01-Nov-12 17:02:37

NB IFAs will very rarely suggest that you do the simple stuff listed in my post - as they make no fees from it ....

CogitoErgoSparklers Thu 01-Nov-12 17:16:31

Then again... there have been plenty of 'financial time bombs' in any 10 year period over the last 35 years - which is the length of time the OP is talking about. I saw my own investments and pension decimated in 2008 but they have largely recovered now. They may go tits up and back again a couple more times before I retire. No-one can predict what will happen financially in the next 35 years. Your Cash ISA recommendation however - with respect - will definitely lose money short-term because the interest earned is currently below inflation.

The important thing is to diversify - not have all your eggs in one basket - have some cash, property, investments and other things to take forward into retirement so that, if one fails, the others might pick up the slack.

TalkinPeace2 Thu 01-Nov-12 17:21:50

I'm getting 3.05 on my cash ISAs - inflation is 2.2
then go for shares ISAs if you have the funds
but SPREAD BET

bigkidsdidit Thu 01-Nov-12 17:40:53

Having seen my mother left without a pension (SAHM whose husband left) I would say start saving now and make sure it is in your own name!

DH and I both snuck onto final salary schemes do we are lucky, but after my mother's experience I would never be without retirement savings in my own name.

Also you need to check how muh of your husband's pension you will get of he dies first. It may not be very much at all.

Still, good news is 33 is still young enough to sort it out smile

Plumpcious Thu 01-Nov-12 17:59:48

This is a government website (albeit for Northern Ireland) that has a lot of information about all types of pensions (state; company; personal & stakeholder): www.nidirect.gov.uk/beginners-guide-to-pensions

And Which? has some online guidance: www.which.co.uk/money/retirement/

The usual advice is to build up some savings first (as a cushion for emergencies/unforseen expenditure) - I think the equivalent of 3 months salary is usually suggested.

Then think about longer-term savings. Advice often refers to a 'risk pyramid' with safer options at the bottom (quite safe but not a lot of growth), then moving up with riskier options but which give greater returns (or at least used to before the global downturn). Depending on your attitude to risk, good advice is to build up more money in the bottom of the pyramid (the safer options) and less in the higher, more risky options.

Cash deposits (ie savings accounts with banks and building societies) are safe but interest rates are low so your money doesn't grow much.

More risky are investments which cover things like shares, property, bonds etc. Rather then buy them individually (which is high risk - the company might go bust and you could lose all your investment) you can pay into schemes run by companies that pool your money with other people's and invest in a broad range of shares/property/etc. But with these you pay a management charge on the amount you invest (up to 5%) plus an annual charge (around 1%), and because they're investments your money is at risk of going down as well as up. You can cash in investments at any time and don't have to wait until retirement.

While you're not in employment then a company pension won't be available to you. There are however personal pensions (of which 'stakeholders' are a relatively recent type) that let you pay in money (not from a salary) but they are the same type of investments I outlined above, where you pay annual charges and are at risk of the value going down. But there is a tax benefit in that the money you put in is added to by the Government, depending on what rate of income tax you would be paying. But, with a pension product, the money is only released when you reach retirement age and you have to buy an 'annuity' with it. An annuity is where you hand over a large amount of money to a financial company in return for them paying you an amount every month (ie your pension) for the rest of your life. Annuity rates aren't good at the moment, for example paying £100,000 could buy you a pension of £6,000 per year.

As someone suggested above, ask for a State Pension Forecast, because that will tell you how much State Pension you are likely to receive at retirement age. The amount depends on how many 'qualifying years' you've paid in. If you haven't paid enough to get the full amount, you can consider making voluntary contributions while you're not working. There seem to be credits you can claim if you've been caring for a dependent child under 12 but I don't know anything about them.

Try to read explanatory information from independent sources, eg the links I put at the top. And remember: if you do decide to invest in a financial product (unit trust, pension scheme etc) get advice from an INDEPENDENT financial adviser. They get commission from the products they sell but because they are independent they look at a wide range of products on offer, whereas someone employed by a particular company (eg your bank) can only sell you that company's products and they're not going to tell you if someone else's product is better than theirs.

The widows pension entitlement from your DH policy is a very good point. My company policy is simply a lump sum to the widow. There isn't any pension at all!

That's death in service though and we are defined contribution. I assume defined benefit ones are better. Not sure what annuity pays to widows. And besides that will be 30 years from now!

economistextra Thu 01-Nov-12 19:12:12

Oh dear, does this mean I shouldnt be saving money in my works dc scheme? Why is it a timebomb?

Ofc you should still contribute to your company's pension plan as most of them match your contribution or more. For example mine pays 8% of my pretax salary into it. That's free money from my pov.

APipkinOfPepper Thu 01-Nov-12 19:24:51

State pension age isn't means tested, but the age from which you receive it is increasing, see here for more info.

Usually if you pay into a company pension scheme, the company will also put in contributions - so it is usually worth doing so otherwise you won't get that money from them. However, it is often the case that the base level of contributions (both employee and company) are quite low (eg 5% of salary) so if you are worried about pension provision, it may be worth investigating paying additional contributions - particularly if the company will "match" the extra contributions and pay more too.

APipkinOfPepper Thu 01-Nov-12 19:31:14

Also see this website for info on types of pension and getting financial advice: TPAS

BelaLugosisShed Thu 01-Nov-12 19:37:59

You are fine regarding state pension while collecting Child benefit, the problem comes when it stops and you no longer get HRP / NI credits.
I've recently upped my working hours so I now pay NI, I have to pay another 7 years to get full state pension. I haven't got a private pension, I have a very small one from working p/t for the local council that I paid into for just under 10 years but that's it.
Thankfully DH has a very good index linked military pension that he will get in 13 years time at age 60 and he has 4 other pensions from old jobs.
It's frightening to think that you need a pension pot of £100k for just over £100 a week.
When the mortgage is paid off (10 years and counting) we'll put the equivalent payments into ISAs so we will have decent savings when we retire, I think it's mistake to have everything in a pension, you can't guarantee living until retirement age, MIL died in the same year she retired and her pension died with her.

MoomieAndFreddie Sat 03-Nov-12 09:11:31

Oh look MN have moved this into Money Matters hmm i was wondering why i hadn't had many replies

ffs i put it in aibu for more traffic

god they fook me off, big brother is watching you.

But thanks for those who have replied, i actualy feel better about it now, its not as bad as i feared. But think i may have to get An Actual Job at some point. wink

Carmen17 Wed 07-Nov-12 10:18:20

Hi there, I'm a bit late to this thread but I work in this industry so just wanted to add a couple of things. Firstly, if you think you will still be renting when you come to retirement age then I would definitely start thinking about paying into a pension now because that suggests that your biggest outgoings will still be similar to what they are now and therefore you will need some money coming in to pay the rent. A lot of people think that they won't need a big pension because they will have paid off any mortgages by then so won't need so much money coming in.

I would definitely recommend talking to an IFA though and the best place to find one is at www.unbiased.co.uk. As another poster said they are often free because they get commission from the products they recommend (although they still have to give independent advice). If or when your company starts making a profit, It might be possible for you to set up a company pension scheme then you could potentially get tax relief on any contributions you pay into the scheme before paying yourself a salary.

Realistically if you do get a job, unless you start working in the public sector, you are probably only likely to get offered a defined contribution scheme which means that if the investments you choose in the scheme don't pay out very good returns, the pot that you have available to buy a pension when you come to retire might be smaller than you would like. However, if the investments you choose do really well, you could also get a much bigger pot. And again another poster pointed out that in most cases your company will contribute to your pension pot too so it is almost always better to have a company pension if it is on offer rather than just setting up your own personal pension.

Hope that helps a bit!

CogitoErgoSometimes Wed 07-Nov-12 10:43:29

"ffs i put it in aibu for more traffic"

You said 'can anyone point me in the right direction for more info'....

Gloriousconfusion Thu 08-Nov-12 00:56:24

All these investments are very worthy, and probably necessary, but do bear in mind that as the value of money goes down every year with inflation, many investments end up being worth less at the time you realize them (i.e. cash them in) than you would expect. For instance, the buying power of £10,000 today would probably be substantially more now than £10,000 in 20 years' time. So your investment needs to keep pace with inflation of, say, 3% a year, and if it makes less than 3% a year, it would actually be losing value, not just staying level with today's values. If inflation rises, the real value becomes less every year.

So it is probably worth putting some of your savings into things which are likely to increase substantially in price over the years and keep up with or surpass
inflation. For instance a house which was worth £1 million ten years ago would probably be worth double that today, and whereas houses of that value were rare then, they are now relatively common-place.

You might therefore like to consider buying some collectable items as an investment. You would also get some pleasure out of owning a work of art or beautiful art nouveau ornament. But you would need to do your homework first to make sure you are not buying a pig-in-a-poke.

youngermother1 Thu 08-Nov-12 01:56:02

From 1 jan, IFA's are not able to offer 'free' advice and benefit from the huge amount taken from your inappropriate investment. they will have to charge fees and really not worth it unless you have over £100k to invest and know nothing.

Investments/savings come in three sorts:

1. savings in a bank account - get interest (rates low at present) Can be tax free up to a certain amount in an ISA. These are likely to keep pace with inflation but have a guarantee from the govt (up to c£60k) if the bank goes bust.

2. Shares - either directly or in a OEIC (basically a lot of people give money to an investment professional who invests directly in shares - you get the advantage of his/her 'skills' and a mix of shares it would be uneconomic to invest in directly yourself). These charge fees but should, over the 30 years, give a better return than savings in 1

3. Anything else

A personal pension is option 2 above. the benefit is you get tax relief on the contributions, but you cannot access till a certain age and you are forced to buy an annuity (a fixed guaranteed sum per year rather than access to the capital). Currently £100k of capital will get you c.£5k per year pension

The basic rules are (for anyone earning less than £50k or less than £20k a year in savings), as mentioned by some people up thread:

1. If offered defined benefit pension grab with both hands and don't let go - worth at least 25% of salary
2. Contribute in defined contribution to the extent employer matches or betters contribution (additional salary)
3. if not in 1 or 2 then used ISA allowance - go cash until you have 3 months (joint) salary, then stocks and shares - use low cost trackers as best value
4. Once you have filled 3, can give to kids and their interest is tax free up to £100 pa - however this is their money, so you will lose it when they are 18 - not really savings, but useful if you intend to give them money anyway.
5. If 4 complete or not suitable, then general stocks and share investments - the additional tax cost is, IMO, worth the additional flexibilty of not having the pension restrictions.

option 2 could be 4% of salary, whilst ISA allows £11k a year per person (£5k in cash)

If you are saving in excess of £22k per couple per year, then you need more advice - worth paying for good stuff - choose a chartered account specialist rather than IFA.

IMO anything else (art, property, wine etc) only do if you are knowledgeable about that area - if not you will lose money

Notmadeofrib Thu 08-Nov-12 19:19:51

choose a chartered account specialist rather than IFA

Do you mean a chartered accountant? confused because you meet very few that can advise on financial products (not least because they can't legally advise and implement unless they take relevant qualifications). I'd never take advice from someone not qualified to implement their advice as frankly they are offering little more than opinion.

OR did you mean a Chartered Financial Planner... someone that has a degree level qualification in personal finance and investment. .. I know which I'd choose!

GrahamW Tue 13-Nov-12 15:07:47

There are most pension questions within all these messages, unbiased.co.uk will give you independant financial advisers within your area, and www.ethicalinvestment.co.uk, will give you independant adviser that focus on green and ethical investments in your area. Any adviser called "independant" after 31st December 2012, will offer a fee to arrange a pension. typically the fee will be around £500 to set up. The adviser will be able to answer all the questions above and also make sure the pension fits your situation.

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