Planning for retirement
You're a busy parent. You've got a million things to do in the here and now, and retirement seems an exhaustingly long way off. What's more, as a family you're cash-strapped, so where on earth are you going to find the extra money to stick in a pension fund?
We share your pain, but there are compelling reasons to get your pension provision sorted out sooner rather than later, namely:
- We're all living longer, so if we want a comfortable life in our later years and to avoid becoming a burden on our children, making sure we can manage financially when we're older is paramount.
- The pension age is increasing, for women as well as for men, so that by 2020 both sexes will be expected to work until they're 66 - and the government is already considering plans to up that again, to 68.
- Increasing numbers of us are ending up divorced from our partners, and that has huge repercussions for our finances in our later years.
If we don't plan for retirement when our children are young, then by the time we do start to think about it (and the panic often sets in around the time our children are leaving home, by which time we're in our mid-50s) it's too late to do much about it.
Save what you can
Pensions are just another way of saving - but in this case, the savings are earmarked for when you're older and have stopped working.
There are different ways of saving for later life, and you don't have to follow a conventional route and pay into a pension (although that's often the best way to do it because you get tax relief on your contributions).
Other ways to save include ISAs, shares and a property you've invested in and will sell when you're older.
If you do decide to go for a pension, there are three main types:
- Company pension - this is organised through the company you work for, and often (though not always) the company makes a contribution in addition to what you pay in.
- Personal pensions and stakeholder pensions - these are for people who don't have access to a company pension. You pay in an amount each month to a pension provider, and the funds are invested on your behalf. Stakeholder pensions are the simplest version, and you don't have to be working to have one.
- Self Invested Personal Pension - these are personal pensions where you have more control over where the money is invested.
If you decide to take a career break while your children are very young, chances are you'll be tempted not to pay into your pension during this time. But do reconsider: if you have any spare cash at all, it's a very, very good investment for the long term.
The Pensions Advisory Service has information about your pension during paid and unpaid maternity leave (it'll make a change from thinking about birth plans and maternity bras).
And if you're panicking about your pension - or lack of - then discuss your options on Mumsnet Talk: it's no substitute for expert financial advice, but it's a dead cert for fresh perspectives and common sense.
Disclaimer: Any content in our family money section is intended as general information only. For specific advice about your personal financial situation, get advice from qualified, independent, regulated professionals.