To start a pension when DH doesn't agree?

[nightowlmostly]

I'm having a dilemma! I am the main earner in our family, my DH is part time and looks after our son. We share our money and have for years, and there's never any problem with that. Neither of us takes the piss, any big purchases get agreed in advance etc.

The trouble is, I'd like to start a pension with my work and he doesn't agree. He feels we should focus on paying off the mortgage and investing in another property. I agree but think we should do both. I'd be receiving about £2K a year from my employer into the pension fund.

We've talked about it loads, and always ended up not doing it as he's convinced me! But now I want to do it, we've done it his way for ten years and I'd feel much better knowing I was saving. He did agree to it but I think he didn't think I'd actually ever get round to it. We talked about it again and he was quite anti.

My AIBU is, would I be out of order to use family money to start a pension fund when he isn't in agreement? It'd be about £150 a month which we could manage without at the moment. He's in no way controlling or anything sinister, it's purely a difference of opinion on the best way to provide for our old age. He doesn't trust the system, which I do understand, but I'd be prepared to take the risk. Help, thanks!

[mamageekchic]

How old are you both? I'm 26 and worry about my pension. I can't see why anyone wouldn't at least pay in enough to get their maximum employer contribution (unless it would mean being unable to pay for essentials), it's additional salary and v tax efficient. FWIW i'm also paying a v small amount into a pension fund for my 23mo DD. State pensions are small and unlikely to be around for all forever, the cost of living is rising and houses are no longer the investments they once were (and think of the interest you'd pay on the mortgage on an 'investment'!)

[TheDoctrineOfSnatch]

Please please please both start a pension. It's the most tax efficient thing you can do.

If you prefer not to use fund providers you can set up a SIPP (self invested pension plan) and pick from a wider range of funds or individual stocks.

Do you have ISAs?

[zwischenzug]

Most pensions only pay half to a,surviving spouse so if you die before you begin to draw your pension he would only get half. The other half just disappears so I understand.

Source? Sorry but that sounds like bollocks to me, I have several pension funds but have never read that anywhere.

[TartinaTiara]

justpaddling, some pensions pay half to a surviving spouse, some pay more than that, some pay less. The sort of pension the OP is talking about is likely to pay the full amount if she dies before her DH, and if she survives to retirement, she gets to decide exactly what proportion of pension goes to her spouse on death.

OP, do the pension. If your employer is matching your contributions, then that's more than a 100% return straight away.

[Inertia]

Both of you should be in your employers' pension schemes.

[scrivette]

Join the fund, it is like turning down a payrise if you don't.

In the event of your death there should be benefits payable to him.

With Auto Enrolment in place you will be opted into your employers pension scheme automatically within the next couple of years anyway.

[whois]

If your employer will make employer contributions it's a total no brainer to pay into a pension - free money! Also compound interest and all that, the sooner you start the more it grows.

I can see the idea of over paying your mortgage is attractive but I still think pension is worthwhile to have.

[WileyRoadRunner]

Most pensions only pay half to a,surviving spouse so if you die before you begin to draw your pension he would only get half. The other half just disappears so I understand.

There is something in this ^ . Sadly my mum passed away at 61 unexpectedly. She had a pension worth a lot but my dad does not benefit from this in totality. It was one of the things that upset her most in the Hospice when she was dying.

[Tethering]

If you set up a SIPP you can use the funds to invest in a commercial property which might keep you both happy.

[chicaguapa]

You can ask what will happen to your pension fund if you die before retirement. There might be a lump sum paid on death too if you're still working for the company.

The general rule of thumb is that you join a company pension scheme before overpaying on the mortgage due to the extra money from the company and the tax efficiency. But overpay on a mortgage before paying into a private pension because there's no extra money from a company.

If you are both working and have access to a company pension scheme, you should pay into it. If you wait until you are automatically enrolled anyway, the company will probably only pay in the minimum 1.5%. But doing it now may will get you into a better scheme where they match what you pay.

But you'll have to get your skates on as the staging dates for auto enrolment are looming.

[BadgersRetreat]

i'm pretty sure my mum only gets half my dad's company pension now he's died.

sounds like you are missing out on free money OP - i'd go for both the pension and property if you can. The more eggs in your basket the better.

[Beaverfeaver]

I'm dead against pensions and would rather be in control and make my own investments.

Me and DH have talked in me goth about pensions and he agrees with me mostly.

However, if he decided he wanted to get a pension through his work one day, I wouldn't stop him or be upset. It would be his choice.

Neither of us see ourselves in our companies for life. We have good jobs but our goals are to start a business and the small amount in a company pension, even if it does do well, wouldn't really touch the sides when you come to needing it.

[nightowlmostly]

Hi again, thanks to everyone for their advice.

So I signed up for it, I put in 3.5% and they put in 7%. It won't amount to a great deal in the end, which is one reason I was put off originally. But as you say, it seems like a good idea because of their contribution.

Can anyone tell me, can you buy an annuity with any lump sum? As in, if we had a property let out and it became too much hassle, could we sell it and buy an annuity with the proceeds? Am a bit clueless about this stuff tbh!

[BlueberryHill]

You should probably talk to an advisor, have a look at SIPPs, I think that you can put a property into one, not sure about the costs of setting it up and ongoing ones.

Disclaimer, I am not a financial advisor or have any experience at all.

BTW agree that you should have a pension, if you have your own property plus a BTL as your pension plan you have no risk diversification in your assets. A lot of older people have been stung with this property crash as they planned to downsize and live on the money released doing so, they either cannot sell as the price they want to or have to accept a lower price and hence less cash.

[frogwatcher1]

I don't understand the tax side of pensions. Surely you don't pay tax paying it in but pay tax when drawing it out - therefore tax wise there is no benefit to a pension?

[prettybird]

If you are paying 40% tax at the moment, but when you draw your pension you are only paying 20%, then at a very simple level (ie not even factoring in your tax free allowances) you are gaining.

With the new (still to be confirmed through parliament?) allowance of £10,000, if your pension was only £10,000 a year (although you'd need more! ), then you'd pay no tax on it.

Plus you don't need to pay NI contributions on a pension.

[badguider]

frog - it's the interest on the money that is tax-free. The only other way to make money tax-free is interest on ISAs and they are strictly limited in value.

return on any other investment (like regular income from property) is taxed every year.... or if you have a captial asset (like a property you sell) by capital gains tax.

[prettybird]

The money that you put into the pension fund is "tax free" - or rather, it comes from your salary before tax is deducted. So if you earn £50,000 and you put £10,000 into your pension scheme, then you are only taxed on £40,000 - and a full £10,000 goes into our pension fund.

Whereas if you want to save money from your salary, that comes from the money that you get after all £50,000 has been taxed. So that £10,000 you wanted to save would now only be £6,000 'cos of the 40% tax rate (I know that's ot strictly true because of tax allowance and NI etc). You could then choose to put that into an ISA, the interest/proceeds of which would be tax free.

[prettybird]

your pension fund - not "our pension fund"

[GreenEggsAndNichts]

yep it'd be foolish not to have a pension. It's all been said here. I'm surprised your DH is so against it, but perhaps he doesn't understand how they work.

You've got time to get a second property, should you wish it. You can't get back the years you spent not investing in a pension, though.

[PixieL]

Sounds like you've made the decisions already, but thought I would link to this anyway as it's a good overview

www.moneysavingexpert.com/savings/discount-pensions

The bit I was looking for when I found this page was the general rule of thumb that you take the age you start paying into a pension and half it. That figure is roughly the % of your income that you should consider puttin into a pension.

Also it's worth bearing in mind for those on higher salaries that a lot of changes to things like child benefit are based on taxable salary, not gross salary. So if you earn £55k but put £6k in a pension then your taxable salary is £49k.

HTH

[chris481]

I assume this is a defined contribution scheme.

In that case he would get the full value if you died, assuming you nominate him to get it. The people who got reduced pensions were probably in defined benefit schemes, which hardly exist outside the public sector any more.

It sounds like there are employer matching contributions, i.e. they will pay in some money if you will. You would probably be insane to not maximise the matching contribution you can get.

I'm also no fan of property investing, I think it is risky, a hassle and likely to have low returns in future. (But I may be biased because I only pay attention to London prices.)

The actual amount you are talking about contributing is quite small though, so my only worry would be if having savings would decreae any benefits you would otherwise get in retirement. In that scenario putting money into your own house looks attractive.

I see you have now signed up, and your employer is putting in twice as much as you - it's a double no-brainer!

[sashh]

I'm under 50 and I receive a pension because ill health forced me out of my job.

I will get far more out that I have ever paid in (v.lucky it was a final salary scheme).

What you pay into a pension you get tax back on top and your NI contributions are reduced.

You should both be paying into pension schemes.

[chris481]

A general comment on tax relief, since there has been some discussion.

Your pension income may fall into a lower tax band than your salary would have, but also you can take a quarter of your pension savings tax free, so even if it doesn't you will still pay less tax. Also if the contribution is by salary sacrifice you will pay less national insurance.

I usually make the assumption that my pension income will be taxed in the basic rate band. (I assume state pension will use up most of personal allowance and I'm not planning to have taxable retirement income of more than 40K) On those assumptions, my pension savings will be taxed on average at 15% (75% of savings taxed at 20% and 25% at 0%) but the tax relief on the salary I've given up will (from memory) be something like 46% for salary in the higher rate band or 38% for salary in the basic rate band. (These percentages include employers NI in both numerator and denominator, as unlike most people I also get employers NI saved by salary sacrifice paid into my pension.)