To worry about the future..(no pensions)

[LalaLeona]

Can anyone give me advice. I am 40 and due to inheritance I own my own home outright. However I have no pensions coming to me apart from my state one which I'll get at 68 (if they still exist by then). My dh is 50 and self employed and also has no pension apart from state. We already know we have made bad decisions in life but what would you do in our position? Sometimes I lie awake at night worrying about things. We could sell our house and move somewhere cheaper but we have young children and are scared to lose our support network. Of course this may be our only option. Would you start a private pension in our position or is it too late and are we better off saving?

I'm no legal expert but, if you start a pension, even now, you will benefit from tax relief is for ever £1you save you will get, er I can't remember, 25p (depends on tax rate you pay).

Now you might end up taking that as cash but it will be more than just saving. Just make sure you don't need the money.

Have a look at NEST, that's the government scheme, it is easy to understand and you can see your pension pot grow.

Thanks I just feel so stupid for not sorting this earlier for background me and dh are from very poor backgrounds and have gone through life quite undeducated about money. Not making excuses but that's the way it is.

No problem, I have been lucky in that from 21 I had jobs with pension schemes. BTW you can now start a pension for children, maybe something to think about for yours, you could do a very small amount, £10 a year to start.

It’s all relevant though. I will have a pension but won’t own my home until I’m 65. You are 40 and mortgage free. Have you any savings? The money you save on a mortgage could be put into a pension? Not an expert but I’m thinking you might be able to put double the amount away?

I think you either need to start pensions and chuck serious money into them, I mean a lot every month, as you’re only starting now at age 40 and 50

Or, why not wait until the children are older and independent and then sell up and downsize, maybe moving to a cheaper area too? You won’t need schools and the same local support network by then.

At least you’ve recognised this as a problem- many people bury their head in the sand and then get a huge shock when they’re at the stage of really not being able to carry on working. You’re also right that the state pension is so rubbish and you won’t get it til you’re nearly 70 and who wants to still need to work by then?

You’re lucky having the house but it’s living that costs... council tax, utilities, food, and of course just enjoying life.

You are in a fortunate position in that you owe your home outright.
Start a pension now, you can do a lot in 25 years.
Look at MOneysavingexpert and talk to your company HR department about workplace pensions

You've got it the other way round to most I would say in terms of being mortgage free. In your shoes I would throw serious money into pensions as of now.

DH's pension is poor and mine is good (public sector). We won't be mortgage free until I am 48 if our borrowing stays the same and we don't overpay.

Sort out a bit of your pension now. Then consider equity release.

I think you should get some proper advice on what is the best course of action. Pensions have the benefits of tax relief and with the new options you are not forced into a paultry annuity anymore. However, you could look at other investments to build up an income in retirement but this is where IFA advice might be worthwhile to guide you to the most sensible decision.

Just start saving for your pension now you've got 28 years to save and no mortgage. You actually have lots of options. Stop worrying and start taking action.

Without wanting to highjack the thread, does anyone know what happens if you only get state pension? Do you just claim benefits aswell?

Don't worry OP... The good thing is now you've realised, you can act!
I believe the general rule of thumb is if you want to continue your standard of life into retirement then

You take the age you started your pension (40)
Halve it (20)
This is the percentage of your gross income you should be saving every month into a pension (20%)

Let's say you earn £25 per year gross. Then you should aim to put £5000 per year into a pension (20% of 25k = 5k)

Same with your husband. I don't know your money situation but as you won't be paying a mortgage hopefully this should not be too difficult. But the sooner you start the better. Speak with an independent financial advisor. I'm self employed as this is one of the first things I did.

Max out your pension starting tomorrow. Put whatever you can afford into two pensions every month. You’ll stop noticing it going out and live within whatever you have left.

You will feel better psychologically from the day you do this. You will have a more secure future and then you can also downsize if needs be when you’re older for additional capital.

Unless you are in a £3m house, downsizibg alone will Not give you enough money for 2 people for potentially 30 yrs to live on!

Your outgoings must be small with no mortgage so just start saving. You could put away a nice amount over the next 30 years. Definitely no reason to panic. You could always buy a smaller property once you retire and the kids have moved out. Your property will have risen in value and will release a lot of money.

You both need to start pensions now. Use the money you would have been paying into a mortgage into the pensions. You can both put a large chunk in. It might feel quite painful to start with, but you've got to make up a decent size pot for your retirement.

Sorry should clarify my above post.
If you're self employed it's 20% of your gross profit

Why not to look into buying to let? You could get a mortgage to buy a small place in a cheaper area and rent it out. By the time you are retired you will basically have two properties to fund your retirement. That’s our plan anyway - we live abroad and my husband will not have any pension whatsoever (and he is almost 50 too) and we are still paying mortgage for our home we bought in the country where we live. I also wake up at night feeling anxious about the future

You've got 28 years before you retire to build up a pension, if it were me I'd be throwing all the money I could at it. Pension contributions are tax free so that helps.

You take the age you started your pension (40)
Halve it (20)
This is the percentage of your gross income you should be saving every month into a pension (20%)

I was going to post this earlier - except that I think you have this rule of thumb wrong, there is no halving it. If you start at 40, you need to contribute 40%.

A quick google and I have come across the idea that you should save half your age, but it's half your age at the time of the contribution, and assuming you've been contributing your whole life.

He added that as a general rule of thumb an individual should be saving half of their age as a percentage of income. So for instance a 40-year-old should be saving 20% of their salary into a pension, and a 20-year-old should save 10%.

citywire.co.uk/money/are-you-paying-half-your-age-into-your-pension/a751045

I think my rule is more applicable to her situation.

@firesuit
Oh right! I thought it was the age you started.
Might have to start upping my contributions then!

Thank you so much everyone for your advice there are some really good ideas here. You are all right we need to stop worrying and take action. First things first i will make an appointment with an IFA on Monday. Trying to plan ahead for once in my life, really need to change my mindset. As the children of hippies we genuinely were told never to worry about the future and that things would somehow work themselves out. We've put money in trust funds for our kids so that is one thing we've done right so we can afford university fees for them. Do not want to keep burying our heads in the sand about getting older though so thank you again every body.

So there are two different rules, one for someone who contributes all their life, which assumes you contribute increasing percentages as you get older. Presumably this is to take into account that pay rises, children leave home and mortgages are paid off, so you can contribute more when you're older.

The other rule assumes a flat rate, and shows the value of compounding, as the older you are when you start the bigger the flat percentage.

You're in a better position that me. I'm 40. I've only been paying into a pension for 5 years. My dp is self employed and has none. We'll be paying our mortgage off until 65.

I'd suggest your dp sees a financial advisor to find out which private pension scheme would work for him. Do you work? If you do, you're entitled to work place pension. Then find out if you can top it up.

You can also look into equity release when you're older.

So glad to have found this thread. In recent years I took a lower paid local job to accommodate school run and have next to no money to put into pension. Joined the workplace pension as auto enrolment and I only realised today how much money is going in. Better than I thought but I do worry about only having 27 years to pay into it. I had a flat which I let but had to sell it to buy my quite basic family home. I was also the breadwinner but now earn the same as my partner but still have the same expenses. Argh!!!

No harm in looking for a private pension now. If you get to retirement age and don't have very good state pensions you will just get topped up by pension credit anyway.