Old age money, help!

[Salsi]

I’m 50, just started a new job. Finally, we have some financial security. But I’m anxious about the future and old age poverty. AIBU?

For context, have spent past 15 years of freelancing, while the kids were little. Over this time, almost no spare cash, but I am a careful saver, so I tucked some away in isas, over the past 25 years. My former boss (25-15 years ago, when I was last in non self-employed employment) explicitly told me not to bother with a pension, but to to save in isas, which I did. Saved about £50k.

But I’ve had to draw down those isas during covid, and up to now (husbands business not recovered yet) so I only have about 10k saved now. (Btw, Am now wondering if former boss was simply fobbing me off - he’s a small business owner who wasn’t liable to support employees pensions…)

Anyway, long and short: I have no pension provision, and nor does my 53 yo self-employed husband. Our combined income has been very low, esp during covid (£18k joint during past couple of years) but now I’m getting roughly 45k/ year. He’s maybe on £40k/year, but it’s hard to tell, it goes up and down, depending on the jobs he secures.

obvs I’ve signed up to the work pension. But I’m so confused.

my husband has his head in the sand. He hates communicating about money, like it’s a slur on his soul (his work is a vocation). He thinks he’ll work until 70 (quite likes his work!) but what the heck do we do?

It was grim living on £18k (ie our joint earning in covid, which is equivalent two state pensions), hence we drew down my isas by about £20k per year during that period. We are in London. We have a house, with £250 k left on mortgage. But no assets otherwise. AIBU to be very worried? Any advice? Where do we start? What have you done? How do I learn more about investing? I’ve maxed out the work pension, but can I put even more away? If so, how? I can do some extra work on the side, c. £5-10k per year, which I’m thinking I should invest!

Will you be entitled to a full state pension? Have you each got 35 years of contributions? That would be my first place to look as you can buy extra years.

Have you checked your contributions to your state pension? You can check this online

When will you pay your mortgage off? Without your monthly mortgage payment is £18k more manageable?

In your position I would start making either some AVC's (check if your employer's scheme gives the ability to do this) or start an additional SIPP.

In your situation, I'd do three things.

First, go on the govt pensions website and check you both have your 35 years NI paid. This will give you a full state pension. You will need your NI numbers to check. If either of you are behind, you can 'purchase missing years'.

Second, keep a couple of thousand in an ISA for unexpected emergencies.

Third, pay off your mortgage as fast as possible. With interest rates as they are, a mortgage is very hard to pay after retirement.

You've signed up for your company pension which is great because your employer will contribute as well, and you'll get your tax rebate.

So helpful, thank you all! Question, if I bust a gut and do the extra work, it may (will) take my earning to over £50k and I will lose child benefit. I can’t afford this. If I put the extra money in a pension, does that mean I can keep the child benefit?

I’d rather not work myself to the bone, ie all weekend, just to lose this money, I’d wonder why I bothered, or I’d rather not do quite so much extra work, if that makes sense. the extra work is freelance job-by-job basis, so it’s up to me how much I take. It could generate up to £10k per year. Thanks again!

Child benefit isn’t ‘lost’ at 50k and your income is adjusted for pension contributions so it’s worth increasing earnings if you can.

If your income went above 50k you could increase your pension contributions to keep under the threshold for child benefit.

Thanks both. Since this extra work is freelance work, I assume I’d need to take out a second pension? Briefly, before I had kids, I spent about a year with a pension, so I do have another one. Would I start paying the extra money into that? Or do people combine all pensions?

Paying off the mortgage is also incredibly hard, we have been on an interest only mortgage since the start (bought when these were widely available!). But I’m going to start funnelling into that, to pay it off over next 15-odd years.

may I double check, Does the IR adjust it then? Percentage reduction etc? I thought I had to write to declare higher income and then I’d lose it all.

OP, sorry for the tangent, but when does your fixed rate end on your mortgage? Because that will potentially have a big impact if you need to remortgage with rates up at 4%+ like they are at the moment.

Have you considered/would it be possible to sell up and relocate somewhere (near decent schools obvously) where you can be mortgage free?

Just a thought. We have a property where the fixed rate ends towards end of next year and if rates are still high at that point then we might well sell it and re-invest the equity rather than take the monthly hit on an increased mortgage!

My thought process is that if you could do this, in theory, then you'd be able to build up the pension/savings pot much quicker without the mortgage payment going out each month... Best of luck!

hi @WoolyMammoth55 . We (I)have to renew the interest-only mortgage every two years, so we have another year on this rate. But it’s been like that from the start (costs about 1k to renew each time; but it makes it affordable - only about £450 / month). I’m always in charge of the renewals and have got good rates up to now. Husband has zero financial planning.

However, the whole £240 k (remaining) needs to be paid off over the next 12 years (the remaining life of the mortgage).

I honestly think my husband’s only old-age planning is selling the house (which I bought with my own funds, and with inheritance from my parents, but we are both on the mortgage, and happily married, no plans to divorce!).

At this rate, I think selling is the only option, and we will have to move out of London! House is now worth maybe £850k. It’s nothing madly fancy, it’s a terraced 2-bed house, an average road, but it’s just that it’s in London. This was all very abstract previously, and I had no capacity to pay anything further (wfh mum), but now I’m in work, I want things to be better, but the reality is hitting me that I’ll have to move out of our home, leave London and all our friends, if we don’t sort things out. i know we are so lucky to even have a house, we’d be completely stuffed without!

relocating atm doesn’t seem like a good idea? given our monthly interest only rates are so very low… I doubt we’d get another interest only mortgage. Even with higher internet rates, I expect we can keep the internet only mortgage costs to under £800 per month. Plus, would like to stay while kids finish their secondary school careers (six more years).

Save like mad, either through pensions. ISAs or paying off your mortgage. The "best" option will depend on your wider financial circumstances.

Do you have life insurance?

Get your husband to face reality. If his business isn't going to recover he needs a job that pays the bills and enables him to save for retirement.

Sounds like your retirement plan will mainly be selling up and moving to a cheaper part of the country.

Check out Money Saving Expert forums ‘mortgage free wannabe’ is brilliant, and they will help you to cut your costs and maximise pension contributions and mortgage overpayments.

And consider lodgers for extra income at some point in the future.

Get started today with overhauling your expenditure and get on with saving for your future

Save like mad to pay the mortgage off. Live like you are on a much lower income than you are. That is what we are doing on a similar income and with an interest only mortgage.

Currently your only option would be to sell up and live somewhere cheaper in a similar house. An £850k house would buy a £500k house at current prices in some areas near London so your friends would still be near.

And breathe! you've got £600k equity in your current home. If you move somewhere cheaper you could have several hundred thousand to access. Secondly, if you both have full pension entitlement that will be about £20k pa between you, and you won't be supporting kids on that money. You also have 15+ years to build a bit more into pensions.

Speak to a financial adviser with good pension credentials to get a real understanding of your options, including making sure you have made sufficient NI contributions to access that full pension.

Are you in a position to let out a room of two and save the rent to help pay extra on mortgage.

Breathing, thanks for the reminder 🙂. Would like to let out a room, when kids have left (only a two bed, the other room is taken). But my husband says he wouldn’t want to (& I can see it would be intrusive).

My husband also refuses to change his job, his vocation, and refuses to work for anyone else. It’s very annoying. Particularly since I HAVE changed my job (vocation also) so that I can generate more money. He also spends (wait for it, min cliche) time on his ‘hobby’ too (loads of time researching and writing about interests for a local website - it’s great what he does, but I feel like he’s not taking our own future seriously; but he has delicate mental health at times, so I feel like I can’t criticise). He hasn’t got a pension, done nothing to start one (I’ve sent him several links, eg money helper expert, not sure he’s even looked at them). He also gets into debt. Doesn’t ever save enough to pay for his tax, and so on. his fathers contribution: sell the house (that I bought). And my husband has bought into this.

I saw a financial advisor pre kids. I think I need to see one again…

Your husband is a massive problem and has the potential to drag you into poverty!

What is his problem with acting like an adult over money?

@paq Just had a big conversation with him. He says he was brought up not to talk about money. Says I get cross when we do. I get frustrated by his lack of planning and forward thinking. He reminded me that he’s borne the brunt of all bills over the past 12 years , which is true. Also that brexit and covid really impacted his industry, also true. Has said he will now explore pensions, and how to generate more work. Truth is, he absolutely won’t work for anyone else, and I find it challenging — the insecurity of self employment /not knowing where the next job will be. I will say he’s immature with his saving ability - as soon as he has money, he spends it. This is a lovely, generous way of living in the moment, but look where it’s got us. I don’t know, maybe I’m catastrophising. We do have a house. And as he also
pointed out, We may (probably will) inherit a bit if we outlive our parents and they don’t need the money for care (not that I’m wishing their deaths!!). But that’s sort of the extent of his planning, so far…

This.

And frankly both freelancing and living well above your means for years on end was quite self-indulgent.

You both need to take any work you can get now, weekends included, to make up for lost time. The hobbies will have to wait.

Do you need to be in London daily for work? If not, I’d seriously consider moving outside of the M25 - somewhere accessible by train, so you can commute into London when needed. As others have said, you could buy a house outright for £500-550k, and potentially have £100k in spare change, once you’ve moved. I’d invest this into a private pension, will give your fund a boost.
How old are your DC? Could they realistically move schools and it not impact their education? Assuming they’re not at gcse/alevel exam age…

Savings wise I would definitely start by exploring what you can do in your pension(s) as that is the most tax efficient way to save because of the tax relief you get.
It sounds as though you were not in a registered pension scheme for the last three years before taking this new job (?), in which case you can't make use of the carry forward rules, but you can still make sure you make the maximum contribution possible from now on.
On your current earnings you can put up to £40k a year into your pension and still get the tax relief.
So I would work out how much will be contributed via your company scheme in total over the year and assuming this does not add up to £40k then decide how much extra you would be able to put away, whether this is as additional contributions to your company scheme or into a separate pension.

@DroppedIt i do have a pre-existing pension. Not added to it for about 13 years.

@ZeldaWillTellYourFortune I hear you. Though we haven’t lived beyond our means, or at least I haven’t. I’ve always cut my cloth acc to my income. I am highly qualified in a low paid area. I thinks that’s where things have gone wrong. E.g. (changing role so not outing) started as a music lecturer; then had kids so freelanced as a music teacher, working all hours I could; now full time employed in an allied role (but not a vocation) e.g. think specialist musician lead in an academy where I look after all the musicians, their contracts etc. I tried so hard to find lots of other jobs, but with my weird background, no one would take me. I’m hoping the skills I learn in this job will let me pivot into other roles.

maybe I should never have gone into music, that’s absolutely true. Now we are stuffed. But I’m trying to correct that.

@Salsi - I would then also check out the carry forward rules to see if that's something you can make use of. There is one link here Carry Forward