To ask whether you would choose Miserably poor now or later

[PoorPensionerToBe]

So I’m 48 single mother and last year I was made redundant. Thankfully I have now found another job but now have zero savings. Whilst out of work I lived very very frugally and by Christ it was miserable !
I bit the bullet and worked out how much I would need to live on when I retire and how much extra I need to pay into pension over next 19 years to achieve that assuming a 2% growth rate (apparently this is standard). It was very sobering. Basically I could do it, but would need to watch every penny which isn’t a fun thing to envisage for the next 19 years. This is assuming of course that I stay in employment earning at the same level as I do now. If I get made redundant again I think it will be difficult to get another job paying the same. Also I could die by then. Also the growth rate may be less than 2% or even negative. Being a pensioner in poverty I think would be very miserable so feel I should prepare for it but not sure I can commit to 19 years of penny pinching

what would you do ?

No I wouldn't bank on the legalisation of euthanasia. I just always think that if I'm desperately poor and unhappy with it, rather than being a burden on my four children, I'd have an amazing last year, create some amazing memories....then there'd be an unfortunate accident.
No way will I be sacrificing today for a tomorrow that's uncertain. Life is a gift, every second is to be treasured. And how can you do that if you're worried about a time when you're frail and tired and ready to go anyway.

Curious... could he have refused to draw his private pension and taken the full state pension, and left the investment in his private pension to just accumulate? It would be untaxable as part of his estate to whoever inherited it, and would come out as a single lumps sum.

I didn’t know they made deductions from your pension if you had managed to save money when you worked. Sounds a lot like another reason to spend your life on benefits.

I have long thought about doing that so maybe I will…not confident it would make me money tho but I’d probably enjoy it

Any suggested topics/type of book ?

restless.co.uk/pensions-retirement-planning/state-pension/state-second-pension-and-serps-explained/#:~:text=SERPS%20ran%20from%201978%20until,Second%20State%20Pension%20(S2P).

When I started working in the UK in my first proper job I was opted out. Then it ended within a few years and I was opted back in. It will make no difference to my state pension when I retire.

There’s no pension credit on new state pension

He hasn’t had a loss in his state pension simply because he has a private one.

At some point, he will have opted out of SERPS (available from 1988 to 2002). The “deal” was you lost out on some state pension, but you paid less NI at the time, allowing you to invest in a better performing (potentially) private pension.

OP is 48, born in 1974/75 so is unlikely to have opted out of SERPS for much or possibly any of her pension.

In any case, she’s talking about future pension contributions - and there is no opt out.

Your husband hasn’t his state pension reduced because of his private pension - he chose to give it up for less NI.

I don’t think it’s that easy for young and fit people to engineer an ‘accident’ let alone when you’re old and in ill- health. I think there’s a reasonable chance the tories will legalise it as for them would reduce the pension / disability benefits / nhs / care home costs

Become an expert.

I worked with someone whose dad was retired but an expert in things related to construction. So he was always being paid by the media for his experienced assessment of buildings.

There as I know authors of factual books who make very little money from the books. The money they get is from being an expert in their field and being hire to give talks or solve problems.

@PoorPensionerToBe Ain't that the truth! I'm a skydiver and plan to continue for many years. If I was desperately poor there would just be a malfunction. I'm not planning on becoming old and infirm unless I'm comfortable well off.

I wouldn’t piss your money up a wall now…
But I would definitely prioritise some fun now. Which doesn’t all need money, but in some cases it does.
When you if you retired at 67, your son would be 32, most likely long since flown the nest. Let’s say at 28, that’s 4 years of lodger income. Conservative £300 a month.
That’s £14400 tax free under the rent a room allowance. Nice safety net.
Then continue to make £3600 tax free from a lodger (again, conservative).
You might not like the sound of a lodger, but personally I’d rather have a little more financial freedom now.

Your “tits up” option of euthanasia?
My “tits up” option is equity release.

I’m a big pension planner because I definitely find myself thinking the worst - but I’m still having fun now!

I would be piling extra into a pension once your child hits 18/gets a job or set up a private pension and do the same on medium risk if possible. Your not that far away from that. Also look at money now can you even put away a bit per month (even £20 will add up over the months). Tandem and chase have good rates for instant access.
You have lived frugally so can meet somewhere in the middle going forward and in some ways it will have helped you long term.

My husband had 3 redundancies in the space of 3 years due to industry downturns. I got used to paying all the bills and living tightly so even though its in the past and my salary has risen its still in my mindset. So I now put this aside into savings.

The lodger idea is actually a good one ! I’m assuming given the state of the housing position in U.K. there would be ample demand so could also be a little choosy !

I’m 40 and have zero pension. I know plenty of other people in similar situations as well. I guess I just hope there will still be a semi decent state pension by the time I reach that age. There’s also the possibility of inheritance and / or some support from grown up dc. I wouldn’t live a miserable life now to save for something that might not happen.

I think if the economy is bad enough that you need a lodger, it’ll be bad enough that people would need lodgings!

I can’t see the tax free allowance changing on rent-a-room, it never gets talked about as an option for cutting to save money.

Don’t forget that you can also take 25% of your private pension tax free in one lump sum. For small pensions, you can take the lot - it’s called “trivial sums” which makes me laugh as I think it’s up to £30K which is far from trivial! Obviously that’s not always a good idea. But it is a way of propping up a state pension short term, when you’re in your youngest pensionable years and possibly more active.

You mentioned raising £60K from downsizing. That cuts out the lodger option, but does give you 10 years worth of the extra £6K to you. Until you’re 77! And is thar just downsizing? Try to downarea instead - keep to a 2 bed, in a cheaper area. Pocket the cash and the regular income.

Basically: stop thinking of pension income as this one number from age 67, no possible change. You can use up “pots” (downsizing, tax free lump sum) sooner if you want to. Then coast along on those until (say) 77 and go for equity release to coast another 10 years.

You don’t need euthanasia as your backup plan. A lodger is a better option 😉
But if you really were ready to die, you can do that by suicide, regardless of government legislation. I doubt you’ll want to. You’ll be having a nice social and comfortable time with that lodger and your part time job!

All good advice ! And a bit more positive than my outlook !
I think being made redundant last year and not getting another job for a few months has affected my outlook on life. It’s hard to tell whether I had my head in the sand before or I’m overthinking now ….

It’s funny @PoorPensionerToBe because I’m not that optimistic 🤣
The reason I have these suggestions to throw out is because I think through all the worst case scenarios.
My optimistic husband just says, “it’ll work out” (drives me potty: yeah, it will for you, marrying me with a pension when you don’t have one 🤣).

I agree with this. Although I think 48 is pushing the limits of being "young".

You sound v switched on.

Two pennies from me:

1. you don't have to stop work completely at 67. Plenty of people work part time and just that little bit of extra income can be great. It could be something completely different (I'm a farmer and employ 3 over retirement age ladies doing 9-2 4 days a week for example) or something fun like ushering at a theatre where you like the shows

2. maybe think a bit differently for options for your child. Could they aim for careers where accommodation is included - the forces, farming, hotels?

More thoughts:
Do you Max out your employer match? That's free money.
I'd follow the Dave Ramsey rule of 15% if all income into retirement. Over and above that would make like hard now

@Testina She will be retiring at 68.

UK state retirement age rise

www.theguardian.com/money/2023/jan/25/uk-state-pension-age-rise-68

It's still possible to retire to Spain, look into it again. The cost of living is cheaper and the energy bills are lower too. 😊

This is incorrect. Either, as others have said, he was contracted out for a period of time, OR he may be on the old state pension, not the new one. The old state pension is lower - did he retire before 6th April 2016?

A private pension is in addition to your state pension.