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AIBU?

Share your dilemmas and get honest opinions from other Mumsnetters.

Original poster

To ask for advice on savings

40 replies

slithytoveisascientist · 05/09/2023 18:10

We are currently paying 6% into DH pension, employer is paying 3% - this has only recently started. I don't have one.

Both have up to date state pension contributions with 17 more years of payments needed.

Have a decent amount in premium bonds

Have 2 fixed term accounts earning 4% - we will move these when the fixed term ends on Nov.

We have about £400 spare per month after bills and luxuries.

Yes, I know we are very lucky

But we have no real future planning and are facing a huge retirement shortfall.

Where should we be putting our savings, what should we be putting in a pension, and what should we be doing for our kids?

OP posts:
Original poster
slithytoveisascientist · 05/09/2023 18:11

And sorry for being so rude! Thank you in advance for any advice.

OP posts:
MarvellousTimeRuiningEverything · 05/09/2023 18:13

Do you own your house?

jallopeno · 05/09/2023 18:15

Get your own pension sorted. Why don't you have one?

Original poster
slithytoveisascientist · 05/09/2023 18:18

We've never done pensions before now and have done DHs due to employer contributions.

I'm self employed.

I was wondering if it makes more financial sense to pay more into DH pension and use it for both of us, as he is a higher rate taxpayer. If we did this we would have a legal agreement that I get half in the event of a divorce.

We have a mortgaged house. Around 50% equity.

OP posts:
MarvellousTimeRuiningEverything · 05/09/2023 18:19

I'd focus on overpaying your mortgage. Then when it's cleared, put your mortgage payment and the extra into pensions and savings.

Original poster
slithytoveisascientist · 05/09/2023 18:23

If we were to overpay our mortgage by the 400 it would still take us 15 years to clear it, that feels like a lot of compound interest and government pension contributions lost.

Also wouldn't we get more in savings at 6%? Our mortgage is 4.8%.

OP posts:
catmg · 05/09/2023 18:25

How old are you? What's the decent chunk in premium bonds and are you getting sufficient winnings to make the lack of interest worth it?

Original poster
slithytoveisascientist · 05/09/2023 18:28

Age would have been helpful 😆

We are both 37

Kids are 8 and 10

Currently the premium bonds is acting as an instant access account, interest is tracking about 3%. We do need some savings in instant access.

The kids savings is also in there. No winnings for them so far but it's only been 3 months.

OP posts:
Original poster
slithytoveisascientist · 05/09/2023 18:29

The chunk is £29k

Another £20k across the 2 fixed accounts. In theory we would be able to invest this elsewhere in a couple months.

OP posts:
Isyesterdaytomorrowtoday · 05/09/2023 18:30

Pension!!! The tax relief makes it an absolute no brainer, they need time to grow, the earlier you pay in the better

mintbiscuit · 05/09/2023 18:36

Focus on your pensions!

Separate pensions.

DH should increase his conts to bring tax down. He should be taking advantage of tax relief as high earner.

you should paying in as much as you can afford into your own pension. You are leaving free money on table in form of tax relief.

The best way you can help your kids is to focus on your pension savings first. If you don’t have a pot to piss in in your old age the burden might fall to them (and the tax payer) . You have capacity to save so you should do so.

You can also tip any unneeded savings into pension to get the tax relief on that (basically a 25% bonus on top)

Turmerictolly · 05/09/2023 18:36

Also saying pension, you could put in a lump sum to start you off. The sooner you start the better. Not sure it's a good idea boosting your dh's pension only - sorry to say, what if he passes away/divorces? I'd make sure I had my own.

Yellowlegobrick · 05/09/2023 18:38

Rule of thumb with pensions is you each want roughly half your age going in as a % of your wage.

9% of one person's pay plus 0% of another will amount to diddly squat as annuity when you come to retire, sadly. Look at the annuity calculators - you may find it an eye opener how little a pension pot buys.

I'd be using spare money to get at least 15% going in for your DH scheme and as much as possibly going into a pension for you.

Original poster
slithytoveisascientist · 05/09/2023 18:39

DH has good death in service and I get his pension if he passes away. It would be the divorce scenario I need to safeguard against.

What is financially better - paying £400 more into DH pension ( which is what we have spare net, so more like £500 gross) or £400 net into a new pension for me? Or splitting it?

OP posts:
DeductibleIRA · 05/09/2023 18:40

It’s imperative that you have your own pension, a stakeholder lets you start and stop contributions at will which is great if your earnings from self employment vary. Do you pay tax? You’ll get tax relief even if you’re not a taxpayer but your annual allowance (max contribution) will be under £3k.

Original poster
slithytoveisascientist · 05/09/2023 18:42

Yellowlegobrick · 05/09/2023 18:38

Rule of thumb with pensions is you each want roughly half your age going in as a % of your wage.

9% of one person's pay plus 0% of another will amount to diddly squat as annuity when you come to retire, sadly. Look at the annuity calculators - you may find it an eye opener how little a pension pot buys.

I'd be using spare money to get at least 15% going in for your DH scheme and as much as possibly going into a pension for you.

This is exactly what I've done hence this convo.

The 9% doesn't include the gov top up plus 3% employer, plus I need to work out how to claim the higher rate tax.

It's scary how little it amounts to in 30 years.

My gut says throw it all at DH pension and get a legal agreement I get 50% in the event of divorce, a post nup if you will. Would that be enough to protect me?

If we throw enough at it I'll also get CB back.

OP posts:
Original poster
slithytoveisascientist · 05/09/2023 18:44

I pay tax and NI
Planning on going LTD next year

OP posts:
Original poster
slithytoveisascientist · 05/09/2023 18:52

Sorry meant the 6%

OP posts:
catsandkid · 05/09/2023 19:21

You should really do your own pension along with DH's. Why wouldn't you do your own? Much simpler than having a side agreement for ensuring you get 50% of his and less risky overall.

Original poster
slithytoveisascientist · 05/09/2023 19:29

The only reason I wouldn't do my own right away is if it made more sense financially to pay into his. I thought as a higher rate taxpayer he got more tax relief.

We would also in theory be able to use pension contributions to reduce his salary so I got child benefit back.

Additionally for me, at least until I'm LTD I'll be making net not gross contributions.

As long as I can protect myself in the event of a divorce, wouldn't we be better off?

OP posts:
ThomasHardyPerennial · 05/09/2023 19:45

I'm in a similar situation, and have been looking in to starting a lifetime isa. Have you looked at them, op?

CottageBearskin · 05/09/2023 19:53

No you wouldn't be better off. You need your own pension.

When you hit retirement age you will pay 20% tax on your pension income over 12k. If only your DH has a pension you'll loose more of that income to tax. If you both have pensions, your tax free income as a couple is doubled so that you pay less tax.

To give you a rough idea of numbers, you need a pension pot of about 300k to have an income of 12k a year (this will be in addition to state pension, giving you an income of about 24k a year). To get to around 300k at your age you need to be putting away 350 to 400 a month. But please double check these figures in an online pension calculator.

Original poster
slithytoveisascientist · 05/09/2023 21:05

ThomasHardyPerennial · 05/09/2023 19:45

I'm in a similar situation, and have been looking in to starting a lifetime isa. Have you looked at them, op?

Not once, I wouldn't know where to start. It's looking like getting going on my pension is the best first step.

OP posts:
Original poster
slithytoveisascientist · 05/09/2023 21:06

CottageBearskin · 05/09/2023 19:53

No you wouldn't be better off. You need your own pension.

When you hit retirement age you will pay 20% tax on your pension income over 12k. If only your DH has a pension you'll loose more of that income to tax. If you both have pensions, your tax free income as a couple is doubled so that you pay less tax.

To give you a rough idea of numbers, you need a pension pot of about 300k to have an income of 12k a year (this will be in addition to state pension, giving you an income of about 24k a year). To get to around 300k at your age you need to be putting away 350 to 400 a month. But please double check these figures in an online pension calculator.

This makes sense and hadn't occurred to me, thank you.

OP posts:
CottageBearskin · 05/09/2023 21:43

Also because you asked about savings on general...
I'd ditch the premium bonds. They don't give you any interest on your savings and the chance of winning is very small. There's a brilliant article on money saving expert which explains the maths behind it all. But basically you'd be better putting the money into a easy access savings account at around 4 to 5%

Or you could use a chuck of this to jump-start your pension.