Pensions-unrealistic expectations?

[Monster6]

This is a ‘money in the future’ related WWYD…I’m hoping for some good advice, and maybe a bit of a check-in. I’m mid 40s, in a stable 20yr relationship, 2 teen kids. I find myself worrying about pensions/future money so much these days! With the WASPI women in the news a lot, my thoughts really have turned to retirement age and the completely unrealistic expectations I may have to EVER stop working.
I have about three pensions, totalling £30k, some savings in ISAs etc, probably only about 10k, a joint mortgage which has £80k remaining, on a £350k home. When I started my career after a few false starts I was 28. I paid into a pension, however due to taking years out for childcare and going very part time…I think at one stage I was only able to put in about £40 per month!! 🙈 (full time childcare was so expensive, I made the decision to look after my own kids) I am now self employed and putting in 21% of earnings into a SIPP. To that end, I do expect my pension savings to grow significantly. I just would like to know, any other (younger) middle aged mums (44-46) with this dilemma? What are you doing about it if anything, and could you share some tips please! We do plan to downsize home once kids are grown. We’re also overpaying aggressively so should be MF in 6 yrs.

Stop overpaying your mortgage and put it in a pension surely? The interest on your mortgage is presumably a fraction of what the money could be getting in stocks and shares?

Thanks for the reply. Ok. I actually hadn’t considered that: I’m chronically financially risk adverse, and our mortgage rate is stupidly low rn.

Pay off your mortgage ASAP then worry about your pension. Whatever shit happens in your life, owning a house is always the winner and the security you need. Then, when that's paid off, whack everything you can in a pension but live life too. You never know what might happen in life. No point in having a huge pension only to find out you're not healthy enough to enjoy it or, worse, dead before it pays out!

Apart from feeling a bit put out by your "chose to look after your own kids" comment, to which ill refrain from saying that i chose to stay in work because its more than just a salary, its so much more, Ill stay on topic.

I'd suggest looking at what your husband or boyfriend can contribute to your pension. If you were looking after joint kids then it's reasonable to expect him to pay into your future too.

I'd suggest marriage if he has had the opportunity to work and you haven't because if you ever split his pension will be on the table.

In the meantime, consider what your pooled resources are and seek financial advice.

If you're self employed then make sure you are working as a Ltd rather than a sole trader so that you can avoid national insurance payments on the money you are putting into your SIPP (particularly since NI for self-employed has went up recently).

Also make sure your SIPP is invested somewhere sensible (ideally a global equities tracker, or a high performing index with the S&P)

Spread your risk, half on mortgage overpayment, half in pension.

I picked up on the childcare thing, too - yes, it is expensive, but you have to pay it for a relatively short time. If anyone is thinking of staying at home to look after their children for financial reasons, make sure you are thinking about the long term impacts to your future income (you are probably not going to go back on the same salary you left, and will have missed out on progression in the intervening years) and to your pension.

It should be 100% in pension/ISA really, a £85k mortgage in your mid 40s is far too low unless you are very low income.

Thanks, I meant nothing more than exactly that, really. There are SENs in the mix, so that was also a contributing factor. Plus the poverty wage and workplace bullying! 🙄

I totally concur. I was on a very low wage, and had no one suitable to look after my special needs toddler who was non verbal until school age, really. We make the choices we make at the time, and I guess that’s why I’m now facing a shortfall in my savings. That’s for replying.

How can a mortgage be 'far too low'?

I was just about to ask!! 🙈Here I was happily overpaying, thinking 🎉…but ‘too low’? Please explain pp

Are you married?

No. Thinking about it. Just never really got round to it!! But it’s in the plan 😍

We're doing the same as you really, investing in pensions, plan to downsize for sure and we have two investment rental
Properties that we hope to be getting a return from by then too to supplement retirement.

It sounds bloody tough 🫂

The trouble is that noone tells you this stuff at the point when you start working and then it's a scrabble to backfill the funding.

Definitely consider the viewpoint that if you are with the father of your children, that he has benefitted from working and building a pension and so now it is fair thst he pays into yours instead. You shouldn't be in this alone x

What are your pensions invested in? If you accept you have more than ten years to retirement then would you consider 100% equities in a global world index with low fees?

That's what I have done. I accept it is risky but over 10 years I am willing to ride out any dips in return for higher chances of double digit % returns.

@ServantsGonnaServe thanks for being kind. ❤️ @Powderblue1 well done. That’s a huge financial achievement.

Prioritise your pension. You make 25% straight out of the blocks, never mind the growth that will follow.

Being risk averse is fine but it's good to appreciate that there are different sorts of risk. There is the risk that you put money into a pension or S&S ISA and make a loss in the short term. But there is also the risk that you go too far the other way and under-invest, meaning that your money doesn't grow and you end up with too little for a comfortable retirement.

Plus if your mortgage rate is "stupidly low" why are you overpaying? That's throwing money in the bin.

@LizardQueeny i guess I saw it as a way to bite off £20/30k and put us in a good position to be MF? Unlikely we’ll ever get anything as low again. This is why I need advice as I clearly have no clue 🙈

Since you are not married and have prioritised your partners career you really need to prioritse your pension over his pension or the mortgage now. I'm sure he has a much healthier pension and other savings and if your relationship was to end you'd be in quite a bad situation. You should never have sacrificed your career and earnings for somebody you had no financial ties to, but there is time to rectify it if you start now.

Get the registry office booked perhaps meal and do it!

Do you own your house as joint tenants? Do you have a will? Does your partner have a death in service payment and have they nominated you?

If your partner owns the house and you split (unmarried) you could easily get nothing from the house and nothing from their pension as well as nothing from savings that are held in your partner's name.

If you don't have a will and your partner dies your children will inherit through the rules of intestacy (and any other children that they have) rather than you. That could be a car crash for you. Your child with special needs might be expected to fund their care (if needed) when they become an adult if they have £££ and that money could then dissappear very quickly.

If your house is held as joint tenants then it does automatically pass to the joint tenant if one of you dies. If not it would be inherited as described in the will or if no will the rules of intestacy.

Do you have life insurance? That's a priority if not as it sounds like you need both you and your partners efforts to manage income and childcare.

You could look into a vulnerable person's trust for your child if you think that is relevant. This would protect your child's inheritance from being used potentially very quickly paying for their care. I don't know a lot about it but need to look into it myself in the coming years as one of my children is 7, largely non verbal and has developmental delay.

One of my colleagues could not afford to be in the pension when she was younger but now that her kids are grown and her mortgage paid off she saves at least 1k each month (probably around half her wage) so each month that she works should potentially give a month of early retirement waiting for her state pension and without having to take her work pensionearly (that she has now joined).

You need to think about your overall financial security as well as your pension.

https://www.moneysavingexpert.com/mortgages/mortgage-overpayment-calculator/ For the mortgage overpayments, have a look here- you can compare what you'd save by overpaying with what you'd make if you put the money into a savings account. You can make 4.5% or more at the moment completely risk free so if your mortgage rate is lower than this it might be an idea to save instead, then pay off a chunk.

But you can insure that risk via life & critical illness cover.

I’m the same age, also with 2 teens. I’m also not married but have a DP.

I agree with those that inferred that prioritizing paying off the mortgage (esp when interest rates were low) was a bit of a wasted opportunity. You can’t change the past but can look at what you do from now on. My mortgage is much higher than yours and is due to be paid off in 10 years but I prioritize pension and ISAs (which are also much higher than yours). I actually had my annual review of my investments this morning - got 9.5% growth on the portfolio this past year. This is much higher than my mortgage rate so my money has worked harder for me invested in my SIPP and S&S ISA vs using it to pay down mortgage. Also it will compound over a much longer time than the remaining term of my mortgage. I also put 4k a year into a LISA and the government gives me £1k every year, so 20% growth on those annual contributions. This is also for retirement savings.

My DP and I also have wills and a cohabitation agreement since we both own the house 50/50 but aren’t married. It covers the scenarios if we split up, sell, die etc.

It’s not perfect but the above might give you food for thought.