AIBU for sacking off pension contributions in anticipation of large inheritance?

[minormajor]

If you knew you would be getting a large (c.£1m) inheritance, would you bother paying into a pension at all or prioritising retirement savings if you are on a lowish income?

Dh & I are 52, both self employed ticking along nicely but far from flush and didn’t start paying into a pension until our 40’s & even then minimal amount as that’s all we could afford.
Our kids are older: one at uni one working/training so we’ve both taken on more work and finally in a position to save so naturally thinking about increasing our pension contributions.

Parents are 80 & 81 in pretty good health and I have a sibling who would be joint beneficiary. Inheritance could be 15/20 years off if parents live as long as their parents did and I’ve accounted for IHT and potential care home fees on the £1m estimate. No inheritance on DH’s side.

AIBU : make your own retirement provisions don’t rely on inheritance or
YANBU there’s a decent inheritance coming your way so no need to prioritise your pension

Agree. Just do what you would be doing if there was no inheritance. Things change. By all means protect yourselves (you, your parents etc,) from bad decisions and misguided intentions, but be aware that they are out there.

@minormajor if you had said at the start that the estate was worth 4 million I would've given a different answer!

be more sensible if they gave you some money now though to avoid the tax.

If there's a chance that they could live 15/20 years, they may outlive you or your DH. I'm actually seeing that around me (I'm nearly 60). The 80+ year olds have benefited from the post war diet/natural exercise and NHS. Unlike their unhealthy 60 year old adult children. No-one is guaranteed good health. I'd be having the holidays while you can.

I stand to inherit a similar sum. Except my previously frugal father has decided to spend money like he is running out of time.

care fees can easily wipe out 1 million, especially if there are two people. People on their 80s could need 20 years of care.

Im very glad I have been steadily contributing to my pension. If any inheritance materializes, it will mean a more relaxed and luxurious retirement, but I am covered without it.

DIL's GF's carehome is £7,000 per month and that's in the North of England. DM's was £4,000 a month pre-Covid.

A friend of mine is doing the same, I think he’s mad forgoing a pension altogether (especially as its a civil service pension) as he is a single dad to 2 kids and could use that £300/400 pension payment for the kids. His parents are already in their 80’s and he has another 17yrs to retirement so I can see why he’s done it. But he was quite surprised when I told him how much lump sum i’d get at 67. I guess he could end up with care home fees as he isn’t a position to provide care.

Your pensions are very low for being in your 50s but if the 1500 a year is 5% then are going bringing in £30k as a household annually? If so, that’s not a massive wage and I can see why you’d not necessarily have the option of increasing pensions massively.

When are you hoping to stop work and will you be entitled to full state pension? There actually seems like quite a big disparity between your parents being sat on and a £4m estate and your approach to savings etc.

Make your own provision

I work as a Nurse and have patients that are now 104 so there could be another 20 odd years.

we’re putting in about £1,500pa

That's very low for an annual amount (and I'm also self employed, and I know how difficult it is without any employer contribution). What occurs to me is whether the parents would be prepared to contribute to your pensions, as a regular sum out of income. Regular support of a family member shouldn't fall foul of inheritance tax.

Do check that, of course.

I would never rely on someone else to fund my retirement so no, I would keep paying whatever I could into my pension. Anything else is a bonus and I will use it to either have a more luxurious retirement or give the kids a house deposit.

How can you have a true idea of what future care costs will be?

I think it's crazy to bank on an inheritance in 20 yrs time & I say that as someone who has parents and in-laws with houses worth ££££. The gov will need to tap into that money as the county is broke!

Also some economist think house prices will be somewhat depressed as the boomer generation die off as there is a glut of expensive family homes on the market plus fewer people want larger homes due to smaller families and utility costs.

If your parents estate is like 10m then you will likely get something but why haven't they helped you out already.

Agree that it makes more sense for your parents to pass on some of their wealth now.

Personally if you’re having these conversations already with your parents, why don’t they gift you a holiday each year and you save extra into the pension? That way they can see you enjoying the benefits of their wealth now, and (with the usual caveats) it’s more tax efficient?

it’s still only about 12.5% of people over 85 that even use care homes it’s not the given for every older person.

what is likely to charge is costs for care in the home as that what the majority need. Currently house value doesn't get included, I see that changing.

I was one of the executors of my Mothers will. It divided her estate equally between her 6 children. Imagine my surprise when on her death there was a newer will that was 2 years old leaving her entire estate to my sister and cutting out us 5. She was compos mentis, spoke to solicitors. As there were 6 of us it was only going to be about 40k each. DH was also a cut out due to favourite child syndrome as his Father left everything to his sister. My friends Dad in his late 80’s has a girlfriend now, friend is worrying he will leave a chunk to her.

Anyway nothing is certain. DH and I always made decent contributions. He chucked in loads of additional payments in his last few years of work.

How much have you factored in for care home fees?

My FIL was in a home for 9 years, my Mum has been in hers for 5.5 years and my Dad for just over a year so far. All with dementia (and dementia care homes tend to be especially expensive). So fees can swallow up a huge amount. Their estates were substantial although not as large as your parents’, but I’m assuming I won’t inherit much.

Keep saving hard into your pension.

Should your parents be very long lived (all my family make it past 95) It will give you the opportunity to retire earlier than receiving inheritance.

And is savings and very cost effective savings at that.

And it is as well to have a buffer to retire earlier and enjoy early retirement at full tilt as to ‘fritter’ your luxuries now, IME.

Also, being self sufficient is good for confidence, morale, contentment, and will forfend wishing your parents’ lives away.

I am not saying you are doing that now, but you might veer into it if you hit your 60s with chronic conditions and hate every day you have to drag your aching bones into work!

Lots of things could impact in that. Care homes being more than you think, house price crashes, your parents deciding to leave it to the cats home, the law on inheritance tax could change

I have no idea if this is possible, but can your parents pay into a pension for you?

Imagine my surprise when on her death there was a newer will that was 2 years old leaving her entire estate to my sister and cutting out us 5.

I would never want money over the relationships with my siblings, I have no idea how people can be so immoral.

From your figures the chances are you are correct and you will have a sizeable inheritance , but one of your parents may live into their late 90s , as both my DM and MIL are . This means , by depending on that money , you have no option to retire early as you could be late 60s before you receive your inheritance.