Am I being foolish not to have my own pension?

[Bramshott]

I find the whole pensions subject very confusing!

As DH works full time, and I am self employed, he has one pension through his work which they also contribute to, and one personal pension in his name which we also pay into every month. I am mildly bothered by the fact that I have no pension in my name, despite the fact that we can't afford to contribute to a third policy. DH says that it's better to have the pension in his name as we then get higher rate tax relief, which makes sense, and that if we ever split up, I'd be entitled to half of his pension anyway.

This all seems to make perfect financial sense, but I wouldn't like to feel I'd missed something, and was being naive not to have my own pension - even though the only way of achieving this would be for us to stop paying into the personal policy in DH's name, and open up a new one in my name (with less tax relief).

Anyone know more about this than me, and can re-assure or enlighten me?!

I have no pension at all. Can't afford to save a pence, really and truly cannot. I've got no choice but to work until I drop.

if you and DH are married, probably is OK but if you are not I would be worried big time!!

The only prob with personal pensions is that they don't carry on the same after the person they're for dies, iyswim. When you buy an annuity with the pension fund on retirement you have to decided between a single larger one or a smaller one which also has woidow's benefits (or something like that, I am quite crap at it all too )

Bramshott, assuming you have kids (or you wouldn't be here?), you will get credits towards your basic state pension while you receive child benefit, up to a max number of years, there was another thread about it recently. But you can make small contributions to NI on your own account if you earn enough to spare it,and that would be the best thing for you.

widow's, even.

expat, do you pay any NI?

Yes, we are married (and with one child).

I am self-employed, and even though I don't pay much tax, I do pay my Class 2 NI every month, so I should be okay for the basic state pension, but am assuming that that will barely be enough to buy a tin of beans when I get round to retiring (or that's what the government would like us to believe).

So with a personal pension in a single name, can you choose to buy a single or a joint annuity? I guess I am most concerned about what might happen if he upped and left me - not that this is at all likely, but I'd hate to be one of those divorced 55 year olds who suddenly realise there's a big gap in their financial planning!

The only downside I could see before in the setup we have now, is that our pension contributions would have been limited to a percentage of DH's salary, assuming that at some mythical point in the future we could afford to make the maximum contributions! But I think the government have recently changed this haven't they? I suppose in theory it is better from a charges point of view to have fewer, larger pensions, than more, smaller ones.

Oh why is it all so confusing!!

Yep. I pay whatever the NI rate is for PAYE earners in my income bracket.

I'm sure you can buy a joint annuity but the income is less than with a single. I used to understand it a bit when it was simpler than it is now and I had more brain cells.

When you're self-employed do you have the options of contributing more and getting the SERPS equivalent? (It has a new acronym now with a 2 in it but I can't remember it.)

It makes no difference to the charges if you have one pension or loads really unless you get a large fund discount of £25K as most pensions just have a single annual management charge usually of 1% or less if you go to some of the online stakeholder schemes you can get less than this and Norwich Union and legal & General are two you might want to consider.

The one reason why you might want to consider having your own pension now is that assuming you are both still married at the time your DH retires, you will only be using one full personal tax threshold entitlement being your DHs and therefore you could end up paying more tax in retirement on a lower pension as joint annuities are approximately 30% less than single life pensions. Also they normally reduce to 50% on your DHs death. Unfotunately if you go first your DH carries on at the full right but has lost out on the bigger pension he would have had, had it been single. If he is a 40% tax payer he will get more tax relief but if you are basic-rate or even a 10% or lower tax payer you will still get the full 22% relief and therefore there is the difference of 18% to take into account if the pension contributions go in your name. However, there would be less tax on the eventual pension.

If you and your DH got divorced, you are now legally entitled to some of his pension and this would be part of the court decision. You may end up with a lump sum in your own pension or it would be offset against other earnings. Therefore if he leaves you make sure you get divorced and that your lawyer gets full fund values for his pensions.

Anyway hope this has been useful. One other bad thing. At the moment women get lower pensions for the same pension funds than men because we live longer although sex descrimination may change this by the time we retire.

Sorry forgot to say you were right that from next April you can pay 100% of your salary in as a pension contribution if you want to. The limits will only really apply to very high earners.

Thanks all. Fsmail - you are a marvel, this seems to make sense, even to me! I couldn't help thinking that there must be some advantages to me having a pension in my name. Once again, the collective wisdom of mumsnet comes up trumps!!

Maybe I will wait and see how things go, and hope that at some point in the near future we can open up a third plan in my name, without stopping the personal one we're currently paying into. I'll look at Norwich Union and Legal & General - thanks!

depends what the terms are on both pensions

what are the benefits if policy holder dies whilst working, or shortly after retiring .. how much money does spouse get

I am the 'beneficiary' on them I think, so I had assumed that if he died before retiring, I would get the fund. More hazy once an annuity had been bought though - presumably normal rules, as outlined by fsmail would apply.

I would check you might only be entitled to a proportion of the funds

also what would happen if you divorced?

On death, under a modern personal pension plan, i.e one started within the last fifteen years any beneficiary would be entitled to 100% of the fund, if part of it is from contributions from contracted out of the state scheme you would have to get a pension as you are probably receiving child benefit but you would be entitled to 100% of it. That is assuming your DH has nominated you as his beneficiary. On divorce any death benefits would also be taken into account to ensure that you do not lose out in this event.

On the company pension scheme it depends whether it is a Personal Pension Plan (sounds like it as your DH has another PPP running along side it) or an occupational scheme. If it is a PPP it would be 100% death benefit. If it is an occupational scheme different rules apply but these will be changing from April next year anyway to fit in with the Personal Pension Plan style benefits.

Sorry should have said, this applies only before retirement. After retirement it does depend as you say on what annuity is purchased. Once again the rules after April may make this more flexible however, this is going to make it really complicated so I shall stop now. I can't wait until they make personal finance a GCSE subject. It would have been much better for us if we had learnt it all at school.

I agree with you about the personal finance as GSCE fsmail - surely that would have been more useful than all that sine and cosine stuff. What worries me, is that I sort of feel I am reasonable financially literate, and yet it still confuses the hell out of me!

Thanks for all advice. I'm feeling more clued up now, and will talk to DH about it again.