Mid 40s and no pension

[Bedknobbroomsticks]

My DH is in his mid 40s and only has a group personal plan through his employer. He only joined and started paying in a couple of years ago so there isn't much in the pot. He's also low income so it isn't going to increase quickly.

I'd always assumed he had earned enough to have qualifying NI contributions to get a full state pension. We've checked and he's missing too many years such that he won't get a full state pension and it's too £££ to make up the NI payments.

At this point, is it still worth putting money aside into a SSIP? I've been saying into a pension since my 20s after seeing both my parents struggle with a low pension in their retirement. Mine won't be enough to cover us both and, being totally honest, I don't see why I should. I also want us both to enjoy our retirement together.

My question is, is it still worth paying into a SSIP now or onto his existing group personal pension plan? I am guessing the answer is yes but wondering if there are alternative ways to ensure a liveable income when he's old?

Thanks in advance.

When you put it like that 😫

I’m really heartened by the recent posts about pensions on here... so many people think they’ll be complicated and stick their head in the sands - but so many questions can be easily answered.

If he can get a civil service job now he could get a good pension from that. On top of his state pension.

@Cocomarine omg thank you so much! This is so helpful.

Yes wild Friday nights all round lol

Ok, I didn’t know that either 🤦‍♀️ Yes 12k ( I am an average earner) is for my pension.. I thought that was low so I feel better now. Thanks

Sorry I mean 9k some odd !

You mean £9K + odd (£9110 I expect!) was your forecast amount?

That would be a full state pension on current rates.

If you have the line on your statement that says you can’t increase that amount (I forget the exact wording) it doesn’t mean that you can’t buy any previous missed qualifying years. It means that even if you do, you can’t get more than the absolute top about of approx £9K.

So say you have 10 years already, but you missed 2. You buy those 2. But if you have 25 years before your state retirement age, then you would (theoretically) have 10 + 25 anyway. So buying the 2 extra missed years won’t change your projection. It’s a personal decision to buy missed years. Just cos you have 25 contributing years ahead of you, doesn’t mean you’ll be in a position to work them all. But if you had 30 years already, and 10 more to work, you might decide you’ll easily get your extra 5 so you don’t need to pay for 2 missed. I would, because I’m a cautious type!

*won’t change your projection because the forecast statement calculations always assumes you will add every year between your current age and state retirement age

Well you should be
I started a pension at 27
100 per month and increased it as yrs got better. At 50 pd in 2000 per mth to save tax. At 60 received six figure lump sum. Receiving 20k per annum from 60. Great investment. Start it off early and build up. Best advice i was ever given.

I've never checked my state pension before, it says I'll be entitled to £175 a week and that's the maximum. Why does my dad get more state pension than this now (he's not entitled to any credits or benefits so it's definitely just state pension)? I can't even claim my state pension for at least another 32 years so £175 will be a pittance. I've worked from the month I got my national insurance number, part time while I studied but full time from the age of 21 no breaks. Even when I was made redundant I was working 3 days later. I'm nearly 36 now.
I do have a decent private pension so I'm not concerned, just don't understand why the amount is lower than people receive now.

It's lower because pensions were reduced and levelled a few years ago. The sum will go up with inflation, but it will be relatively less than our parents get. And accessed later.

Mine won't be enough to cover us both and, being totally honest, I don't see why I should.
...(he) then took time off to provide childcare when our eldest was born. So that's 9 years missed there.

Okay, so he took time out from work (9 years) to be a SAHD and you are married.Therefore, your pension is his pension, just like if the roles were reversed.
What is yours is his and vice versa. You're a team- well you're suppose to be even though you don't want to be where money is concerned in later life.

@KingdomScrolls you need to understand more about your state pension. Why do you think it’s fixed at £175pw and so that’s what you’ll get in 32 years, almost completely eroded by inflation?

The state pension is protected by the “triple lock”. This is discussed frequently in the media, because it’s quite controversial - it’s very favourable, and some people think it’s unfair that pensioners are so protected when other benefits are cut. (guess which age group is 1. Large and 2. Very good at turning out to vote?)

The triple lock means that the government makes three calculations, and then chooses whichever is highest to increase the pension by - every year.

1. Average earnings
2. Prices (as measured by CPI
3. 2.5%

So... if as a country everyone’s earnings plummet after Covid, and prices go down as no-one is buying... pensioners still get a 2.5% rise. Every year.

@Cocomarine so what's the point of the forecast? It's not really a forecast is it? Which is why is never checked before add there are too many variables. Also triple lock won't last forever. Even if it's by today's standards I'd be receiving less than my dad. Why?

@Cocomarine helpful, thanks. So later retirement age and entitled to less when we get there, seems about right for my generation.

But to go back to your initial question.

State pension is best value for money. But you will have to keep paying NI even if you hit max pension years accrued so I personally wouldn't buy extra years now. If you aren't or choose not to work later, you could buy extra years then if required.

Then usually it's best to pay extra into employers pension scheme, because you get tax relief plus employers contributions (free money). You need to look at terms and conditions for that too.

Then after that, you can pay into a private pension too, which gets you tax relief.

If you are very anxious about this he can consider working for public sector who in general do excellent pensions. Even on the lowest bands he could built up a nice pot over 20 years, with fantastic survivors pension, sick leave etc. This isn't only the civil service, but also local government and nhs. This is guaranteed too for civil service and nhs (don'tknow about LGPS now), and good value for money. But these schemes now only start paying out at state pension age, so no good if you want to stop a bit earlier. Whereas a private pension can be accessed earlier (the age is rising but will probably always be ten years before state pension age).

You obviously regret previous decisions. Well it's done now. Use that energy to understand your finances and move forward from here. Everyone is learning. No one lives with no regrets. As you learn you refine, circumstances change etc. You can save and grow a lot in 20 years or so, all is not lost, not by a long shot.

I'd really recommend slowly but surely putting in time to understand all of this. It has been one of the most empowering things I've done, gaining me huge freedom of choice.

You can join us on the FIRE (financial independence retire early) thread if you like - people there at all stages, making a difference to their own positions.

@KingdomScrolls you’re making the mistake of just looking at one thing: your dad’s state pension is more than the current entitlement.

But there have been huge changes in pension legislation over the years - a lot of which you’ve benefits from.

The personal pension as we know it today was only introduced in 1988. So you have the opportunity to save for a pension yourself that he will not have had for much of his working life. And that saving has tax relief - so the government is giving you money at a time when it can be invested and grown.

When your dad retired, any personal pension (and the conversion to payment of some work pensions) had to be done via purchasing an annuity. These could be quite bad value. It’s very recent that the legislation was changed “pension freedoms” giving many more options. For example, instead of having to swap your entire pension for a badly priced annuity, you can now leave it in place and allow it to continue to be inverted for growth, whilst only drawing down what you need.

Go back to your father’s early working life, and he probably wasn’t allowed to join a company pension until he reached a certain age and had a couple of years service. Now - you join as soon as you hit an earnings limit, regardless of age or service.

Even if you’re only looking at the auto enrolment schemes now, with small contractions - so you know that the government is giving you money in those? Tax relief on both your contribution and that your employer is obliged to make. Indirectly, by reducing other tax liabilities for the employer, to push through their auto enrolment liability.

Then there’s the level at which you are awarded a qualifying year. There is the Primary Threshold, where you start to pay NI. But there is also the Lower Earnings Limit. At this point, you are charged no NI (as a low earner) but the government still credits you with a qualifying year. So you get your pension for free - protecting lower earners. That LEL was £90 in 2009 but £66 in 2019. So it’s actually become easier to get a qualifying year. (I don’t have the full history of LEL, those came up quickly on Google)

So it’s really comparing apples and oranges. You can’t just say - oh he has a better pension, without looking at whether he paid more for it, and what other benefits you have each had along the way of your pension journeys.

Thanks for posting that link @cocomarine I had no idea how to check that and I've always been vaguely worried because of years I had out of work (maternity leave, living abroad). However it says I will get 175 a week if I work another 12 years is likely as I'm only 42.

I'll get dp to check his later but it's probably the same.

Do you still get that if you have a private pension though? I'm with the lgps and they send me statements every year but I can't really make head nor tail of them.

When I was a child in the 80s everyone still called child benefit family allowance

[quote KingdomScrolls]@Cocomarine so what's the point of the forecast? It's not really a forecast is it? Which is why is never checked before add there are too many variables. Also triple lock won't last forever. Even if it's by today's standards I'd be receiving less than my dad. Why?[/quote]
Of course there’s a point in checking it!
There are people on here who don’t even know what it is now, or what they need to be doing to secure it.

People losing out because they had no idea that just by one phone call to switch the CB claimant from mum to dad, they’d have had an extra 9 qualifying years.

Off this thread, I’ve seen so many women on MN not knowing that they can claim CB without payment (high earning husbands) to protect their qualifying years. A proportion of those women will divorce, and have a rude surprise years later when they see their pension...

Checking statements is the first step to understanding them, to getting educated and taking action.

Just knowing that your current “best case” maximum is £9Kpa means you can start to make decisions about whether you need to save in a personal pension (or other investments).

Will the triple lock last forever? I don’t think so. But in 2018 it was announced that it will last for the duration of that parliament. Which is the longest promise that can be made. Politicians are reluctant to mess with it - see my point out the demographics and voting habit of the electorate! Sure, it will probably change. Perhaps to the lowest of the 3 measures not the highest. Perhaps just tied to the CPI. Some kind of inflation proofing.

Maybe it’ll go from 68 to 69... does that make the current forecast useless? Of course not. We have to plan against what we know.

How can you even begin to plan, if you have zero idea what your state pension even might be?

@ConnieDobbs your private or work pension is completely separate to your state pension 👍🏻

If at some point in the future state pension because means tested, of course your other pensions would then be looked at. But that is not what happens now. That’s not on the cards by the way - I’m theorising! It would be electoral suicide!

Can we help with understanding your LGPS statement?

For a start - it’s good news! The LGPS is a great scheme since almost all the private sector took away “defined benefit” schemes, as the LGPS is. I won’t start explaining that as you may be clear on that bit 👍🏻

But on your LGPS statement I expect you have two figures - what your pension would be when you retire if you don’t work at all from now on, and what it would be if you continue to work until a certain age (probably your state retirement age). There might also be an adjustment to model taking a 25% tax free lump sum.. can get confusing, but usually a little knowledge can make it clear!

@Cocomarine to be honest I can see how it's worth checking if you might have gaps, but I've always worked full time and ill health or sudden windfall aside that won't change. My work based pension is very generous and I've been contributing from 26, so I don't have to rely on state pension. We also have good life insurance with critical illness cover, and a decent savings routine. Essentially I will probably receive a smallish amount in state pension when I reach state pension age (whatever that is by the time I get there), that's what I'd assumed before so haven't gained any real insight by checking, but concede if your employment has been patchy or part time you need to make sure you're topping up/buying back years NI contribution.

I think this should also be highlighted more, quite specific circumstances but could potentially make a big difference to those individuals:

Specified Adult Childcare credits work by transferring the NI credit attached to Child Benefit from the Child Benefit recipient to a family member who is providing care for a related child under 12. Therefore, if no one has claimed Child Benefit for the child there is no attached NI credit to transfer and Specified Adult Care credits cannot be awarded.

www.gov.uk/government/publications/national-insurance-credits-for-adults-who-care-for-a-child-under-12-fact-sheet/specified-adult-childcare-credits-fact-sheet

This is the paragraph I meant to paste

These National Insurance (NI) credits were introduced from April 2011. You may be entitled to receive these NI credits if you are a grandparent, or other family member, who cares for a child under 12, usually whilst their parent (or main carer) is working. These credits are only available from April 2011 and you must make an application to receive the NI credits.

Don’t get your hopes up about a good civil service pension.

They aren’t anywhere near as good as you’d think considering people describe them as gold plated. More brass plated.

Ive paid into mine for 30 years it tells me if I didn’t pay another penny to it now, at retirement I would get well well under a grand a month.

So don’t rely on that.

You’d need to get a very senior position in the civil service to get anything half decent out of it on retirement due to your age.

@KingdomScrolls that’s your individual position - but you did make a sweeping statement about there being no point in a forecast! And I disagree.

Like you, I have a good company pension - and I’ve prioritised a private one too. I don’t “need” the state pension - a deliberate decision because the forecast allows me to see what it currently set at, and I’m cautious about it changing. However - my other pension isn’t so great that an extra £9K wouldn’t be very much appreciated!

@Elieza that’s not really meaningful without my knowing what your salary has been throughout those 30 years, and is currently.

It’s definitely true that not all LGPS pensions are gold plated. But - you laugh about brass plated. It’s all relative - if that brass plate is still being a defined benefit scheme (which LGPS is) then it’s definitely worth having, and definitely a better benefit than someone who is only on auto-enrolment. Many of whom are on NMW, so there’s none of the standard counter of, “yes but public sector is paid less and so makes up for it in pension benefit.”

I need to buy a few years due to early retirement. I think it's under £300 per year though so not hugely expensive.