Private pension? Low income

[Invinsibubblality]

I stopped working last year due to becoming a carer, which is looking like I won't be able to re-enter the work force for a couple years.

Carers allowance gives National Insurance credits but as I won't be paying into a work pension, should I look at opening a private one?

DH is working full time but not a high income, so we receive UC top up as well. Money is tight but manage okay and we are sensible, so realistically I can afford to put a little away each month but not much.

Can anyone tell me if this is a good idea and if so where to start with this? Or am I better keeping money accessible for now until we have more coming in each month? Thank you

Do you have any other pension provision, eg from previous employment?

Is it likely you'll only be out of the workplace for a couple of years?

Do you have any savings at the moment?

How much is "a little" that you can afford each month?

Stakeholder pensions were introduced for people in your sort of situation, but if you can only contribute a little, don't have any/much other savings, and are likely to be back in work in a couple of years, I'm not sure I'd bother with a pension at the moment. Unless it's something you'd continue paying into after going back to work, in addition to an employer's pension.

Which is what I did - started a stakeholder pension when I had a break from work and continued paying in after I went back to work, even though I've got a work pension too.

If you’re not working you can put in up to £2880 each year into a private pension, and for every £80 you put in the government tops it up to £100. So that’s free money. If you’ve got it spare it’s well worth doing.

Yes I do have a previous pension from working for about 15 years, is a few years gap going to harm that?

Some savings (under the 6k lower UC limit) and trying very hard not to touch them!

Could maybe do £50 a month, possibly 100 if a good month but very unlikely to be higher than that.

Hoping the work gap will be a couple of years max.

I'll have a look at both things suggested above thank you

Not what you asked but - as you are on Universal Credit, have you looked at a Help to Save account? For those who are eligible and are able to save, the financial incentive is stunningly generous. It beats just about any other investment you could make. Also, you could get at your money if you needed it in an emergency.

If you haven't got one, I'd do that first. The max you can add is £50 per month, so you might need some additional investment such as a pension if you have more to put away than that.

I hadn't heard of a Help to Save account but it looks worth looking into. It doesn't pay interest but instead pays a bonus at the end of years 2 and 4.

https://www.gov.uk/get-help-savings-low-income

In your situation there are other things I would prioritise before a pension.

Do you have any debt? Mortgage? If so I'd plan to pay these off - tackle immediate financial security first before the longer term.
If not working, do you and your spouse both have life insurance? If not use some spare income to purchase some. This is particularly pertinent if you're a carer to provide for your family in case of the worst. Use a comparison site to find the best cover and premiums. If you are fairly young - under 50 and in good health the premiums will be very affordable.

If you are already up to your £6K savings limit, do you have a healthy credit balance on your energy bills - these are forecast to rise significantly in April so paying more on Direct Debit would keep you ahead of this.

If you have some excess after this, a pension would be an option to consider. But Stakeholder pensions are not so popular now, with good reason - they are expensive in fees and offer a limited range of investments. They are often restricted to managed funds by a limited number of platforms, They can be overly cautious and dampen investment returns. SIPPs (Self invested personal pensions) have all the benefits of a Stakeholder with much lower fees and much greater flexibility of investments. Many of the low cost platforms offer these.

If you are claiming universal credit only for a couple of years then it makes little sense for your DH to take taxed earnings, which will also reduce your universal credit entitlement, and then put it into a separate pension for you. It makes more sense for him to contribute to his own pension during this period, if it is going to be short term and then you will return to work and not be claiming universal credit anymore. At that point you can rebalance the pension contributions so that you contribute a higher amount to yours from your salary and he takes more of his salary as current earnings to pay living costs.

This is worth doing, though. And you can always then put the money you save through this scheme into a SIPP at a later date.

Not what you are asking but have you passed your DH some of your tax allowance? https://www.gov.uk/marriage-allowance

Do you have any gaps in your NI record, does it look as if you’re on track to get the full state pension? That would be my starting point.

I think carer's allowance includes national insurance credits.

Yes but I was thinking of before she started to claim it. It’s always worth checking, I found one year where I was missing just one week so paid a tiny bit and now I have an extra year.

The thing is working life is so long now that the state pension age is so high that even if you have missing years for some reason (most reasons not to be working such as being a full-time student or carer or even taking time out of work to care for young children are covered by national insurance credits) that most people will end up with 45+ years of credits by state pension age even if they go to university and don't start work until 21/22.

If considering of paying more to make up a shortfall of contributions in a year you should think carefully first whether you'll actually have a shortfall from 35 completed years when ypu retire. Given the above, it seems highly unlikely unless you have a very significant private pension that will enable you to retire in your 50s.

Cool, it was just a suggestion.

35 years of contributions doesn't apply in OPs case though. She has said that she has at least 15 years of previous work which would mean that she started paying NI before 2016. The calculation is different for anyone that was paying NI before the New State Pension was introduced. She could need anything from 29 to over 45 years of NI stamps depending on her circumstances pre 2016.

That's only if she was "contracted out" of NI payments for some years due to those NI payments instead being added to a company pension scheme instead anyway.

Most people were contracted out. If she wasn't then she would have been paying into the additional state pension so again the 35 years does not apply to her. It will range from 29 to over 45. Considering that she does say she has a pension from 15 years of working chances are she was contracted out.
The point is other people read posts and think 35 years is a blanket one size fits all which is not the case. Chances are most people reading mumsnet started paying NI before 2016 so the advice of needing 35 years won't apply to most people reading the thread.

No, "most people" were not contracted out, not unless you go back decades and decades. Contracting out only applied to DB pension schemes and most of those were gone from the private sector much more than 15 years ago.

I don't know where you are getting your information but contracting out was not only for Defined Benefit schemes. Contracting out applied to Defined contribution schemes as well. The scheme were closed in 2012 for DC and 2016 for DB.
Most people were in fact contracted out at the point of the closures for each of the schemes. It even says as much on the personal tax account page when checking for state pension entitlement.
Once again. If a person was paying NI before 2016 their number of years needed for entitlement to the full New State Pension can vary. It is not a given that 35 years will be the figure. Every person who worked and paid NI or was over the age of 16 at April 2016 had a calculation done on that date which gave them their individual record telling them how many more years / months were needed for full entitlement.
Anyone who started paying NI or reached the appropriate age after April 2016 will need exactly 35 years for full New State Pension.