No pension at 40

[Its2early]

As the title says, I'm 40 and don't have a pension. I've worked for 24 years, 4 of which were part-time when I was a student and 5 as self-employed. I had a 2 year break after having my DC and then took on a part-time, employed role which I've been doing for almost a year now. 3 months into this job I was auto enrolled into their pension scheme to which I contribute a tiny amount due to give my low hours and earnings. The pension calculator shows that by retirement age, I'll have £15k in the pot. I think I contribute 3% which the company matches. It's the bare minimum.

My DC are both below school age so I have no intention of ever returning to full-time work. DH earns a good salary and has a very healthy pension. Should I start contributing more to mine or would I be wiser to look into other investments?

Why won't you ever return to work full time? Once your kids reach secondary they will be more independent etc. No reason you can't go full time when they are 11 which would give you time to build up a more healthy pension.

Why not go back to work? How many NI qualifying years do you have?

At the very least, you should aim to get your 35 years, to get a state pension.

Also look at the terms of your dh's pension. Will you get full benefit if he dies early? If you divorce, is there sufficient to provide for both of you?

A £15k pot will give you a pension of approx £450 a year.

Yes, you definitely need to put more in. You get tax relief on pension contributions, so it's a good investment - for every 80p you put in, you actually get £1 invested.

Don't rely on your DH's pension. What if you split up?

So at the moment state retirement age is 67, so you’ve got 27 years to pay into your pension scheme, whatever you can pay in will be an investment and with government top up, I think at 25% of what you pay in, it will be worthwhile.

If you have the money to invest, as you appear to do, the best way to invest is through a pension for the tax breaks and the employer contributions. That's free money! Who knows what will happen in the future. Your DH might leave or get sick or die. Don't put all your eggs in someone else's basket.

You are allowed to put in all of your salary into a pension, so if your DH can cover the household costs, you could ramp up contributions right up to your annual salary. That is what I have done on a pt wage and it's meant I've been able to build up a decent pot despite starting my pension aged 35.

I also max out my LISA as there's a 25% bonus so it's just as good as a pension contribution (for me as a basic rate taxpayer). I think you have to have opened one before age 40 though.

Check which fund your pension is invested in - the default option is often low risk and I have switched to higher risk options, which have given better returns. I have used a SIPP to contribute additional amounts to my pension as the options are wider than my employer pension.

Check your National Insurance contributions, you really need these to be current to get a state pension.
Yo7 can do this on the Gov.Gateway website.

Everyone should check this once a year

What is your salary, if you don’t mind saying?

Thank you all for your advice and suggestions. To answer a few questions -

I don't intent to return to full-time work because I don't want to. I intend to work part-time until I retire.

I have full NI contributions, I top up the shortfall every year.

My salary is current £1k a month but this will increase slightly later this year when my youngest starts nursery and I up my hours.

I know very little about my husband's pension to be honest, other than he pays 5% and his work pay 10%. I will definitely look into what happens if the worst should happen as I'd assumed it would automatically come to me as his spouse.

I would keep focussing on a pension. Can your DH also pay into a private pension for you? I've no idea if that's good advice, but you're very vulnerable if you split up.

You need an open conversation with him, check what retirement looks like on this path, what his pension is like, does he support you working part time and subsidising you, what age are you both planning on retiring etc? Are you the same age? Will he want to go part time at any point?

But I also think you need be considering what happens if the marriage breaks down, and what steps can be taken to protect you in that regard. Hopefully a plan B you'll never need.

Given that you've been part time/taken time out for the last 3 years because of DC, I'd be asking your DH to put a lump sum into your pension to balance out for the last 3 years, given that he will have been contributing to his all this time and saving on childcare. And then he needs to pay in regularly moving forward to top you up, considering that you will still be part time at least for childcare reasons for the next few years. After that... well, I wouldn't blame him if he said work full time if you want a decent pension.
I'd advise that you do a lot of research on what happens pension wise if you:

• divorce
• DH dies

How come you didn't pay into a pension when self employed? Were you enrolled in a workplace pension the years you were full time employed - 12 years was that?

I will definitely look into what happens if the worst should happen as I'd assumed it would automatically come to me as his spouse.

Purely from a pension point of view, 'the worst' is divorce In that case you could get nothing (depending on the financial settlement; it would be usual for.you to get some but it's not guaranteed). In the case of death, you would usually inherit the pot if it's a defined contribution pension, or get between 1/3 and 1/2 of the ongoing payments if it's defined benefit. But those depend on a combination of will, pension nominations, and the decision of the pension trustees.

In all of those scenarios there are several factors out of your control. So you really need to concentrate on building up your own, not relying on his. Especially as you don't know how big his pension is - 5% contributions is pretty low.

Def need to check what you get if your DH dies early.

For example my DH will only get one third of my DB pension if I die early, but I get all of his DC pension. We have made provision for this with very well stuffed ISA in his name.

What happens if he is hurt in an accident next week or has a stroke and can't work ? These things do happen

Being able to fully support one's own self, in all circumstances , is really important

Your DH may have a healthy pension but is it sufficient to support two households if you separate and it's split? Also if its a dc pension, there is nothing stopping him retiring and converting the pension to an annuity that ends on his death or allocating someone other than you as the beneficiary.

Is that £1k per month gross or net?

You should definitely save for your retirement, but whether the pension is the best way of doing that depends on your circumstances. With a pension you are giving up accessibility and and a certain degree of control (government can change the terms of access). That is often worth doing for the tax benefits and employer's contributions, but you do need a clear headed assessment of the cost benefit analysis you you. Contributing to get your employer's contributions is likely to be very sensible. Whether you should contribute more when your earnings are at this level is more uncertain. Are your earnings currently taxed? There's much less benefit in paying into a pension from money that is in your personal allowance so untaxed. You could also look at ISA/LISA options.

There's much less benefit in paying into a pension from money that is in your personal allowance so untaxed.

In a SIPP you still get the tax 'refund', even if you've contributed from untaxed income.

That's true, I was assuming she was meaning add more to her employer's pension.

By topping up the shortfall do you mean you are paying Class 3 NI contributions? If you have dcs under school age I don't see why that's necessary. Even if your DH is over the child benefit threshold, you can claim Child Benefit and opt out of getting the payments so you'd get the NI credits towards your pension.

Although if you're earning £1k a month, that would put you over the Lower Earnings Limit of £123pw. This means you get a Class 1 NI credit, so you shouldn't have any shortfall.

‘I have no pension’ and ‘I don’t intend to work full time because I don’t want to’ are probably mutually exclusive statements at 40.

Employers pensions with a relief at source arrangement (eg NEST) also give a 20% tax refund, not just SIPPs.

You really need to get going with pension savings. You’re in a very vulnerable position, especially if you’re never going to work full time. Expect to work until you’re 90 is all I’ll say.

I don't intent to return to full-time work because I don't want to. I intend to work part-time until I retire.

Well I guess make peace with having less money and a low retirement pot. There’s an about a 50/50 chance you’ll be single come retirement.

"I don't intent to return to full-time work because I don't want to. I intend to work part-time until I retire" Then don't complain about a lack of pension!
Just hope and pray nothing happens in your relationship 🤷‍♀️

If you go online and find a pension calculator you'll be able to check what sort of money a year you'll have at your target retirement age with the pension you currently have, and you can also do a calculation to find out how much you need to save from now to have a target income in retirement. Here's one from a quick Google: https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pension-calculator

This one is also quite good for messing around with the different numbers to see what increasing or decreasing your pension age or savings can do for your pension pot, I've just had a play around with it and it's easy to use: https://www.standardlife.co.uk/pensions/tools/pension-calculator