What will happen to those of us who can’t afford to pay in to a pension?

[whatnooow]

I’m starting to get a bit worried about how we are supposed to support ourselves as we get older as we basically live hand to mouth each month.

My DH and I are minimum wage workers and had to come out of the company pension contributions about 7 years ago to be able to get by, day to day. we’re both early 40s and are both knackered already. Another 30 years will definitely kill us off!

Will we just have to work until we drop dead? What if we can’t work due to ill health, but not actually disabled? Luckily we will have paid the mortgage off in about 20 years, but how will we survive, pay bills, buy food etc?

Neither of us will receive any inheritance. Time feels like it’s speeding up and I’m very worried.

Yes that’s true too.

You need to rejoin company pension scheme & find a way to cut back elsewhere.

There seems to be a higher proportion of higher earners on Mumsnet tbh - I think it’s hard for them to see how you can be so short of money you can’t spare any for a pension.

I imagine cleaning is hard work physically. I wonder if you could look to do something less physical with similar income. Maybe something like Aldi - they rotate staff round I think so you could sit down for some of the day & they pay over minimum wage. Pretty sure they would have a pension scheme. There will be other ways to earn where you’re not having to clean.

It sounds like you have 30 years to contribute.

I think you’re one of those people who are only marginally better off working full time & so may not get pension credit because you will have paid house off.

Can you cut back anywhere - even £50/month? We were very short of money when mine were babies but we still managed to stay in pension scheme & I used to put £10/month into children’s government ISA.

I know how tough things are at the moment but please please both rejoin the pension scheme. You won't regret it when you're older.
There are so many different money support Facebook groups like Rebel Finance (their free course is fab) and My Money My Goals who will help support and cheerlead you to success. So many people in there have pulled themselves out of debt and forging a better life for themselves. I promise you, you'll be able to make a 'gap' in your finances if you evaluate everything with a fine tooth comb. We look again at phone contracts/ what tv bits we had/ internet package and saved over £100 per month and that was just to start. We work hard at being frugal and slowly we have got into a much better space but please do opt back into your pension as it sometimes has death in service and potential safeguards if you do have to stop work early due to health.

I think you’re one of those people who are only marginally better off working full time & so may not get pension credit because you will have paid house off.

Pension credit won't be a thing much in the future, anyone who has a full new SP will not be entitled because it is designed to top up people who have only the old SP (quite a bit lower) and no other income up to the level of the new SP.

Agreed. The point is that the old mantra of ‘if only you work hard enough you’ll make it/be comfortable’ is for large numbers no longer true.

More than ever those who inherit or who bought a home in 90s or earlier are going to be much more comfortable in retirement than those without luck or timing on their side.

Middle income renters in same boat.

This is really unfair. For those who did the right thing and worked all their lives to have a meagre retirement isn’t right. Still recall when retirement age for women was 60!

Controversial perhaps but would it not be better means testing the state pension? Anyone with £50k private pension per annum or whatever figure should then have a tapered entitlement to state pension with savings going to pay more to likes of this poster and OP. Hell, anyone with a property owned outright over say £2m should also not be entitled.

Few of those with vast wealth have built it alone as many had a head start (private school, inheritance etc being couple of ways disparity widens gap). It’s also a gender issue as women still earn less.

Agree. Not many qualify for it now, mostly single people who have not worked much or disabled people who get premiums added. Any couple such as op with two new state pensions are not going to qualify for pension credit unless both disabled. A couple would need to have a joint weekly income of less than £346 to qualify for pension credit.

@Playingvideogames

the OP has her own home though which will be paid off

With a paid off house and the state pension you'll be better off than many. Downsize?

No, some can and a lot can't. Bully for you.

if OP and her husband both contribute approx £50 a month to pension with employer top up and tax relief that is £100 a month each going into a pension, most pensions are in the stock market trackers the average yield over past several decades is about 8% so 2 x 100 a month for 20 years at 8 % means they put in approx £2400 a year which in 20 years is £48,000 but only 24,000 is their money but with compound interest that is 117,000 ( so put in 24K of own money add employer and tax relief gain approx 69K in interest) so definitely worth doing as more than 4 times actual contributions
of course with wage rises OP's contributions will also gradually increase so the final totals will be much more than this, if we assume wages and therefore contributions go up by 2% per year the final sum will be closer to 136,000

currently OP and DH are minimum wag so current family tx home income roughly 3300 -3500 a month depending on hours
if both on full pensions right now they would have 1994 a month but no mortgage payment as OP said it would be paid off before then
£136,000 would give a lump sum of approx 34,000 (25%) and a monthly income of roughly 450 ( using standard draw down of 4% annually whilst leaving the rest invested)
so total income as pensioners 1994 +450 = 2444 so about £850-1050 less but no mortgage no commuting etc so if mortgage 600 a month in reality as pensioners they will only have 300 -400 a month less

it is definitely worth signing back into the pension there is nowhere else you can get that kind of return

Must say, you know your onions......Accountant perchance ?

Omg. This is such a clear breakdown, definitely the sort of info we need. Thank you so much @Cottagecheeseisnotcheese

Look up Rebel Finance school. They have set up a free course to enable people to maximise their earnings to retire early. The course is free on YouTube. Don’t follow any links that say you have to pay. The people got MBE so are legit.

being a cleaner is physically demanding and you are unlikely to have the same energy in 15 years.

look at entry level admin jobs. You have the skills. The civil service takes on older people as I was 45!!!! The application is a bit like joining a cult but they will train you. Be confident.

@Welshmonsteri have had a look at some civil servant jobs today. Can I ask, if you were to be employed by the DVLA for example, could you move to say the department of health? Or is it just like a private company job, where you’re in that “company” DVLA eg?

I had a client a while ago who worked her up to director in some other department, I think it was DWP but I’m sure she started out at another “branch”. I never thought to even ask her about her path.

Another vote here for Rebel Finance.
Me and dh are working through the you-tube videos at the moment and we're finding it really helpful/useful.

https://rebeldonegans.com/finance/rfs/

@joeninetey not an accountant but self employed and maths is my strong point

there are lots of compound interest calculators available so you can just type in if I save £100 a month for 20-30-40 years and increase the £100 by inflation each year and the returns are x% it will tell you your contributions and the return
if the stock market performs long term the way it has for the past 70+ years the average is 8% (using FTSE 100)and at 8% compounded your money doubles roughly every 9 years
so if you invested 10,000 aged 20 and never added another penny you would have 20k at 29, 40k at 38, 80k at 47, 160k at 56 and 320k at 65

to have a million at age 65 you need to invest £150 a month from the age of 20 ( increasing by 2% per year) you invest 129k, the rest is compound interest over 870K

compound interest is the most useful concept in maths for personal finance after basic functions to make sure your expenses are less than income

the terrifying part is that compound interest on debt works the same way

you don't invest your emergency fund or your savings for a house deposit or holidays that needs a high interest savings account around 3.5%
investing is for the long term ( minimum 5 years) I am not an adviser so I just use something that tracks the whole FTSE rather than trying to second guess whether marks and Spencer Glaxo or Apple shares are going to go up or down just a whole market tracker so you can ride out the bunps as some years are 3-4% some are 15%

according to Dave ramsey and it is American stastics of people who have a net worth of 1 million not multi- millionaires it is typically a mortgage free house of around 400-500K and a pension fund of 5-600K and 89% of millionairs in USA did not inherit any of it and when you look at the professions there are the obvious lawyers accountants doctors but teachers and nurses are also in the top 10 professions achieving this due to reliable jobs with the abilty to regularly save relatively small sums ( well 150 per month on paper just doesn't seem enough to save a million in a working life but it is) I also know that for many saving 150 a month is not possible but you don't have to be saving 500-1000 a month for a comfortable retirement

Absolutely. And we're intent on people with disabilities and carers working wherever possible - minimum wage jobs are often the only ones offering the flexibility needed.

I earn about minimum wage, but inherited 3 houses, so yaaaay !

I am fairly certain that the government (any party) is going to be considering how money could be hauled back. My DH and I will be centre frame. We were sensible enough to start putting money into our pensions in our late 30s. And now Reeves has made direct contribution pension funds taxable via IHT. Not DB funds which obviously cease on death. But money that I have saved and invested for 30 years is suddenly going to be subject to inheritance tax and income tax. This is a huge policy shift.

Like everyone else, we shall spend the pension fund first, and gift as much as possible to the DC for property, which has consistently been the only asset class that keeps pace. So, we took our tax free lump sum in September and passed it on immediately. Plus, I did a deed of variation to my DM's estate and it bypassed my estate completely. DH has given most of his mother's estate to DC. When ready, DC will be in a position to buy a modest house outright but not in the southeast. Otherwise, on NMW the choices are non-existent.

I agree that I am writing from a place of some privilege. We/I are clever. And well-educated; I read the FT and several other daily broadsheets routinely. But if you are not, then it's possible that you will end up not getting it right.

Just want to ask you something practical? Is the pension for a couple paid into one bank account? bit worried about a close friend of mine who seems to have so little money !🤔

WTF are you talking about? It was the tories that ruined being a landlord when mortgage payments were no longer tax deductible. And clearly this isn’t an option for the op. Idiot.

Each of a couple would receive their own state pension paid to whatever bank account they nominate. If the woman ( it's usually women that have much lower state pensions) receives a lower amount maybe the partner isn't sharing their larger one or they aren't pooling it ?

It depends what pensions they are / have and how they have worked & contributed over their (working) lives.

Traditionally, if a man worked whilst a woman was a SAHM it may be that the man has a much bigger pension is his own name - both state and private - and that they would be paid into the man's account.

A woman should get some form of state pension themselves, and should have had the opportunity to top up and claim HRP also (also currently the government is undertaking a review as have realised that some women have been underpaid).

How old is your friend? Did she work? Did she ever pay into a pension? Any inheritance? What do you think their relationship is like, do they share money?