How much should a working partner pay into a stay-at-home parent's pension?

[Karma1387]

How do you work out the right amount to put away into a pension from partners income as a stay at home parent?

Me and my partner have decided I wont return to work for the foreseeable future due to childcare costs and wraparound fees at primary school.

I am aware this means I wont be paying into my work pension. I have seen lots of advice that the working parent should put money into the stay at home parents private pension. How do you work out how much to put away?

I have considered doing 4% of a full time minimum wage salary ( as this seems fair as its what I would be earning if I returned to work. But I thought I would see how others do it before we commit to anything.

Any experiences appreciated.

(We are getting married just so it doesn't turn into a thread about needing to get married)

£80 is almost nothing to put into a pension (especially without an employer matching this) - you need to be putting away much more than this if you actually wish to afford to retire at some point. I really wish schools taught re pensions as a lot of younger people today have no idea how much you need & how important it is (it is unlikely there will be a state pension for anyone under 40 in the future or it’ll be means tested) both my husband and I put in £700 each a month ( matched by employees)

It never dawned on me to consider my pension when we decided I would stay home with our daughter, although it was so difficult to manage with just one salary thst I doubt my husband could have afforded to make any contribution anyway.

I'm 29. I don't think we could afford much more than £80 a month as thats what I would put away if I worked.

We arent entitled to any benefits even if I give up work completely so wouldn't get any part time either.

I get child benefit so as far as I am aware I am covered for a fair while with that.

£80 would be what I would be putting into a pension if I was working (although I would get employer match. My partner only puts in around £160 i believe but I don't think we could afford to quite put away that much but as a lot of replies seem to say its fair to put away how much I would if i was working so thats probably a fair amount to put away.

Make sure your husband pays extra into his pension pot - you can have more than one pension privately too you know? Then you get the employer contribution and also in terms of divorce you will actually be entitled to more than 50% anyway being the stay at home parent

As a family (if married) you would be better off having your husband up his contributions to the maximum they can be employer matched as that will offer the best return. If divorcing you’d still likely be able to get some of the pension. (There are risks though -imagine he takes out a single person annuity with the money then dies).

I would then pay anything additional up to £2880 into a pension. Until you are married I would do this and pay in as much as you can for now.

If you suddenly had more than that to save and were still a SAHM then I would put it in a stocks and shares LISA. (You get a 25% government bonus so if you pay in £1000 you have £1250 deposited -limited to £4k a year until you turn 50). LISAs are due to be replaced soon and can only be opened when under 40 but will continue to operate for those who already have one. I would be tempted to open one with £1 now and you can reserve your right to pay into it later.

So if we can only afford say £80 a month to be contributed into a private pension for me, we would be better off putting that into his company pension so we get the company match?

Thank you for this. We cant afford to max out his contributions to the employer match but I will look to add the £80 we would put away in a private pension for me to his workplace pension instead to get the employer match.

Lots of mentions of divorce! However also good idea to have your own because if you are both in retirement era and your husband dies and it depends on the pension but you then may not have any income above state pension as his pension may die with him.

I would ensure you keep your stamp up to date NI contributions as these are what your state pension will go off, if your not working you don’t get the credits for them so need to pay this to get yours years in.

I should be fine until youngest child turns 12 as child benefit covers the lack of NI contributions.

@Nearly50omg that is totally legally incorrect

op would be entitled to a fair share - but that could be less than 50/%. There is nothing to say as a sahp she’d get more than 50%.it’s just not factually correct at all

Right now you aren't married, so extra payments into his pension aren't in your best interests. If something happens to prevent the marriage, you would end up with no rights to it. You could also lose out if you are married and retired and dies before you, depending on how money is taken for retirement. Dp's dad died not long after retirement and his mum ended up with only half the main amount, with all additional contribution payments being wiped. It will not be in your control what type of money release he chooses when retired.

You are both paying very little into pensions, although I was doing the same in my 20's! You should look to increase where and when you can.

Thank you for the insight.

Unfortunately no room in the budget to increase our contributions. Eventually as debt reduced and partners income hopefully increases we can increase them.

Was just thinking 50k retired we don’t even have that at the moment 😂 and we should be mortgage free before we retire so would have that (£800ish currently) that we wouldn’t have to pay! Maybe the poster lives in London where 50k is nothing

I know people are shocked by the 50k, but I have definitely seen a lot of pension companies quoting those kind of figures, so £43,000/year for a moderate lifestyle for a couple, closer to £60,000 /year for a comfortable lifestyle (again for a couple). I suppose it very much depends on what level of disposable income/spending you are used to when you are working.

The general rule for pensions is to put your age/2 as a % of salary to afford retirement at the same level you live at more. In your case 14-15%. This is because it accounts for compound interest when you're young and lack there of when you're old. Now don't get me wrong, most people cannot afford this. However, what people under 40 really need to consider is that the state pension will likely not exist when they hit the current set retirement age. The total cost of welfare already exceeds income tax, the triple lock makes pensions less affordable with an aging population. It is scary.

Pension recommendations also account for inflation - for £50k now has much more spending power than £50k in 40 years time. Consider that.

In your situation, I would max out your partners pension to get the most out of your employer. I would then have a private pension for yourself upto the tax efficient limits/what you can afford.

You should plan to return to part time work when you'd have access to free nursery hours and your child goes into primary school and prioritize topping up your pensions with that income to mitigate what you have lost in contributions and compound interest.

Also consider, if you do not own a home outright then you need to have sufficient pension to rent for life. If you have a home, you need to have sufficient income/assets/savings to maintain that home. A lot of pension calculations do not factor these two things in.

We already get free nursery hours. But finding a job that is 9.30 - 2.30. 3 days a week is pretty impossible and my current part time job working nights means we never have any time together as a family so I'm not wanting to return to this after my maternity leave.

In a couple of years we will look to max out my partners pension to our company match.

When are uyou getting married?
Dont max his assets until.you married

Hard, but not impossible - I'd keep an eye out and look across admin, retail and hospitality. You have the ability to not be in a rush, but you do need to consider your long term future - it would be better to set yourself up now over not being able to afford to retire. If you can't afford to retire, will you be well enough to work?

There is a real risk that the welfare system, including pensions, will not be the same in 40 years as it is today unless we find a way to be able to afford it.

Next year we are getting married. We cant afford to max out his contributions for a couple of years anyway so we wont be maxing it put for a while.

I agree with the person commenting- you & your husband are putting almost nothing away in pension contributions currently (just your husband 3%??- unless you up this asap you will never be able to afford to retire as a couple - I don’t think a lot of the population under 40 currently understand this

He puts away 4% so around 160ish (every 4 weeks). It isn't a case of those of us under 40 don't understand it. But we can only afford what we can afford.