In our Pensions Crisis Coach series, we aim to help ease your retirement worries. Are you concerned you’re not saving enough for your later years, do you want to know if you have enough to retire or don’t know how to find your lost pensions? Email us at money@theipaper.com. We’ll seek to get you on the right track with help from some of the best financial experts and advisers in the business.
Debbie writes… I will be turning 56 this month and I am in a pension crisis. I worked as a freelancer in my 20s and 30s and couldn’t afford to pay into a pension. I think I may have some other pensions from later in my career but I’m not sure. Can you help me track these down if they do exist? On top of all this, I worked abroad for years so I feel that my NI contributions won’t even provide a full state pension. I can’t imagine I will ever be able to retire.
Alina Khan, The i Paper’s money coach reporter responds… The best place to start with your issue is finding out what pensions you do have.
On our email back and forth, you said you worked for the Department of Work and Pensions as a temp via an agency in the early 1990s for a total of nine months and later took a temp position with a council for five months.
You also worked for the Office for National Statistics via an agency for five months before being taken on by the organisation directly part-time.
After contacting Capita, which runs the civil service pension scheme, they confirmed you were not paying into a pension when you worked for the DWP. It was unfortunately a similar story when I contacted the council.
In terms of your pension with the ONS, when you were placed there through an agency you were enrolled into an employee pension with Nest, who confirmed you have £265.54 saved currently.
You joined the ONS as an employee very recently, so you would only just have started paying into their pension scheme. It is worth speaking to your employer to obtain your log in details and look at the scheme in full, but as it stands your entitlement will be very small.
When looking at your financial situation more broadly, you mentioned you have £9,000 in savings and your partner will soon receive a £200,000 inheritance.
You work part-time and earn £14,500. You own your home, which is worth around £150,000, with a small mortgage. You also receive on average £300 a month in income from a rental property you own which is worth around £120,000.
In terms of expenses, you have a 13-year-old son and pay around £2,000 to £3,000 a year in school fees.
Taking this all into account, the first thing we need to do is ascertain the type of retirement you want.
You mentioned in an ideal world you would like to travel or live abroad in a camper van for half the year, but if you don’t end up travelling, you want enough retirement income to be able to cover your bills and have a little left over each month.
Pension UK’s retirement living standards says a couple living a ‘moderate’ standard of retirement – which might involve a holiday for two weeks in the Med costing £1,600 and a long weekend off-peak break in the UK with £336 spending money – need to spend just over £45,000 a year between them.
As you want to go travelling for half the year you may need a more than what is outlined above, but it gives you a good marker of the baseline for the sort of income we’re talking about.
A key provider of income for you given your limited private savings will be your state pension. You build up entitlement to these via NI credits or contributions, earned via work or claiming certain benefits. Hannah Mayfield, founder of advice firm What is Wealth, said the first thing you needed to do was find out your exact state pension forecast.
You can do this by going to the government website and clicking on ‘check your national insurance record’ – this will tell you how much you are currently forecasted to receive and will suggest to you if its worth making any voluntary contributions to fill any potential gaps you have from the past six years.
She said: “You will be on track to receive some state pension assuming you continue to work. As long as you meet the minimum requirement of ten qualifying years of national insurance contributions that means you will get about £68.90 a week.”
For every year of additional contributions you make, you end up with an additional £6.89 a week in state pension.
Mayfield added: “If you can get to 15 years of contributions you are looking at £103.35 a week which adds up to an annual state pension of £5,374.20.”
But based on what you would like to do in retirement, you are going to need to top up your retirement income from a pension pot or other assets.
You have a rental flat which does provide you with some income, but it probably won’t be enough to meet the shortfall you will have in retirement.
Mayfield said: “Unless you can significantly increase your income it sounds like the most realistic scenario will be that you eventually sell the property to pay off the mortgage [on your home] and use the remaining equity left over to fund your retirement.”
To ascertain whether this is definitely right for you, it would be worth speaking directly to a financial adviser and giving a full picture of your retirement.
In terms of setting yourself a target of how much you would need saved in your pension pot before you retire, a rough rule of thumb is to multiply how much you would want as an annual income in retirement by 25.
Mayfield said there would likely be a “significant gap” from where you are now and where you want to be finances wise, even if you were to up your contributions into your pension scheme dramatically.
“Taking all this into account it seems wise to follow up on any additional sources of income,” she said.
On top of your rental property potentially being a source of income, you mentioned you won a court case against a former employer abroad who stopped paying his staff.
You said you were awarded more than €170,000 (£146,914) plus interest and fees by a court but the company went into liquidation, and you had no luck in recouping the funds. Speaking to a lawyer may be helpful in this situation to see if this can be revisited.
Mayfield added: “It’s also worth looking at where you might be able to cut any other expenses so you can reallocate it to your pension pot.”
Once your contract at the ONS ends, it is also worth thinking about what comes next, so you can keep accumulating money to put towards both your state and private pension.
I hope this has provided you with a clear picture of your finances and you can now start to address your retirement concerns. I wish you all the best.
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