Making A Retirement For Those Who Make A Home

September 15, 2017
Taryn Lee-Johnston

Children are expensive and as soon as you know you’re having one, planning for their arrival and taking care of them once they’ve arrived can take precedence over every other priority. You’ll always be a parent, but you’ll always be a person too and while your children may seem like they’re growing up so quickly that you’ll miss something important if you even blink, you’re growing older too and it’s important to prepare for your own old age. If you think of this as being selfish, then consider how much of a relief it will be for your children to know that you are able to take care of yourself and maybe even help them (with grandchildren) rather than them having to worry about how to take care of you.

If you are a home maker

Even if your overall household income is too high for you to receive any child benefit payments, it can still be worth your while to register for child benefit so that you can receive National Insurance credits, which can count towards your State Pension. Having said that, it is an open question as to what level of State Pension will be offered when you reach retirement age, in fact, in principle the State Pension could be abolished completely or be converted into a means-tested benefit. That being so, it is advisable to look for additional ways to save for retirement, which will boost your income if you do receive a State Pension and replace it if State Pensions are withdrawn (or the qualification process changed). You’ll be unable to take advantage of the benefits offered by workplace pensions, but you can still open a personal pension and if a taxpayer such as your partner pays into it for you, you can claim tax relief.

If you work part time

As a part-time worker, you may or may not be automatically enrolled into a pension scheme, but if you are not you can still ask to be enrolled and your employer may choose to make additional contributions. If they do, then it is generally very advantageous to make the most of them to build up your retirement funds as much as you possibly can, particularly given that part-time workers, by definition, earn less than their full-time counterparts (on a like-for-like basis). If they do not, then you may wish to stick with a personal pension for reasons of continuity. In either case, however, you do wish to contribute as much as you can from as early a time as you can manage, even when retirement is decades away.

If you work full time

Upon returning to full-time work, you are very likely to be eligible for auto-enrolment in a workplace pension scheme. In this situation, unless you actively opt out, you will have deductions made from your salary and your employer will also make contributions. The minimum level of both employee and employer contributions is set out by the government, some employers may choose to let employees make extra contributions and some may make extra contributions themselves. Obviously, employer contributions are attractive in any situation and if an employer makes contributions over and above the government-mandated minimum, then this can be a very attractive benefit and you should take full advantage of it if possible. At the same time, however, it is understandable that some people may be uncomfortable making a commitment to sacrifice part of their salary in the here and now, when they may be on tight budgets and have little room to manoeuvre when life happens. In that situation, it may be appropriate to use a personal pension, which offers more flexibility. You may lose out on employer contributions (although you could ask and your employer may offer to pay them), but if you opted out of auto-enrolment, you would lose those anyway and at least this way you are saving something.

For pension advice we act as introducers only.