Before I became a stay at home dad, I used to work in the pensions industry.
The majority of that time looking after occupational schemes.
But since I’ve been at home I’ve thought very little about my own retirement.
As I’ve been out of employment for over five years now, I thought I’d better review the situation.
And it’s not looking overly promising.
If you have any spare cash, it’s possible to save up to £3,600 each year into a pension as a stay at home parent.
You don’t have to be employed or self-employed to do this.
The maximum you can pay is £2,880, with the rest receiving income tax relief at 20%.
That means the UK government cover the balance of the contribution.
Let’s face it though, as a stay at home parent when is there any funds available that wouldn’t be required for something else?
Saving £240 per month into a pension sounds like a nice idea but one which is unlikely to happen in my case.
National Insurance Contributions
As a employed or self employed person in the UK you pay National Insurance (NI) contributions when your earnings are above a certain level.
That will entitle you to qualifying years on your NI record.
You need at least 10 years to qualify for the Basic State Pension and at least 35 to get the full amount.
I’m currently registered as self employed as a stay at home dad.
Any cash I earn from bits and pieces on my blog I declare to the tax man and I can pay voluntary class 2 NI contributions.
That means I get qualifying years and don’t miss out but from April 2018, class 2 NI contributions are being abolished.
So I won’t be able to get qualifying years through voluntary contributions.
I would be able to pay class 3 NI contributions from April 2018 but they are at least five times more expensive.
That’s not exactly practical for me but there are other routes to be explored.
For whatever reason when we applied for child benefit for both my kids, my wife filled in the application forms.
She now receives child benefit for both kids.
It didn’t matter at the time because we were both still in work.
But now I’m at home, it makes more sense for me to receive the benefit.
That’s because it’s one of the ways that you can earn qualifying years in relation to NI contributions.
And I wouldn’t end up with missing years and not make it to 35 for the full state pension.
You can earn qualifying years until your your kids reach age 12.
So now we need to get things moved over to me before April 2018 and class 2 NI contributions are no more.
As I understand it, that’s a case of my wife contacting the child benefit agency and consenting to giving the benefit up.
I will then need to apply for child benefit myself.
Fingers crossed the process goes smoothly.
There are other ways you can get NI credits too depending on your situation.
It’s worth noting that even if your partner’s earnings are over the amount where child benefit wouldn’t be paid, you can claim child benefit on a zero rate.
That would still give the stay at home parent the NI credits towards their State Pension.
I’ve missed the boat on the Lifetime ISA (LISA) but it may be something to consider as a stay at home parent.
You have to be over 18 and under 40 to open one.
You can save up to £4,000 each year and the UK government will add a 25% bonus.
And that’s before interest or growth.
The bonus is paid every year until you reach age 50.
After you reach age 60, you can withdraw your money tax free, either all in one go or in smaller amounts.
If you take any money out early, there’s no penalty in the first year but after that, there’s a whopping 25% penalty.
But at least you can get the money early if you wanted to, unlike with a pension where you have to wait until at least age 55 in most circumstances.
You may already have some retirement provision in place if you were employed before becoming a stay at home parent.
I seem to have picked up several pension funds from three different employers over the years – unfortunately none of them from a final salary scheme.
And none of them are worth a great deal either.
It feels like it’s going to be complicated to put things together when I do reach retirement.
Although it’s likely I’ll take an open market option and move the funds to one annuity provider and buy a pension that way.
It’s always worth taking advice on what to do with your fund on retirement.
There will likely be more annuity options available via an independent financial advisor (IFA) than if you choose to cobble things together yourself.
You should also check over your pension statement every year to make sure things are going in the right direction.
If they’re not, you might consider moving it to another fund, although it’s worth getting advice from an IFA if you’re not sure of your options.
Are You Prepared For Retirement?
Are you saving for retirement?
Or will you be relying on the State when you get to retirement age?
What do you think about using a Lifetime ISA for retirement instead of paying into a pension?
Please let me know what you think in the comments section below.