How will mums survive financially when they grow old? Will mums need payday loans, because after all, which pension can they rely on?
There are millions of British mothers that make a huge sacrifice and stay at home to look after their children. It’s a decision that many households believe is the only answer to their predicament. Both parents can’t remain at home with their children. They also can’t both go away to work as they don’t live near any family and can’t afford a childminder. Typically, it’s agreed that the primary breadwinner, the person that brings home the most money, will continue to work and provide for the family. More often than not, this is the husband.
There is a common misconception that staying at home is the easy life. In reality, it’s quite the opposite. Stay at home mums have it tough, and it’s also not a great position for your finances. With only one source of income, it’s difficult to prepare financially for the future. Sure, the husband or partner’s income might be enough to help a family live comfortably, but what about when they retire? If only one person has a job, does that mean there’s only one pension to rely on? Too many stay at home mums don’t have an income and simply don’t plan for retirement or save any money. In the end, these mums need payday loans to help keep their finances afloat.
They think they have little hope for a pension of their own beyond the online payday loan market to make ends meet and help fund their retirement. However, this isn’t the case. There are some tips and ideas you can use to still have a pension on top of the state pension, making life a lot easier in the future. There is no real reason that stay at home mums need payday loans. Below is a list of ideas to have a look through:
There are instances where you can still try and stay in an old pension scheme even when you become a mother and have to stay at home. Some companies continue to pay into your pension pot when you go on maternity leave, and they can continue to do so for upwards of 39 weeks. So, instead of making the immediate decision to leave your job, you could go on maternity leave and reap the benefits of a continued workplace pension for as long as possible.
During your life before pregnancy, it’s likely you had multiple jobs with multiple employers. Over the course of someone’s working life, it’s easy to lose track of different working pensions, and miss out on all the money you earned while working in various places. In fact, recent figures suggest that lost pension pots equate to around £400 million in the UK. Thankfully, there’s something called The Pensions Tracing Service that can help you track down any lost pensions and revive them, giving you access to the money. As a mum, you should try this as you could stumble upon some additional funds that can then be put towards saving for your future.
There are many mums in positions where they’re no longer earning any money and aren’t part of a workplace pension scheme anymore. In this situation, will mums need payday loans, or is there a better alternative? What can you do in this situation to still give yourself money in retirement?
Well, many people will tell you to take some of your savings and start a private pension. There are loads of private pension companies out there, and a lot of people are encouraged to start one alongside their workplace pension when they work too. You pay money into a private pension pot, and your private pension provider pays some in as well. In fact, if you’re a UK taxpayer, then all the money you contribute to a private pension gets a nice 25% boost.
However, there’s reason to believe that a better option is out there in the form of a Lifetime ISA (Lisa). This is a brand new savings product that’s meant to start rolling out in April 2017 and will be offered by a lot of major banks and building societies. One of the aims behind it is specifically to help people when they want to retire.You can open one of these accounts if you’re between the ages of 18 and 39. They work similarly to regular investment savings accounts, your money is either invested as cash or in stocks and shares, etc. When you turn 60, you can withdraw money from your Lisa as you please.
But, here comes the key thing that sets it apart from a pension. With a pension, you get that 25% boost, but any money you withdraw gets taxed. With a Lisa, you also get that 25% boost, after the first year, but any money you withdraw is tax-free – provided you meet any one of the following conditions:
So, if you are hoping to buy a home, or if you have a decent amount of accessible savings so that you won’t need this money before the age of 60, the Lisa might be right for you. But what happens if you do need to withdraw money without these criteria in place? In that case, you get a fine of 25%.
Let’s say you have invested £10,000 in a Lisa. The government has added 25%, bringing up the value to £12,500. When you withdraw it, you will pay 25% of that, which is £3,125, so you will be left with £9,375 – you’ve lost 6.25% of what you yourself contributed. As you can see, if you are likely to need the money before the age of 60, and not for a house, a Lisa is not the right choice for you.
Perhaps the best advice out there is simply to start preparing for retirement from a young age. A lot of private pensions and Lisa’s can be started when you’re 18. If you save while you’re young, it won’t be a problem for you when you grow older and leave a job to become a mum. For any mothers already in the position where they’ve left work but haven’t been saving for years, don’t worry too much. As you can see, there are ideas out there to help you prepare for retirement and survive without using expensive personal credit such as payday loans.