20th January 2017 at 3:54pm
Are you one of the 8.5 million* or so people who work part time in the UK?
If you are one of the lucky ones – and I include friends and family here – it’s about work-life balance. For others, it’s a necessity.
Some couples I know have gone part-time to spend more time with their children. One has swapped the ‘usual’ roles, with the newly stay-at-home dad providing the childcare.
Balancing life now and later
While working part time might suit you now, it can affect your finances now and in the future.
You might not worry about ‘lost’ income. It balances out childcare, gives you time at home or you simply have enough to live on.
But that part-time salary means you’re likely to be funding a part-time pension because your contributions will be less than if you worked full time.
And this can make a big difference because most jobs offer a workplace pension, as long as you earn £10,000.
You could be missing out on benefits
Workplace pensions usually come with benefits and part-time working means you’d only get a proportion of them.
Your employer normally pays in, often matching your contributions up to a certain limit (the closest you can get to ‘free money’ that I can think of). Plus, when you pay in to your pension, you get tax relief which is a 20% boost if you’re a basic rate taxpayer: if you pay £40 in, it is boosted to £50.
One of your biggest benefits could be the State Pension, which has changed a lot. You can look up when you might get it on the Government’s website.
You need to have built up 35 years’ national insurance contributions to get the full £155.65 a week, as the Pensions Advisory Service explains.
If not, you may not get the full amount but you can top-up your contributions.
“It’s the closest you can get to ‘free money’ that I can think of.”
Will you have saved enough?
Of course, like most people you won’t want to retire with a part-time pension. You want one which might give you the retirement you want. So, what are your options?
Some people I know plan to use buy-to-let property to supplement their retirement income but, as I’ve written about in the irrational attraction of property investing, it’s so tax inefficient these days.
There are also significant risks and hidden costs so you really need to be confident that the returns you could get outweigh these.
There’s no magic answer but there are certainly a few things you can do to boost your pension which is, after all, just a really tax-efficient savings plan.
Simple steps to help you boost your pension savings
- Check what you might get: there are easy-to-use online tools to help you. It takes minutes, I promise.
- Work out what you need: Citizen’s Advice has good information on this, or try our online tool to find out. It might surprise you.
- Save more: What you save is also boosted by tax relief and you may get further contributions from your employer.
Views expressed are Andy Dunbar’s own and information is correct as of January 2017.
A pension is an investment and you could back less than you paid in.