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Savings v Pensions
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pollyanna24
Posts: 4,390 Forumite


I don't know very much about pensions, but know some people save instead of getting one. Me and bf have never had a pension, but I have a plan for when we have paid off the mortgage (35 year term, but overpaying at the moment to knock it down to 26 years, and hopefully will start knocking even more off soon).
Once it's paid off (long time from now I know), was just going to open a savings account, continue to put the mortgage payment into it, and hopefully live off the interest in 20 years after that. Is there a calculator I can use to help me work out how much I will get?
Also, you don't lose the state pension if you have savings, do you?
Once it's paid off (long time from now I know), was just going to open a savings account, continue to put the mortgage payment into it, and hopefully live off the interest in 20 years after that. Is there a calculator I can use to help me work out how much I will get?
Also, you don't lose the state pension if you have savings, do you?
Pink Sproglettes born 2008 and 2010
Mortgages (End 2017) - £180,235.03
(End 2021) - £131,215.25 DID IT!!!
(End 2022) - Target £116,213.81
Mortgages (End 2017) - £180,235.03
(End 2021) - £131,215.25 DID IT!!!
(End 2022) - Target £116,213.81
0
Comments
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Smart girl Pollyana.
You've spotted the flaw.The strong likelihood is that if you do it that way, you will only save a bit, but it will be enough to make you ineligible for benefits you would have got if you hadn't saved.[It won't affect the state pension itself.]
What you need to do is to "invest" the money, not save it.This involves taking a risk but over the long term, history shows the risk evens out and the returns are much higher. Before investing, it's sensible to learn more aboiut how to do it, and this site is a good place to start.
So since you have some time while you're knocking back that mortgage term ( a wise approach) hang around and get clued up about investing.Then later you'll know what to do when you have money to spare.
[Always make sure your state pension is paid up to date, as that's a valuable benefit as you've noticed.I wouldn't bother too much about other pensions unless your employer will contribute to one for you, or you become a higher rate taxpayer. Saving/investing in ISAs is better for those on basic rate.]Trying to keep it simple...0 -
savings are just not suitable for long term planning. You will struggle to keep up with inflation over the long term.
Also, you don't lose the state pension if you have savings, do you?
You dont lose the basic state pension but they can impact on pension credit which is means tested.
You have some ideas which could work but you are looking at the wrong products (savings accounts).I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
I don't know, it's not gona be for another 20 years or so. Just thought it might work. Not really into risk.
How do I know if my state pension is paid up to date? I received a letter from them not so long ago saying how much I would get or something.
I work full time, so does bf and both have done since we were 18. (25 and 26 now).Pink Sproglettes born 2008 and 2010
Mortgages (End 2017) - £180,235.03
(End 2021) - £131,215.25 DID IT!!!
(End 2022) - Target £116,213.810 -
Not really into risk.
Savings accounts carry a risk. The risk of inflation. If you put real inflation at 3.1%, then you need to beat that after tax on your savings account. Historically, apart from small periods of time, savings accounts have not kept up with inflation. So, whilst your passbook/statement would show an increasing value, the spending power of it would be going down in real terms.
Risk is not an on/off situation. Its a sliding scale and you can move just very slightly up the scale and start to access low risk investment areas which can offer much greater returns and give you real growth.How do I know if my state pension is paid up to date?
You can complete form BR19 which is a state pension forecast request. You can get it online http://www.thepensionservice.gov.uk/resourcecentre/br19/home.aspI am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Hi, pollyanna,
Just a couple of points.
1 - waiting until you are fifty to start saving for retirement is utter, utter madness. You have at your disposal the single greatest ingredient of investment returns, time. Use it! Start investing while you are young and the amounts you need to put aside will be far, far smaller than if you wait until you are much older.
2 - you have not a hope in Hades of saving enough money over 20 years to live off in retirement.
Consider; at today's interest rates you need £250,000 of capital to produce a measly £10,000 of income. In actual fact if you wanted to preserve your capital you could only take about £2500 of that, the rest would be needed to cover the effects of inflation. There are very few people who could save that amount out of income over 20 years ( a lot easier over 40 years, of course ) but with regular investments into the stock market it shouldn't be that difficult to reach a comfortable sum. Have a look at the retirement income calculator here; also the retirement planning calculator.
HTH
Cheerfulcat0 -
Agree 100% with above post - really don't wait until your 50 - it's the pound thats invested the longest that makes the greatest difference.
Also, given the tax advantages of pensions there is a very good chance that you will get a better return paying the amounts you are currently overpaying to your mortgage into a pension (especially if you can get an employer to match).0 -
Also, given the tax advantages of pensions there is a very good chance that you will get a better return paying the amounts you are currently overpaying to your mortgage into a pension (especially if you can get an employer to match).
The tax advantages of pensions are largely incorrectly stated nowadays and with changes made 6th April this year, the pension tax wrapper is less attractive than the ISA tax wrapper for the average person.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0
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