Stakeholder turned into a SIPP

margaretclare

Hi richone

The beauty of it is, we both receive our income separately and we're taxed separately. If it was one income for both of us (the former 'man as breadwinner with wife as supported dependant' model) we would fall into that 'clawback' situation. DH's annual income totals £11,860.28, mine (including AA) totals £12,524.33.

Yes, we both have cash ISAs and I have an equity ISA as well. I paid tax on the first year's annual drawdown from H-L but plonked the net amount straight back to H-L into the equity ISA. I haven't used up all my 10% tax allowance band so I contacted HMRC and hopefully will get some of that tax back - I paid 22% but should only have paid 10%.

Re bonds from banks and building societies - yes, I've never been tempted by anything that's 'tied' to any bank or BS.

Not sure what's the point of single premium insurance bonds for us - the only use I could see would be if we have to pay for residential care at some time in the (hopefully distant) future.

We are 71 now and we could easily live another 20 years - we don't know what we may need in that time. Given that we both have disposable income, it makes sense to save it. DH was finding that he always had approx £200 unused at the end of every 4-week period (pensions get paid 4-weekly) and he decided to start a cash ISA. Even with paying for the roof a few months ago (between us) he now has around £1800 in his cash ISA. It just shows what can be done.

Margaret

margaretclare

Hi all

As usual, DH has money left over at the end of each 4-week period when he gets the next SRP payment. Today he has paid off his credit card (he does that every month religiously so never incurs charges) and still has money left over. He's been watching the dollar/pound exchange rate like a hawk because it could pay us to buy dollars in advance of our trip to Niagara next July - the dollar may be strong again then, who knows!

Anyway, he's just paid another £200 into his cash ISA with First Direct, has just over £2K in there now. I think this has surprised him a bit, because it has all been from what's left over every 4 weeks! I've recently moved my cash ISA from smile to the Yorkshire BS because their rate was better - 5.15%. I have about £1300 in there and £2500 in the equity ISA. Although I took drawdown from my H-L SIPP it is still growing.

DH asked me that question 'what are you saving for'? Well, for one thing, I like saving! It gives me a feeling of security. I like seeing what is possible. I've heard people say 'you should spend it'. On what? We live well, we live comfortably, we have all we need and we do the things we want to do, so what else should we spend on, just for the sake of spending? This year is the first Christmas ever we're going to be away for nearly a week, it's all paid for, we have nothing to do except just turn up, and we're looking forward to it.

Margaret

Victors_Bruvver

I do wish I was as organised as you Margaret. I took voluntary redundancy nearly three years ago and even with your recent advice still haven't got my finances in order. Now this morning I get a letter from my pension provider asking me to make a decision and sign the documents necessary to start receiving my pension early next year. Would not be too bad but the decision to make is - do I take the lump sum and a reduced pension or do I leave it all there and get roughly a third more paid to me each year? I would imagine (all of this is beyond me) that by leaving the lump sum alone it guarantees me a slightly better lifestyle but the concern is, if I take the lump sum and invest it, would it give me a better return. IE if it was wisely invested into safe options, sipps, issa’s etc., would it or could it make a return that would be equal to that third I would "lose" on my annual pension payouts?

margaretclare

Oo-er. I would suggest you post on the Pensions Board - there are people there like ReportInvestor who can help.

I think your pension provider should have given you more information rather than expecting you to make a decision i.e. just sign the documents! Once you make this type of a decision there's no going back. You need a bit of expert help here and I am not competent to suggest what to do. There are so many ifs and buts, you need proper help.

Given what I've learned over recent years I would NOT make the decisions I made earlier. It has been a lengthy learning curve and I'm still learning.

Best wishes

Margaret

Victors_Bruvver

Thanks Margaret, I did exaggerate a little as there were a few more documents to accompany the letter especially the one with an explanation of the pension changes this year. However, it looks as if the choice is mine and I suppose it is because of the regulations they cannot say in which direction I should be going, unless of course I ask them to advise. I am a bit wary of doing this as I may end up putting my money into one of their pet investment schemes and end up with administration charges etc., I'll do what you suggest and post something to the Pension Board and see what happens.
Thanks again V_B

margaretclare

No, they are not allowed to give you 'advice'. Advice is what you pay for. No one on boards like these will give you advice, either.

However, getting a third more pension paid to you each year sounds like a pretty good deal to me. You would have to be fairly knowledgeable in the investing world to do better than 1/3rd. Of course, if you don't need the extra 1/3rd you can always invest that! Just keep sticking it into an ISA - you'll be surprised how it adds up.

My DH has now got over £2000 in his cash ISA and he only started a few months ago, just putting away the £200 that he hasn't spent at the end of every 4-weekly pension period. (Following my advice - even though he's very money-savvy himself having been a businessman for decades - he was inclined to let it sit in his current account at a tiddly rate of interest).

Margaret

margaretclare

Hi all, just a little update:

As of the end of the current tax year I'll have paid the maximum allowed into my equity ISA, £4000, and as far as I can work out, it's doing OK, growing very nicely!

This was interesting in yesterday's 'Telegraph': http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/02/10/cmtax10.xml

These people seem to have got it right between them, worked as a team, spotted the opportunities and took advantage of everything that came along. Just shows what can be done! In the same time-period, 20 years, how many other people will have frittered uncounted amounts of money away?

DH has now got approx £2,600 in his cash ISA, just from saving £200 that was unused every 4 weeks when the next pension payment drops into his bank.

I continue to be asked: 'what are you saving FOR? After all, if you have to go into a home the council will either pay for you, or sell your house over your head....'

Well, I might need an 'immediate needs annuity' if such a dire state of affairs ever came to pass. I've only seen that suggestion expressed by EdInvestor (thanks!) and I can't imagine why more people haven't picked up on the idea.

My Attendance Allowance expires in July, and no, I don't want to re-apply - I'm all better now. However, it was useful, not least because it enabled us to have the boiler replaced under a WarmFront grant, and since then we've had the hall re-carpeted so all is done indoors. No more need for craftsmen and technician coming in and out, I was determined not to have a new carpet until all was done.

In addition, the value of this bungalow has increased from £140K in 2003 to probably £175K now, all the work has been done, it's warm, comfortable and nicely-decorated.

Margaret

savingforoz

Thanks for the update, Margaret and yes, that's a wonderful story about the PEP millionaires. Isn't hindsight a wonderful thing?! - I do kick myself sometimes that I just wasn't switched on enough previously to do the same. Still, I expect that applies to many of us, and I do think it's a case of better late than never! - I'm 45 now and fully intend to get as switched on as I can about money from now on. You are a shining example to us!

lswwong

Hi Auntie Margaret

Great thread! Just want to say thank you and wish you well (am at work now and browser has restricted setting on it which won't let me use the "Thanks" button - will thank properly when I get home).

You have shown us that it is never too late to save and to apply oneself at it for one's betterment. I think it is the "money in the bank" feeling that the majority of MSE members find comforting.

I have just had my retirement savings provisions reviewed and am extremely glad that I did it now as it has highlighted some problem areas early - I still have some 28 years to go before I retire. Time (and so compounding) is the ingredient that I can't buy. Also, by rearranging my retirement investments now (and review regularly), I will benefit from such application when I am retired and will be able to spend more time having fun (and not worry about making ends meet!

Thus, I would like to think that I have saved (future) money by saving something now.

Some of my immediate family and friends at work continue to spend recklessly or are simply burying their heads in the sand. Actually, the burying their heads in the sand (which my mother eloquently calls the "emu policy") crowd breaks my heart as they are often lovely people who do not feel empowered to help themselves. One frequent excuse is "oh, it's too complicated/scary to think about" and that's that while time ticks away.

Sorry I seem to be rambling .... just a subject close to my heard and the people I care about don't seem to be able to make sense of it for their own sake!

Best regards,
Louise