Pension, savings or Isa's?

phlairey

Just after some basic advise / help.
My husband is 43, self employed and has no pension or savings of any kind.
If he wants to put aside £150 a month, is he better off putting it into a higher interest savings account and paying tax, an Isa or a pension?

Just some general opinions would be great!
Thanks

ViolaLass

First off he needs six months living expenses (some say six months salary) set aside in an easy access account. This is a must before he plans anything more longterm.

jimjames

And ISAs are generally worth putting money into to protect them from tax even if you don't need the tax benefit now.

A cash ISA would be ideal for the 6 months living expenses savings. Then you can look for your next step but saving for retirement is essential and you may need to save more than £150 per month for that to ensure a comfortable living in retirement.

dunstonh

My husband is 43, self employed and has no pension or savings of any kind.

Being self employed, this means he doesnt qualify for the full state pensions. Just the basic. So, how is he planning to pay for things in retirement if he hasnt got anything put aside?

The three options you have given are all suitable as they effectively cover three different timescales. Short, medium and long term. However, I think you really need to have a sit down with him to discuss your budget and future needs as £150 is not enough and you are heading towards poverty unless something changes. If you cannot afford more then you should consider popping over to the debt free wannabee section of the board which has some very good people there who help others in a poor financial position. The first thing to realise is that being self employed with no pension and savings at age 43 is a very poor position to be in.

Loughton_Monkey

You did ask for general opinions!

I agree that £150 a month - while better than nothing - is not going to provide any 'reasonable' amount of pension at all. In fact (gritting my teeth) it pains me to admit that you are in danger of being in that sad position where some people advise "In that position, all you are doing is saving enough to destroy your qualification to benefits. So don't bother. You are shooting yourself in the foot."

Most tax payers, who foot the bill for benefits, are comfortable contributing to benefits for the 'unfortunate', but are less comfortable contributing to benefits to peers simply because (unlike themselves) someone else chose to spend every penny income rather than save some of it.

The full 'cost' - in terms of investing/saving for a pension that almost matches final earnings - is in the order of 20% to 25% of total income over the whole working life. So saving £150 a month for the latter half of working life is a bit like a thimblefull of water in the bath.

I would suggest a thorough review of income and expenditure. There will be a certain level of expenditure at which the resulting 'surplus' may be enough to supplement state pension so that roughly the same expenditure is available after retirement. I would think it is worthwhile trying to calculate what that is.

Jake'sGran

He could consider opening a SIPP with someone like Hargreaves Lansdown. My SIL opened one at about the age your husband is. He would need to choose the investment to put in it after doing a bit of research. HL don't give advice unless you pay for it but they will explain how the SIPP works. There are tax advantages in saving for a pension.

jem16

Jake'sGran wrote: »

He could consider opening a SIPP with someone like Hargreaves Lansdown.

Why a SIPP and not a personal pension?

dunstonh

HL don't give advice unless you pay for it but they will explain how the SIPP works. There are tax advantages in saving for a pension.

You are paying for advice with HL. You are just not getting it. (remember that HL do not rebate any of the IFA trail commission but keep it all).

Also, £150 starting from zero balance makes the SIPP an expensive folly. I could imagine that if this was a real world case and a SIPP was taken out on advice, then it would just be an upheld complaint waiting to happen. Hopefully, the OP will come back and post more information as I fear at the moment, the issue is being looked at the wrong way. It needs to be looked at from the other end and worked backwards. i.e. what do you want in future (long term. ie. retirement, medium term and short term). Then work it backwards to how much that is going to cost.

There is also needs to be some "disturbance". Whilst that will be uncomfortable, the OPs husband needs to be told and be made aware of the consequences of the current position and future position. Otherwise you just end up in the position where many people are today where they are paying £x pm but dont really have a clue what they are going to get for it.

Even worse, you end up like those jaded people who started paying £30pm in 1988 and never increased it with inflation or earnings and now complain that pensions are bad and a waste of time as their £30pm hasnt given them a £2000pm income. The type programmes like Panorama roll out when they decide pensions need slagging off. Starting £150pm now is the same as someone starting £30pm in 1988. Its just heading for a repeat of the same old problem.

Jake'sGran

jem16 wrote: »

Why a SIPP and not a personal pension?

Sorry, I suppose I was not aware that a PP could be opened via HL bit it is obvious really.
My SIL has a company pension as well as the SIPP with HL.

xrjtg

Jake'sGran wrote: »

I was not aware that a PP could be opened via HL

I don't think that they can. I think the objection was more to SIPPs in general in a case like this.

jem16

Jake'sGran wrote: »

Sorry, I suppose I was not aware that a PP could be opened via HL bit it is obvious really.
My SIL has a company pension as well as the SIPP with HL.

The point was that in most cases a SIPP is not necessary as it can be dearer than a personal pension if just investing in funds.