Another first timer would like some advice.

inscrutable79

I've been starting to think about how to start my retirement planning, and need a few opinions as my financial knowledge is almost non-existent!

I'm 31, in full time employment in the NHS, earning approx. 35k. I'm a member of the 1995 section of the pension scheme, and have saved about 10k in a cash ISA as a deposit for hopefully buying a flat in the next couple of years. I was a student until I was 27, so I'm a few years behind in saving/pensions.

I want to have a comfortable retirement and so I've been looking into my options for increasing my income in retirement and as I see it I have 3 options

1) Buying NHS Additional Pension.
I put some numbers into the calculator on the NHS Pensions website and to give me an extra £1k a year I'd have to contribute about 8-9k in total. I'm obviously hoping I wouldn't fall off my perch only a few years after retirement but this basically means I'd have to live at least 9 years after I retired to make this worthwhile? Whilst my mum's side of the family have all lasted into their 80's and 90's, my father died at 69, so this is something I think about even though its a bit morbid. So what is the benefit of buying Additional Pension?

2) Making Additional Voluntary Contributions through my NHS Pension

3) Investing in a Stocks and Shares ISA.

Options 2 and 3 I guess are similar as I suppose they are investing in similar sorts of areas? The two NHS AVC options are with the PRU and Standard Life and they seem to have a wide range of fund options that they offer through the NHS AVC scheme. I guess with doing it the ISA way though I could access the money more quickly/in a lump sum e.g. if I fell ill and needed to get to it?

I can probably afford to put away at least £200 pounds a month for my retirement (still trying to save a bit more for the deposit, plus rainy day money at the moment so this may go up in the next few years). So what should I be doing with my money?!

All help gratefully received!

Loughton_Monkey

My own very strong opinion is that retirement planning doesn't start with "where do I put my money". Rather, it starts from very strong budgeting and full understanding of how you spend your money, and what sort of lifestyle you want to live now and in the future.

Your life and career will develop, and so it's not easy to predict the future. But that should not stop you drafting out a future likely income stream. How much you will earn, when you will be a property - when you might upsize. When you might get married.....

Work out how much you are going to spend, on Utilities, Motoring, Housing, Purchases, Tax........ Build up a budget for yourself.

As a rule of thumb, ensure that around 25% of gross salary in invested somehow. Your NHS pension is 'good' but you have started it late and probably will not be enough on its own.

Out of this drops a complete financial plan - based upon assumptions - which you can update each year on a rolling basis, and the pleasure comes from seeing how far you can stick to each year's component of it.

Only when you have done this, will you have some idea of what you need to save for retirement. What you need to 'provision' [short term savings] for deposits, cars, homw improvements.... And out of this should drop some logical breakdown of where your money should be going. Keep up the NHS pension obviously. Put extra in either AVC or Stocks & Shares ISA. Save for house deposit in Cash ISA and/or things like Sanatader Home buyer's plan. A bit into easy access bonus accounts for emergencies and 'smoothing'.....

I know people who have not done this. The majority have saved, but nowhere near enough. But I have a relative who has 'over-saved'. Now retired - lives a life (more than happily) - spending about 70% of total pension income. But has house paid for, and savings, which between them total 50 times his annual spending.