In my 40's with no savings / pension.....

Tara100

Hello

I am in my early 40's and due to life circumstances, I have no work / private pension or any savings
I am in a position now to put aside approx £40-£60 a week (not much I know, but I'm single and have a mortgage etc to cover on my own)

My query is, what is the best way to see a decent return on my money in the future?
I don't understand pensions very well, but from what I have learned, it's a dire situation for many, and come retirement day, the money pot is not as expected.

Your thoughts / advice would be appreciated - Many thanks

dunstonh

I don't understand pensions very well, but from what I have learned, it's a dire situation for many, and come retirement day, the money pot is not as expected.

There are significant numbers of people who pay under £100pm but think they are going to get £1000 pm from that in retirement. So, when retirement comes, they are shocked. It is more to do with a lack of realism than pensions.

You see people with pension funds of £20k and blame the pension for the lack of income. Not the fact they never took it seriously when they were working.

You should probably aim to get your savings up to a certain level first before you start long term planning. Pensions will provide better for the long term than savings but wont provide anything for the short term. That will then give you a chance to look at medium and long term planning.

hugheskevi

My query is, what is the best way to see a decent return on my money in the future?

Long-term savings need to be invested, ie, not put in savings accounts or cash ISAs, which are suitable for short/medium term savings.

I don't understand pensions very well, but from what I have learned, it's a dire situation for many, and come retirement day, the money pot is not as expected.

Pensions are just an investment wrapper, like an ISA. You can put whatever you want into that wrapper, and it is how the investments perform that determine what you have.

Choose bad investments, and they would perform the same as they would in an ISA, or if not in any wrapper whatsoever.

A lot of the bad press is from people with completely unrealistic expectations (I put in £100 a month for 20 years into a pension, why doesn't it provide me with £20,000 a year from age 60 type reports).

Your thoughts / advice would be appreciated - Many thanks

Ensure all non-mortgage and student loan debts are paid off

Build up 6 months net income in easily accessible savings accounts/cash ISAs.

Check what pension provision your employer offers, contribute enough to get maximum matched contributions if they offer them.

Pensions are most attractive if you are a higher rate taxpayer, have access to salary sacrifice, would get an employer contribution or if you receive Tax Credits.

If none of the above apply, you may well be best to put the money into a stocks and shares ISA until such a time as one of the above applies or you get to within a few years of retirement, but without knowing detailed circumstances it is not possible to be definitive.

I am in a position now to put aside approx £40-£60 a week

Enough to make seeing an IFA to arrange a pension or other investment worthwhile.

Whatever you do, don't go to your local bank for advice - anything they offer will be awful.

Tara100

Thanks for the reply

I'm hoping to save approx £5,000 minimum for rainy day measures, and then move onto saving for my retirement.
I was just wondering about saving options, as many seem to advise against pensions altogehter, and to put your money elsewhere. Again, it's all quite new thinking for me (I know it shouldn't be, but c'est la vie!)

I'm keen to learn about the other options if it better suits my situation......:)

Tara100

Ah, I do receive working tax credits. How would this help me please?

Also, I have just started a new job with a small charity - I have a feeling they do not have a pension plan, but will check on this tomorrow.



Thank you

Lokolo

If they are a small charity the then likelihood is they don't.

As said above, people have unrealistic expectation for a pension.

Have a play with this http://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

It will give you an idea of what you can expect to get out depending on what you put in (however, they are estimates!).

atush

First, you need to save in cash. In ISAs of you pay tax, and the best paying easy access acct if you don't. You need 6 months salary/spending, then invest outside. Once you have 6 months cash saved., you can look at Equities- S&S ISAs or investment trust savings plans.

You seem to have very little extra money available for saving for your age, so I suggest that you go to the Budgeting or Debt Free board and get ideas on where to trim your spending/outgoings. How long has it been since you comparison shopped for utilitities, insurance, phones etc? There will be areas in which you are wasting Money I assure you. Keep a spending diary for one or more months and put in every penny you spend to help you find the waste.

You need to look for a job that has a pension if you can. or estimate when your company will have to give you one (in the next 4 years or so all amployers with mroe than 5 people working will have to in some form). You need to look at ways to bring in mroe income such as taking a lodger as you won your own home, or renting out your parking space if you live in London etc.

It isn't too late at 40 to start retirment planning although it can be harder. But you do have 25 or more working years left so get to it ;-)

hugheskevi

I was just wondering about saving options, as many seem to advise against pensions altogehter, and to put your money elsewhere.

Pensions are an absolutely key part of retirement planning, and to a greater or lesser extent should feature in anyone's planning, regardless of income.

Even at the lowest end, you can build up a few thousand to take in a lump sum (trivial commutation) and gain from the incentives to contribute.

Anyone who advises against pensions altogether is an idiot. Having said that, to maximise the benefits of a pension, you do need to understand a bit about how they work, and how best to use them to your advantage.

Ah, I do receive working tax credits. How would this help me please?

For every £1 your income goes down by, you get a 41p increase in Tax Credits.

Page 137 of this report has a bit more information, and I recall a long time ago there was a thread on this forum about it which you might be able to find (perhaps started by dunstonh, but I may be wrong about that).

Suffice to say, getting a 41% subsidy to pension contributions makes them very attractive.

McKneff

And I'd just like to say that any private pension which supplements the meagre state pension is better than living in poverty on just the state pension.

Tara100

atush wrote: »

First, you need to save in cash. In ISAs of you pay tax, and the best paying easy access acct if you don't. You need 6 months salary/spending, then invest outside. Once you have 6 months cash saved., you can look at Equities- S&S ISAs or investment trust savings plans.

You seem to have very little extra money available for saving for your age, so I suggest that you go to the Budgeting or Debt Free board and get ideas on where to trim your spending/outgoings. How long has it been since you comparison shopped for utilitities, insurance, phones etc? There will be areas in which you are wasting Money I assure you. Keep a spending diary for one or more months and put in every penny you spend to help you find the waste.

You need to look for a job that has a pension if you can. or estimate when your company will have to give you one (in the next 4 years or so all amployers with mroe than 5 people working will have to in some form). You need to look at ways to bring in mroe income such as taking a lodger as you won your own home, or renting out your parking space if you live in London etc.

It isn't too late at 40 to start retirment planning although it can be harder. But you do have 25 or more working years left so get to it ;-)

Oh if only I could trim my outgoings further.....I have everything pared down to the bare bones, and live very frugally.

I compare all insurances etc online for hours before buying, BUT, I have managed to cut expenses in a big way over the last few years. I even got myself an electric bicycle so that I could ditch my car
My next step is to sell my home and move to somewhere much smaller - I believe my mortgage will be less than half of what it is then too.
Apart from knitting my own hair to make jumpers, there's no more savings to be had :rotfl:

Tara100

Thank you everyone for the replies - I'm going to make it my task to set up a definate plan over the coming weeks and research all I can too.

You've been stars!