Your help would be greatly appreciated

groatie_queen

Hello and thanks to anyone who can give me some help with working through the logic of these issues. As they span both mortgage and retirement planning, I'll post in both boards, my apologies in advance if this is incorrect, and please moderators feel free to move /delete if necessary.

I'm 53 years old this year. Nearly 4 years into a 15-year £35,000 mortgage with Woolwich. (I bought my ex-husband out, house was valued at £135,000 at the time, value has definitely gone up since, not sure by how much).

For the first two years the offset mortgage was fixed at 3.95%, it's now at 5.95% offset with no penalties for overpayment and £10,800 left to repay. (I saved and put savings towards the mortgage when the fix came off). I have £6,000 in the offset account - my rainy day fund.

I've become unwell and had to go part-time permanently since January, with a 40% reduction in salary. I won't be able to work full time again in my current occupation - too stressful.

My earned income is £940, lodger pays me £330, total £1,270, of which £805 goes towards bills and cost of living, plus ££445 toward mortgage (my choice to overpay). It's a bit tight for comfort, but I would like to pay down the mortgage asap and not have to worry about it any more. How best to do it and cover all bases? This is where I would greatly appreciate some expert views

I have an ISA which was formerly an OEIC (Henderson Preference & Bond Fund, all profits re-invested). It is valued at approx £10,000. As it's a unit trust package I know its performance is relative to the stock market, but would appreciate it if someone can comment on how this fund is viewed. Bearing in mind I'm looking for a safe-ish investment due to my age and circs, but need a reasonable level of reinvestment to help it grow.

At the moment I'm only paying £53 per month (6% of salary) into my stakeholder pension (Standard Life) which was started 3 years ago and was projected to build to £20,000 by retirement at 65 - but obviously will not do so on 40% of the original contributions! I need to get back to a decent level of payment with this, and indeed if I can build a bigger pension pot so be it.

I have another pension pot of £46,000 (frozen - I can't add to it) with the Scottish Pensions Agency - my ex is a teacher.

I know it's a similar question to others posted here, so sorry if this is boring - I find it much easier to work out what might be best for others, not so easy for myself!

Should I cash in the ISA, pay off the mortgage and then throw a decent amount at the pension?

Or keep the ISA as my rainy day fund and use the £6,000 in the offset towards the mortgage?

Other options?

Re saving for retirement, at this stage in life am I better to put spare income into the stakeholder pension or into ISAs? The risk level for the stakeholder is moderate and there are various pots within it. Can I invest in both and still have a worthwhile return? I have to bear in mind I might not be able to keep working till 65.

My plan would be to move and release capital from the house nearer to whatever date is retirement. I reckon probably £50,000 equity would be released.

All suggestions welcome! And thanks for your interest and time.

Best wishes
GQ

EdInvestor

groatie_queen wrote: »

My earned income is £940, lodger pays me £330, total £1,270, of which £805 goes towards bills and cost of living, plus ££445 toward mortgage (my choice to overpay). It's a bit tight for comfort, but I would like to pay down the mortgage asap and not have to worry about it any more.

Well done on this effort so far. Your view is understandable, but you've already done very well - there's no need to knock yourself out. Why not reduce the overpayment for a while until you're feeling less stressed? It's also good to have a balance - you don't want all your eggs in the property basket.

I have an ISA which was formerly an OEIC (Henderson Preference & Bond Fund, all profits re-invested). It is valued at approx £10,000. As it's a unit trust package I know its performance is relative to the stock market

Actually this would appear to be a corporate bond fund also containing some preference shares (which are very similar to bonds) and thus is not related to the stockmarket. This fund won't have done well this year I imagine. I would suggest you choose some different - or additional - investments for this money including a commercial property fund, and an equity income fund or two.Having just one fund is risky.

I would suggest you transfer this ISA to a discount broker such as https://www.h-l.co.uk which will rebate charges on the new investments.Open the new account with them and they will organise the transfer.Then choose say 4 new funds.If you can top it up for this year's ISA allowance, that's excellent as well.

At the moment I'm only paying £53 per month (6% of salary) into my stakeholder pension (Standard Life) which was started 3 years ago and was projected to build to £20,000 by retirement at 65

When looking at income from pensions vs from ISAs, we need to first get an idea about your state pension entitlement. If you don't know what you will get from the 2 state pensions you can check here:

https://www.thepensionservice.gov.uk

I have another pension pot of £46,000 (frozen - I can't add to it) with the Scottish Pensions Agency - my ex is a teacher.

Could you tell us more about this pension? How much will it pay out when you retire? Is this a final salary pension or a money purchase pension? If you already have two pensions it may be better for you to save additional money in the tax free ISA. But it depends on how much they will pay out.

Should I cash in the ISA

Never cash in ISAs.Indeed you should be opening a new one now before the end of the tax year.

The risk level for the stakeholder is moderate and there are various pots within it.

How big is this pension and what is the money invested in?

groatie_queen

Thanks, Edinvestor for your helpful and reassuring reply.

Re the state pension forecast, the online service is closed till tomorrow evening, so I'll have a look at it then.

My stakeholder pension is with Standard Life, and has only been going three years, following divorce. It has approx £4,000 in it at present.

The reason my superannuation situation is so poor? Variously over the years, I was a stay-at-home Mum for 6 years, was ill for several years, and looked after my mother who had cancer for three years, and also worked p/t in the days when it wasn't possible to contribute to a superannuation scheme if you were a part-time worker - so along the way did not build any superannuation entitlement.

The £46,000 superannuation pot was a pension split from my ex-husband's superannuation as part of the divorce settlement. It's with the Scottish teachers' superannuation scheme, a government body. It's a notional pot, rather than a sum of money. I'll contact them to see what it will pay out per annum.

I speak to an IFA recently who seemed happy with the HGI ISA despite what I thought was poor performance recently. Although the IFA was recommended to me, I'm not very impressed with her. I undestand what you're saying about spreading risk across several funds, makes great sense to me!

I think for the time being, I'll continue paying down the mortgage at around £300 per month, and split the extra £145 between the stakeholder pension and the ISA allowance.

Many thanks

GQ

EdInvestor

You should be OK for a decent state pension as after 2010, you'll only need 30 years and you'll have plenty of credits from Home responsibilities protection but it's impirtnat to check exactly how much in case you need to buy up any back years ( the state pension is a bargain these days.)

It's also important to find out how much the teacher's pension will be, as pension income is taxable, so you want to keep all that pension money within the tax free personal allowance for pensioners which is going up to almost 10k by 2011.

So after you've acquired 10k's worth of pension income, all the rest should be designed to come from ISAs (or equity release, if required, which is also tax free).

Looks like you're on track for the correct balance so far.Can you take a tax free cash lump sum from the teachers pension? If so, factor that in on the ISA list.