Retirement Saving Advice

mattrobbo99

Hi All,

I'm based in the Manchester area, am 38, a higher rate tax payer and have around 40k in savings that are for the sole purpose of my retirement, half of which is in an ISA and the rest is in an easy access savings account. Other than that, I have no pension plan for my retirement, so I want to think more seriously about my savings. At the moment, I could put 10k per year away towards my retirement, but I would appreciated some advice on what to do or who to talk to regarding what to do.

I'm employed but by a foreign company who are not registered in UK, so they would have no obligation to pay into a pension plan on my behalf. as far as the Inland Revenue are concerned, it's complicated, but I'm the employer of myself as the employee. so if i had a scheme whereby the employer has to also contribute, it wouldn't be much of an incentive as I'm both the employer and the employee.

I've had a look on the internet for a financial adviser who would be independent and free (ie take commission from the company I use for my savings plan) but I can't find anything.

I've also had a look at companies like Hargreaves Lansdown, but I would like some opinions of a good, relatively safe way of investing my money for the future.

Is maxing my ISA and my wife's ISA each year a good option? As this would take me up to my potential saving capability and the current rates are around 2.5% so not great, but I'm not sure about pensions as people i know have lost a lot of money in their pensions.

Any advice would be much appreciated. I'm not adverse to having several smaller pots, but don't want anything that carries a great risk

bigadaj

If you continue to save in cash then you're in for a poor or delayed retirement or both.

Pensions mainly rely on the increased performance that share investment generates so you need to be invested.

It sounds as though you're effectively self employed so won't benefit from employer contributions, but the other thing really beneficial in pensions is saving higher rate tax, so the government is effectively paying in £4 rather than £2 for every £10 you save.

Paying nothing for financial advice is short sighted and the root cause of many of the mis selling scandals, if you don't pay for advice then you're effectively buying that which is most favourable to the seller, so the highest commission payer which, all things being equal, is likely to be the worst performs because it paying high commissions.

Your choices are either to pay an ifa, or DIY. It s a good idea to read up yourself in any case, but go to an ifa for a chat and get an idea of costs.

mattrobbo99

Ok, many thanks for your advice. What would be a reasonable charge for an IFA as a fixed fee? Maybe £300??

FatherAbraham

mattrobbo99 wrote: »

I'm based in the Manchester area, am 38, a higher rate tax payer and have around 40k in savings that are for the sole purpose of my retirement, half of which is in an ISA and the rest is in an easy access savings account. Other than that, I have no pension plan for my retirement, so I want to think more seriously about my savings. At the moment, I could put 10k per year away towards my retirement, but I would appreciated some advice on what to do or who to talk to regarding what to do.

Higher-rate tax-payer + ISA savings + no pension contribs = alarm bells

By saving into an ISA, you're protecting post-tax money (60% of what you earnt gross) from future taxation.

It would be more sensible to defer taxation on that earning, by putting it into a pension arrangement. Your tax rate in retirement is likely to be lower than it is now, especially when the 25% tax-free lump sum is taken into account.

ISAs are extremely tax inefficient for the retirement savings of higher-rate tax-payers.

Warmest regards,
FA

atush

300 is low for setting up a pension with 10K contribs per annum.

As a higher rate taxpayer (how much over the limit are you?) you pay 80 into a pension, the govt tops it up with 20 to make 100. then they take another 20 off your tax. with cash if you save 60, you have 60. as a HRT payer you save 60 and get 100 effectively. So do it asap. "you are really missing a trick here, and paying to much in tax.

then, how is your employement set up? Are you a Limited company? if so, you could pay a pension contrib for yourself Pre tax, and save Nics on top?

Then ISAs. It is a great idea to have 3-12 months spending in cash for your household. but after you have that between you, it would make sense to use a S&S isa for further saving.

dunstonh

am 38, a higher rate tax payer and have around 40k in savings that are for the sole purpose of my retirement, half of which is in an ISA and the rest is in an easy access savings account.

Oh dear. That is not very good. 1) at 38 and a higher rate tax payer (indicating a certain level of income and lifestyle) that would put you behind in planning 2) you are using cash savings which is bad for long term planning.

At the moment, I could put 10k per year away towards my retirement

That is good. That would swing things around nicely.

I've had a look on the internet for a financial adviser who would be independent and free (ie take commission from the company I use for my savings plan) but I can't find anything.

Doesnt exist and has never existed. Why would anyone work for free? Commission doesnt exist any more. When it did used to exist then you paid for it in product charges.

I've also had a look at companies like Hargreaves Lansdown, but I would like some opinions of a good, relatively safe way of investing my money for the future.

Your current way is not very safe. yes your balance wont fluctuate but you are taking on shortfall risk and inflation risk and the odds of ending up with less are higher than taking on a sensible level of investment risk.

Ok, many thanks for your advice. What would be a reasonable charge for an IFA as a fixed fee? Maybe £300??

I dont see you finding one for £300. That would be loss making for most IFAs. £1000-£1500 is more in the expected level. However, you can get tax relief on the fee at 40% and it can be taken from the pension fund and the product will be nil commission basis making it far cheaper than the type of pension/advice costs you were willing to pay but considered free.

mattrobbo99

Thanks all for your help. I must admit that I've probably been quite naive about this and should have got something set up years ago. Still, what's done is done and I'll move forward immediately. I just assumed that it would be more like finding life insurance and relatively easy, but clearly not.

Are there any websites rating IFAs? I've had a look on unbiased.com, but I don't really know how to choose one other than by location. I've asked around and don't have any recommendations to go by. Any advice pointing me in the right direction would be much appreciated. I live in the Stockport area

dunstonh

Are there any websites rating IFAs?

Impossible to do realistically as advice is measured over decades frequently and also what would you measure. i.e. you want retirement advice, you went to IFA and IFA recommended a pension and investments based on that. That would effectively be the same outcome with the vast majority.

Plus, most IFAs are small local firms with 1-2 advisers. They don't have the scale to get internet coverage. It is a bit like asking if your local butcher would be rated on the internet.

mattrobbo99

Thanks. That's a good point.

Haven't you seen ratemybutcher.com? fantastic site

xylophone

I'm employed but by a foreign company who are not registered in UK, so they would have no obligation to pay into a pension plan on my behalf. as far as the Inland Revenue are concerned, it's complicated, but I'm the employer of myself as the employee.

Do you mean that you have set up an off shore company and are the sole shareholder/employee?

Jack_Griffin

If you are the sole employee why are you paying higher rate tax?

I ran my single employee UK registered company for 10 years and paid relatively little tax, certainly no more than 15% average on over 60K pa. It could have been less except I needed some money to live on & I couldn't work out a way to make it all tax free, LOL.

PS All perfectly legal.. I paid corporation tax on profit/dividends but virtually no income tax or NI & stuck a decent whack of company profits in a pension fund which reduced the corporation tax payable.