Soon to be debt Free now it's time to save

jem16

barcabod wrote: »

I think even if I pay into a pension fund now at my age I will not get a good return on it.
I am willing to be persuaded otherwise though.

We cannot persuade you in any way without further information on what you already have as a pension.

Main questions;

1. What kind of pension is it - defined benefit (ie final salary type) or defined contribution ( ie you have a pot of money which is invested)

2. Does your employer contribute and if so how much? This is really only relevant if defined contribution.

3. What is the maximum your employer will contribute?

We have worked out that with savings and my and wifes pensions+ state pension we will be comfortable

Your wife's pension is a good one from the Civil Service and index-linked. However if she dies first you will only receive half of it. Will this still be enough?

Your savings are unlikely to keep up with inflation so each year you will be losing the spending power from them.

jem16

barcabod wrote: »

I also do not see why we are doomed if we save 14k ayear for the foreseeable future as long as we still work thats a fair amount in my book

You are not going to be doomed but what we are trying to tell you is that savings alone is not the best option for that amount of money as it's not keeping up with inflation so losing value in real terms.

barcabod wrote: »

I am now thinking about going to see the bank manager to see ig he can give me a basic grounding in all this.

If you do feel that advice would be helpful for you, please do not see a bank manager. He would only be able to help with his own bank's products which are likely to be expensive and not very good.

Best person to see would be an IFA (Independent Financial Adviser) or an RFA ( Restricted Financial Adviser) who is able to advise on products from the whole market. Look at https://www.unbaised.co.uk for someone in your area.

barcabod

Thanks Gem

I will see if I can see a financial advisor in the next few weeks

planteria

jem16 wrote: »

3. What is the maximum your employer will contribute?

generally, it is wise to contribute enough yourself to ensure that your employer contributes as much as they are prepared to, if this is affordable.

atush

The risk bit is nonsense, as you are ensuring you are losing out to inflation by saving only in cash. Of the 3 types of risk you are scared of one (which may or may not happen) but are guaranteeing you will fall afoul of the other two- inflation and shortfall.

CC debt, get rid of immediately. No point in saving when you are paying someone 2-10 as much interest.

Pension:

I think even if I pay into a pension fund now at my age I will not get a good return on it.
I am willing to be persuaded otherwise though.

Well yes, it would be worth it. Say you will work until you are 65-67. That means 16-18 years of contributing. Plenty of time to set up a decent pot. Even is earlier would have been better, but that isn't a reason to stop now. Does your work have a pension that they will pay into? If they don't they will soon so join it.

Say you want to put in 100 a month, this would only cost you 80, as HMRC tops it up to 100. So, each 80 you put in is 100, so put in 320 per month and it becomes 400 immediately. So oever 16 years you have put in just over 61K, but nearly 77K has gone into the pension. Add in investment growth, and you are laughing.

Your OH's pension looks to be good, so they should keep paying in. If they want to retire earlier than the scheme age, then she should pay into S&S isas alongside, as those could be used to live on instead of taking the pension early/reduced which should be avoided if at all possible.

So after you address your lack of pension, I'd look to save at least half the rest into S&S isas as they will do better than cash (even in bad times) over periods of ten years or more.

Archi_Bald

atush wrote: »

TSo oever 16 years you have put in just over 61K, but nearly 77K has gone into the pension. Add in investment growth, and you are laughing.

You should, of course, mention for completeness that pension/annuity is taxable once you draw it. So your 20% saving now will probably be eliminated by the 20% or so tax you have to pay on at least 75% of your pot.

However, the investment growth should easily make up for it, and more.

atush

Not completely eliminated.

In any case, you do have a PA to receive income w/o tax. you have to have a very large pot to take 25% TF then get enough income to be more than your PA. Esp if you want to retire earlier than 68-70 as there won't be a SP til then.