pension advice much appreciated

dessssss

I am 45. Married 4 children.
I am the only earner in the family and gross 50K a year.
Just less than 90k mortgage on a house worth 150k.
No savings, no pension. No company pension scheme
I currently overpay on my mortgage by 400 pounds a month.

What would you do?

thanks in advance

dunstonh

I currently overpay on my mortgage by 400 pounds a month.

Why when you have no retirement provision?

What would you do?

Start to plan for a significantly lower living standard in retirement. However, you can go some way to reduce the impact by contributing towards your retirement. it is not going to be cheap. You are talking close to around a quarter of your earnings as you have left it so late.

Nick_C

£50K sounds a lot, but not with 4 children to support, so well done on having a surplus of £400 a month.

However, with interest rates at low levels, paying off your mortgage is not necessarily the best thing to do. What is your rate of interest?

I am about to take on a mortgage (tracker at base rate = 2%) because I am investing in equities that giving me a net return of around 5%, so its better for me to borrow cheap money than be debt free. I will pay off my mortgage once interest rates go above 5%.

Do you have any savings? You should have a contingency fund, and you want to be earning interest on it.

However, your main priority should, as you say, be building up a pension fund. You will get tax relief on your pension contributions, and you may be able to pay a sufficient amount into a pension to take you out of the higher rate tax band. You also need to keep your taxable income (after taking pension contributions into account) below £50K to keep your child benefit.

Personally, in your position, I would be using a SIPP, but if you lack the knowledge and/or confidence to do this yourself, then in your position I would pay for a session with an IFA.

robin61

dessssss wrote: »

I am 45. Married 4 children.
I am the only earner in the family and gross 50K a year.
Just less than 90k mortgage on a house worth 150k.
No savings, no pension. No company pension scheme
I currently overpay on my mortgage by 400 pounds a month.

What would you do?

thanks in advance

If you are currently earning 50k gross and have 4 kids your child benefit is worth quite a bit to you especially as it isn't taxable. If your pay creeps over that amount in the future you are going to start to lose that benefit until it goes altogether at £60k.
I pay extra in to my company AVC which has reduced my gross pay and as a result I have kept this.
If your company doesn't have a scheme though and you contribute yourself in a DC scheme I am not quite sure how this will impact your P60. Perhaps others can chime in on how you can keep this benefit in the future. With 4 kids it is worth having.

dessssss

Nick_C wrote: »

£50K sounds a lot, but not with 4 children to support, so well done on having a surplus of £400 a month.

However, with interest rates at low levels, paying off your mortgage is not necessarily the best thing to do. What is your rate of interest?

I am about to take on a mortgage (tracker at base rate = 2%) because I am investing in equities that giving me a net return of around 5%, so its better for me to borrow cheap money than be debt free. I will pay off my mortgage once interest rates go above 5%.

Do you have any savings? You should have a contingency fund, and you want to be earning interest on it.

However, your main priority should, as you say, be building up a pension fund. You will get tax relief on your pension contributions, and you may be able to pay a sufficient amount into a pension to take you out of the higher rate tax band. You also need to keep your taxable income (after taking pension contributions into account) below £50K to keep your child benefit.

Personally, in your position, I would be using a SIPP, but if you lack the knowledge and/or confidence to do this yourself, then in your position I would pay for a session with an IFA.

I am now saving 200 pounds per month in to an ISA. Other than that I have no savings. I lost my job recently and have experienced first hand the folly of having no savings to fall back on.

My mortgage is fixed at 4.19%. I have 3 years left. I fixed for safety though of course I now wish I had gone for a tracker.
I do believe that interest rates will go up in the next few years , and maybe faster than many predict.

A SIPP is of interest and yes I will be due a bonus so want to keep my taxable income no more than 50k to keep the child benefit.

Is a session with an IFA worthwhile. Will i really get impartial advice?

dessssss

dunstonh wrote: »

Why when you have no retirement provision?

Guess i'm just one of many who have not thought it through properly.
I have just realised Im getting old.




Start to plan for a significantly lower living standard in retirement. However, you can go some way to reduce the impact by contributing towards your retirement. it is not going to be cheap. You are talking close to around a quarter of your earnings as you have left it so late.

Yes I know I have to plan for retirement.
Its why I'm asking questions here.
I wonder what standard of living my wife and I would have if I started to invest a quarter now.

robin61

dessssss wrote: »

Yes I know I have to plan for retirement.
Its why I'm asking questions here.
I wonder what standard of living my wife and I would have if I started to invest a quarter now.

If you are earning £50k you can invest. Just over 8k per year into your pension and qualify for 40% tax relief on that amount. If you were to put in more than this though you wouldn't get 40% on the rest. Only 20%. Still worth having though.

System

I am just impressed that somebody with 4 children on £50k gross a year can overpay a mortgage by £400 a month and save another £200 into an ISA. £50K a year gross after tax and NI must be about £37000.




V.

dessssss

excelpaul wrote: »

I am just impressed that somebody with 4 children on £50k gross a year can overpay a mortgage by £400 a month and save another £200 into an ISA. £50K a year gross after tax and NI must be about £37000.




V.

But with no pension it maybe is not that impressive

robin61

dessssss wrote: »

Yes I know I have to plan for retirement.
Its why I'm asking questions here.
I wonder what standard of living my wife and I would have if I started to invest a quarter now.

If you invest £8k per annum that will cost you £400 per month once you have had the 40% tax relief. I have just put that through an on line savings calculator and based on 5% interest which might be possible that would come to £273k after 20 years. Not a huge pension pot but better than many will have.

dessssss

robin61 wrote: »

If you invest £8k per annum that will cost you £400 per month once you have had the 40% tax relief. I have just put that through an on line savings calculator and based on 5% interest which might be possible that would come to £273k after 20 years. Not a huge pension pot but better than many will have.

That sounds promising.
Where do I start and how do I achieve 5% interest in these times