Confused

househunter2013

Need some advice please guys?
A bit of background. I’m 34 and am self-employed with a Ltd company. I’ve never had a pension of any description and I’m now thinking it may be time to look into my options.
I’m reasonably financially stable with £25k of savings, a mortgage of £185k on a house worth approx. £280k. Although having said that withthe nature of my work my savings could soon dwindle should work dry up.

My wife is a stay at home mum so I am the only source of family income. At the moment, we are overpaying the mortgage by £10k a year in order to be mortgage/debt free by the time I’m 45. The plan from that point was to then think about the future in either starting a pension or investing of some description. But recently I’ve been thinking I could be looking at this all wrong and that I should start a pension now.
Overpayment would save £93k in interest and reduce the term from 31 years to 11 years.

Can a pension outperform the above figures? The worry I’ve always had with pensions is the risk factor, is this fear valid?
Thanks in advance

xylophone

Time to see an Independent Financial Adviser?

https://www.unbiased.co.uk/

Have you taken out insurance to cover the repayment of the mortgage/financial security for your family in the event of your death?

https://www.jrcinsurancegroup.com/breadwinner-life-insurance-for-income-replacement/

Insurance in the event of ill health?
http://www.companybug.com/business-insurance-expenses/

Linton

I guess one could work it out from the data you provide but it's a complex bit of maths and easier to ask - what is the interest rate on the mortgage? If a return on investments is significantly greater than the interest paid on the mortgage it makes sense to reconsider your strategy. Note you dont have to go completely pension or completely mortgage. It may well make sense to overpay a bit, put a reasonable amount in a pension and the rest in an S&S ISA.

As to risk, like an ISA a pension is just somewhere to hold investments. It's the investments that matter. With investments you can choose from a very wide range. Just about zero risk and currently close to zero return to very high risk and high returns - say an average of 10% or more annually. Most sensible investments will have a natural tendency to increase in value, but with fluctuations. So the longer you hold an investment the safer it gets as the underlying increase gets progressively larger than the size of the fluctuations. However you do always need to be prepared for temporary falls in value.

One of your comments does concern me - that your savings would soon dwindle if work dried up. If you hold investments you need sufficient cash to tied you over the bad times. The reason is that you dont want to be forced to sell an investment at the low point of a fluctuation. I would have thought £25K was enough coverage for at least 6 months with no work and in that time you could have found another source of income. However if that's not the case you should increase your savings before anything else.

atush

Plus you mention you are a limited company. You could pay your pension out of company profits and save on tax, as well as income tax?