Trying to plan my retirement but young and confused about everything

yorkshire-lad

Morning All,
Its been a long while since I last posted on the MSE forum .

I am in need of some help please about my pension and planning for retirement.

I am currently 28 years old and been working since 16. I was auto enrolled last year to into the new Government pension scheme which was introduced, apart from this I have no other pension scheme thing.

Now, Since last Jan time I had a spare £70 a month what I could put away plus my regular savings, emergency fund etc. So that has been slowly building up over the past 12 months :money:

Now this is the daft question. I know its a small amount a month but whats the best way to invest this long term ie till retirement.

Do I keep putting this amount into a savings then invest it a few years down the line when it has built up? Do I increase my contributions to the gov scheme, do they even do the same?? Or do I start my own private pension scheme with a company? Or do I do something completely different?

Again, I am a complete novice when it comes to these kind of things but I have figured I need to get this sorted sooner rather than later.

Thanks for reading if you have gotten this far!

YL

bigadaj

By the government scheme you presumably mean auto enrolment, which is a start, put enough into this to get your employers contribution, ideally the maximum.

Looks like you have cleared your debts which is good, so I would do or update your statement of affairs with income, expenditure which will give you a figure you can save or invest.

Once debts are cleared then cash savings in high interest current accounts are probably best, anything between 3 months and a years income, either net or gross, is the typical range suggested.

How much do you earn, if you are a basic rate taxpayer then at your age stand alone pensions aren't necessarily the best option, look at the help to buy or Lisa if appropriate.

Isas are only really worth it for stocks and shares, so read up on these on the forums, monevator and books and come back to rationalise your thoughts.

xylophone

Have you thought of a Help to Buy ISA? Santander offers 4%.

Next tax year (2017-18), think about LISA.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/508117/Lifetime_ISA_explained.pdf

Make sure that you are using the best current account (s) for your needs.

PensionTech

Investment returns over the long term will be higher than returns in a savings account. So if you're not going to use the money for anything else, get it invested ASAP.

It's generally tax-efficient to put this into a pension rather than investing it outside of a pension after it's been taxed. The compromise is that you lock it up until age 55 (likely to be age 58 or later for someone your age). If you're really not planning to get your hands on it until retirement, then I'd say put it in a pension. Increasing your work pension contributions could be a good way to do this - particularly if you contribute via a "salary sacrifice" arrangement and/or your employer offers to match increases in your contributions. Those are things that you should ask your employer if you're not sure.

Whether to do this in your work pension or a personal pension depends partly on what your employer offers - if they do offer salary sacrifice and/or matched contributions, then do it via your work pension - and on the charging structure and investment/retirement options. The scheme used by your employer is likely to have relatively low fees, as work pensions can't charge more than 0.75% (or equivalent) of your fund per annum, but this may be offset by less flexible retirement or investment options. If your employer doesn't offer matched contributions or salary sacrifice, shop around and see how various personal pensions stack up against your work pension.

yorkshire-lad

Thanks for your response bigadaj.

The only debt I have is my mortgage but I dont really take that into consideration. I have 1 cc for emergencies but has £0 balance, my loan was paid off in September last year.

Since then I have been saving £620 (give or take £20/30) a month in total, this is after my share of the bills, food shopping, fuel, health insurance, having fun etc etc.

£350 goes into my savings, £200 into emergency fund and £70 into my 'savings account pension pot'.

I have £5k in my combined emer/savings account and have £1k plus in my 'pension pot'.

I earn just over £23000 so I am in the 20% tax.

I will take a look into those, and have a read.

thanks for your reply.

xylophone

The only debt I have is my mortgage but I dont really take that into consideration. I have 1 cc for emergencies but has £0 balance, my loan was paid off in September last year.

The HTB won't be available but it could be worth looking into LISA next year.

Check out what current accounts offer.

saver861

yorkshire-lad wrote: »

The only debt I have is my mortgage but I dont really take that into consideration. I have 1 cc for emergencies but has £0 balance, my loan was paid off in September last year.

Well if you have a good credit record you can play the 0% credit cards. This would allow you to save/invest more than your current £70 per month. Balance transfers at 0% for 3+ years, and none or very low BT fees, gives you good flexibility. However, key is to ensure you have the funds available to pay off the cards at the required time.

So you can take advantage of free money and make it work for you!