Only have a State Pension

nellis10

colsten wrote: »

Also doesn't include inflation. You might need to save/invest a little more unless your interest/growth will at least keep up with inflation.

Calculator: https://www.vertex42.com/Calculators/inflation-calculator.html

Ahh yes...inflation! Good spot!

justme111

Until now I do not understand most of the front page of Cavendish . I just about managed to register , chosen "investments " and ISA options from their menu, picked a few indices tracker funds after reading on here and monevator a few years ago(you do not even need to chose funds, go for one multi asset whatever they offer there) and placed direct debits on them.
Beware your investments may drop in value but I do not see any way round it specially at this stage of your knowledge.

GunJack

I know it may not be a popular theory on here, but mortgage paid in 8 yrs will give you security of housing, options to downsize if need be, and still many years to be paying what were mortgage payments into a pension...it might also be worth doing the maths to overpay to end it earlier and have some extra years to load up the pension.....

...just saying.....

Horsin

GunJack - Yes, there appears to be many different options for me...which is good...and also not for someone like myself who is unsure of which option to take :rotfl:.
With the great advice and help form peeps on here though I'm starting to get a better idea of my options and what might suit me :j

A question for those of you that are 'getting to know me'....Do all pensions have a certain risk element. I've seen that there are different risk levels that you can spread your investments over, but do all pensions (including ones you may pay into through work) have a certain amount of risk? I'm very risk averse (always had fixed rate mortgage etc).

And, why have a pension instead of using interest from something such as an ISA? Will a pension always pay more?

nicholbb

With raising money for your retirement, I understand you'd probably like stability till the youngest gets to uni. After that would you consider downsizing or getting a lodger in (maybe a university student depending on room).

I actually came with very similar question to the view GunJack had for the forum.
With savings of £25k vs £56k mortgage, why would you not try to pay off the mortgage with savings, even if just 10% lump each year till end of any fix, then reduce yearly and reduce term? Is it the tax advantages or low interest?

What's the calculations comparing mortgage interest and pension investment?

Triumph13

Horsin wrote: »

A question for those of you that are 'getting to know me'....Do all pensions have a certain risk element. I've seen that there are different risk levels that you can spread your investments over, but do all pensions (including ones you may pay into through work) have a certain amount of risk? I'm very risk averse (always had fixed rate mortgage etc).

And, why have a pension instead of using interest from something such as an ISA? Will a pension always pay more?

With the exception of defined benefit pensions (those based on final or career average salary - nowadays largely confined to the public sector) the important thing to understand is that a pension is just a wrapper to hold investments in. You need to separate out the issues around the wrapper from the issues around the investments you hold in it.
Generally a pension will always be the best wrapper because:

1. You get tax relief on anything you put in.
2. You get 25% tax free when you take it out, plus anything you take out that's below your personal allowance will also be tax free.
3. With an employer's pension scheme the employer will also put some money in for you.

As to what you choose to put into the pension, that's where you have to make the tricky decisions around risk. At one end you can buy shares or funds which are volatile in value, but historically return well above inflation over the long term. At the other extreme you can hold cash in there which has no volatility at all, but is pretty well guaranteed to lose value to inflation in the long term. You pays your money and you takes your choice. Now would be a good time to start reading up on investments!

justme111

Pension re ISA- different tax treatment and may be seen differently by DWP if you need benefits, one can not access pension till one is 55 and pension rules are perceived as more likely to be changed by governments.
Re mortgage - because mortgage interest rate is 2% while one could get up to 5% if leaving money in bank accounts and an unknown but potentially much higher increase in investment values ( 20% yearly in the last couple of years without taking into account Brexit it was for me).
If op puts money without paying tax on it into pension and then draws just enough of it yearly so as to stay under £10 000 combined income (state pension plus personal pension) she will not pay tax on it in retirement either. In any case she would not pay tax on the proportion of her drowned down that would account for under £10000. While whatever money she puts into mortgage had a loss of 25% income tax already ( unless she has designed her accounts creatively).

Horsin

nicholbb - Yes, I would certainly consider a downsize at some point (I would like the children to be able to come home in their hols if poss at the moment) in the future and would also consider a lodger.

I haven't used my savings to pay off my mortgage simply because I don't have the financial security that an employed individual may have - if I get an injury I will be without income or support and I'm not sure how much money I would need to cover that . That's what has stopped me putting it away somewhere that doesn't allow me easy access. I think I should do some figures now though on what the difference in monthly mortgage payments would be if I used SOME of my savings.

Triumph13 - isn't that all a bit worrying though?? If you pay the money in it may not perform well, in fact it may go down in value....

justme111 - I'm not capable of designing my accounts creatively :rotfl:

Thank you all for your responses so far - I'm taking it all on board and panicking a little less!