Pension and planning for future for a 31-year-old

edited 30 November -1 at 1:00AM in Pensions, Annuities & Retirement Planning
19 replies 2.1K views
jhyjhy Forumite
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Planning for the future. Just to preface this, I probably have rather strange circumstances for a 31-year-old.

I'm 31 and work as a contractor in financial services, so income can change during the year. Currently gross monthly salary is £3500.

Have about £350k equity in rental properties (have about £34,000 mortgage left). After mortgage payments left with about about £875 per month in rent, so total income is about £4375.

State pension: currently have 13 qualifying years (recently bought 3 years in which I was just short of having a qualifying year).

Still living with parents currently so can save a lot (at least £3k per month). No wife or dependants.

Would quite like to retire early, but not sure how realistic this might be.

I have no pension at all currently. I've read the pension information on the main site and have been looking to save into a personal pension but I'm struggling to decide on the best way to do this.

Looked at something like Standard Life where you put away a monthly sum and they manage it for you. Was also reading in the Telegraph about building a simple portfolio of low-cost tracker funds. The Telegraph also have a list of 25 funds they recommend, would it be a good idea building a portfolio of some of those? Not looking for something I need to pay too much attention to that can keep itself ticking over, so it seems like funds are the best way. If I were to choose some funds myself, would it have to be in a SIPP?

So to summarise, I'm mainly looking for pension advice, but if you have any other thoughts they'd be welcome. Thanks for reading.
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Replies

  • DoxDox Forumite
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    I'm sure you will get plenty of suggestions here, but one of the better ones might be to see a good IFA and get some advice based on a full fact find about your circumstances. Could be the best advice you'll get!
  • Dazed_and_confusedDazed_and_confused Forumite
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    It appears you will be paying higher rate tax, particularly as "mortgage payments" aren't an allowable expense as far as the rental properties are concerned and even the ability to claim loan interest as an expense is being phased out.

    So you may be able to benefit from some higher rate tax relief if you pay into a pension. Partly depends by what your actual employment position is, contractor can vary a lot but if you are an employee of your own limited company then there may be better options.

    IFA advice would seem a good initial investment given the relative complexities which seem to apply here.
  • greenglidegreenglide Forumite
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    You are working as a "contractor".


    Are you an agency worker, self employed or do you trade via your own limited company?


    Without this information it is difficult to suggest anything.


    For the avoidance of doubt, if you trade via your own limited company you are not self employed.
  • AnotherJoeAnotherJoe Forumite
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    jhy wrote: »
    Planning for the future. Just to preface this, I probably have rather strange circumstances for a 31-year-old.

    I'm 31 and work as a contractor in financial services, so income can change during the year. Currently gross monthly salary is £3500.

    Have about £350k equity in rental properties (have about £34,000 mortgage left). After mortgage payments left with about about £875 per month in rent, so total income is about £4375.

    State pension: currently have 13 qualifying years (recently bought 3 years in which I was just short of having a qualifying year).

    Still living with parents currently so can save a lot (at least £3k per month). No wife or dependants.

    Would quite like to retire early, but not sure how realistic this might be.

    I have no pension at all currently. I've read the pension information on the main site and have been looking to save into a personal pension but I'm struggling to decide on the best way to do this.

    Looked at something like Standard Life where you put away a monthly sum and they manage it for you. Was also reading in the Telegraph about building a simple portfolio of low-cost tracker funds. The Telegraph also have a list of 25 funds they recommend, would it be a good idea building a portfolio of some of those? Not looking for something I need to pay too much attention to that can keep itself ticking over, so it seems like funds are the best way. If I were to choose some funds myself, would it have to be in a SIPP?

    So to summarise, I'm mainly looking for pension advice, but if you have any other thoughts they'd be welcome. Thanks for reading.


    I think you should take a look at your rental properties. The yield is less than 3% from what I can see, and any voids, bad tenants etc will only make that worse. So really you are only barely ticking along keeping pace with inflation on the third of a million you have invested. Maybe of course you've gained from house price inflation (though you will have tax to pay when you sell them) but its hard to envisage much HPI over the next 5-10 years. Maybe if you did gain, now is a good time to get out?



    If you do want to run a landlord business, which is not IMNSHO a good place to be these days and getting worse, perhaps you could do with tweaking your properties / rent to substantially raise your income. If you decided to get out of that business, then over time you could put that money into investments within a pension and ISA.



    For investment / pension advice, you could start with some background reading.

    The Monevator website, some FIRE blogs like The Escape Artist and perhaps Mr Money Mustache (hes at the extreme end of FIRE) - FIRE = Financial Independence Retire Early.


    Dont just jump into investing spend some time reading. You dont need to use a SIPP but its probably a good place to start and if you get it right the costs can be very low.



    Note also that though you get good tax treatment in a SIPP (or other pension) it is locked away until a certain age. Currently 55 but likely to rise. So even witha good pension, if you want to retire earlier than mid to late 50's, you need soemthing to bridge the gap and your properties arent going to do that at £10k a year. One bad tenant could easily wipe out a years income.
  • AlbermarleAlbermarle Forumite
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    Just as general info ,if you start a personal pension with Standard Life ( or similar with Aviva, Scottish widows etc) you get a few options .
    An 'easy' option - you get the choice of a handful of 'lifestyle' funds. Then just pay your money in and they do the rest. Then a DIY option , where you have the choice of a couple of hundred funds with different risk/reward profiles. If you feel you need even more flexibility they also offer a so called low cost SIPP, as do a lot of other companies. These will have access to more funds again + the possibility of owning individual shares in the SIPP.

    If you are not sure what you are doing then either -1) go for the easy option- 2) go to an IFA for a full review of your finances ( at a cost ) 3) keep researching on here or many other websites before doing anything
  • tacpot12tacpot12 Forumite
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    The yield on your rental properties might be low currently, but when the mortgage is cleared, it will increase. You could clear your mortgage in 12 months using your ability to save - you could start a number of regular saver accounts to help get you to the amount needed to clear your mortgage more quickly.

    Residential property is a good asset class to give you a diversified income in retirement, so I would not be rushing to sell these properties.

    Early retirement is quite feasible. I retired at the age of 53 from my career as a project manager in financial services. With your financial resources, hard saving and careful investment, should allow you to retire at a similar young age. The key is to start while you are young enough for the investments to have time to grow. The advice about taking your time to research is good, but don't delay too long. Using an IFA is also good advice; you seem to know what you want, but I would encourage you think about what you want the IFA to do for you before going to speak to one. Usually the first meeting is free as it is really a sales pitch as to what the IFA can do for you and at what cost, once you have explained your situation and high-level needs to the IFA. It's a "get to know you" session, so you can see if you want to use them. Expect to do another meeting at their office where you can go into more details about your needs, then a final meeting to receive their recommendations. Note that their implementation costs (if you want them to put their advice into action) will be on top of their cost for the advice.
    The comments I post are my personal opinion. While I try to check everything is correct before posting, I can and do make mistakes, so always try to check official information sources before relying on my posts.
  • dunstonhdunstonh Forumite
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    Looked at something like Standard Life where you put away a monthly sum and they manage it for you.

    Standard Life offer no such service. There is a direct to consumer arm but its self select investments (you pick and manage).
    Was also reading in the Telegraph about building a simple portfolio of low-cost tracker funds. The Telegraph also have a list of 25 funds they recommend, would it be a good idea building a portfolio of some of those?

    The Telegraph also recommend St James place which is one of the most expensive distribution channels in the country. Its a commercial recommendation and not an independent one (i.e. they share the income.).
    Newspaper fund recommendations tend to be fashion investing in niche areas.
    So to summarise, I'm mainly looking for pension advice,
    Advice you get from adviser. Everyone else offers opinion or marketing.

    There is enough info to see that you have potential issues or options which could vary the advice. i.e. we don't have enough to go on to say what you should do because there is not enough known.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • bostonerimusbostonerimus Forumite
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    I'm not sanguine about having so much on your money in a single asset class ie property and you are missing out on big tax advantages by not having a SIPP or an ISA. So I would make sure you have a solid cash emergency fund (6 months to a year) and then open a SIPP and an ISA with someone like H&L or maybe Vanguard when the start a SIPP. As you are young you might consider starting with a simple multi-asset fund with a high equity percentage.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • TerronTerron Forumite
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    AnotherJoe wrote: »
    If you do want to run a landlord business, which is not IMNSHO a good place to be these days and getting worse, perhaps you could do with tweaking your properties / rent to substantially raise your income. If you decided to get out of that business, then over time you could put that money into investments within a pension and ISA.


    IME the landlord business is an excellent place to be, but I got 8% net yields and 6% capital growth last year (10% equity increase). It does of course depend on where your properties are. My one southern property (a former home) returned less than 2% of each,



    Paying off your mortgages will reduce your returns, but with the tax changes may bell be worth doing in the next couple of years. I plan to pay off the mortgages in my own names as I will probably become a HRT payer next year. Presumably with such low yields the plan is to hang on to them and hope for capital growth.


    There is a case for going with what you know as you are likely to maje more that way. But when you are retured you probably want a more stable income you don't have to work at. So I would suggext that you diverisfy into a pension as you seem to be considering. If you do see an amazing opportunity in property then consider using a company to purchase it. If you pay the profits into a pension it could be very tax efficient.


    Do you have an emergency fund? Do you have savings you could use as a deposit on a home for yourself?


    Speak to an IFA. Get a pension started soon.. If it isn't exactly right you can transfer later, but you can't get back the time for growth to compound.
  • AlbermarleAlbermarle Forumite
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    Standard Life offer no such service. There is a direct to consumer arm but its self select investments (you pick and manage).
    They have an 'easy' option. You can only choose from a handful of lifestyle funds and the idea is that you only choose one that fits your age /risk profile and then just pay your money in and forget about it.
    So effectively they are managing your pension money for you in practical terms .
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