Worth starting SIPP ( or similar ) at 58 ?

enthusiasticsaver

You would get the HMRC contribution so I think it would be worth it for that. A multi asset fund like Vanguard sounds ok but if you need to draw on it to cover early retirement then going for a less volatile like the LS40 might be worth considering. I opened my SIPP at age 55 and put it in the Vanguard LS60 but have other investments to draw on. You don't have other investments and 2 modest FS pensions plus state pension and a mortgage so I am struggling to see how you will bridge the gap. Your income in retirement will be around 50% of your current income

kidmugsy

deejaybee wrote: »

58 soon, still working pseudo self-employed in the Gig economy, profits before tax around 30K p.a.
Drawing a Royal Mail pension of just over 2K per year (from age 55) (a DB scheme)

Consider operating as a Ltd company if it could be practical. You'd presumably draw a bit more than £8k as salary. With the £2k of pension you'd still not have used up your full Personal Allowance. So you might open a SIPP and have the company contribute to it, so avoiding some Corporation Tax. Then you'd draw enough out each March that in addition to the bit of TFLS you'd get enough taxable drawdown that you'd fully exploit the PA. That would still leave you £2k of tax-free dividends from your company and the rest taxed on you at 7.5%. You'd still be credited for National Insurance (if you need that) but would not need to actually pay NICs.

deejaybee wrote: »

deferred FS pension due at age 65, around 5K per year if no TFLS.

I'd ask for a CETV quote. Then very possibly I'd decide to keep the FS pension anyway. How good is its index-linking? What is the actuarial reduction if you draw it early? How secure are the finances of the scheme? Do you need the widow's pension?

deejaybee wrote: »

Mortgage outstanding 107K, just moved to 1.99% rate - scheduled to age 70. Which leads me back to the post title, is a SIPP investment for 6 or 7 years too short term for equities ? Or just leave it in a cash SIPP? Or just save normally via bank accounts/ regular savers etc etc ?

I wouldn't use equities if I had a big debt that I wanted to clear in six years time, especially not when stock markets - at least in the US - are very high. I'd aim to use regular savers and so on - basically any accounts that pay better than the 1.99% I would be paying on the mortgage. There are nationally available regular savers that pay 5% and 3%. If you live in East Anglia look also at the regular savers from the Ipswich BS, and the Saffron BS.

As these mature you could consider putting more into a SIPP with a view to holding it in cash and taking it out tax-efficiently in the window between stopping work and drawing your State Pension.

If clearing the mortgage and having a comfortable standard of living look incompatible remember that at 70 you could opt for an Equity Release that could give you the capital to clear the old mortgage. What's your house worth?

In fact you could get ER now but probably it wouldn't be attractive compared to a mortgage (repayment mortgage I assume?) that charges only 1.99%. Anyway at 58 they would lend you only a small fraction of the value of your house: they'd lend you a larger fraction at 70.

atush

Drawing a Royal Mail pension of just over 2K per year ( from age 55) ( a DB scheme)

which is being saved as rainy day fund.

Why are you taking this ension now if you dont need it? Wouldnt it have been worth more if you left it to scheme age?

I suppose if i was putting 2 or 300 a month into equities, and there was a possibility i could be wiped out, then that needs a lot more thinking about than a casual gamble.

Well that could happen if you invested in shares in single companies. But if you use a fund of some kind, or a multiasset fund then no- you cant lose it all in general. As they might hold shares in 100 companies, and not all 100 companies will go on to fail. Plus you wouldnt sell after an immediate fall, you#d wait for markets to recover,

Open a Sipp and invest in a multiasset fund with 80%, and you could invest 20% into a more risky fund if you feel the need to gamble? Still wouuldnt lose it all but you could have a wild ride.

deejaybee

Thanks for all the replies, much appreciated !


I have read them all, and going to read them some more...


To answer question from atush- I took the Royal Mail pension at age 55 because i needed the lump sum to pay back money owed to family at the time - i knew at the time that it was not the best thing to do long term, but those were the circumstances.


I know that at my age, a lot of people are mortgage free, as i would have been 10 years ago, but i went through a divorce in early 40s...that was down to me, so zero sympathy required or expected.

deejaybee

kidmugsy - I have had a CETV quote for the FS pension - 71 K


My gut feeling at time, and backed up by more knowledgable folks on here at the time was that it wasnt a very good offer.

deejaybee

I think i need a 2 - pronged attack- in order to clear the mortgage early AND also build savings ( either in SIPP or accounts ) .


Been playing around with mortgage calculator - if i overpay 300 a month, then it will be cleared at age 66 + 7 months - which is exactly same time as SP would kick in.


My mortgage payments are high ( just gone down from 932 to 831 ) because initial term was only 17 years - so i reckon without that 10k a year burden we would survive ok on 15K ish,


66+ is too old to retire though, a couple of years of that would be good, so need the bridge that 2 1/2 year gap.