Trying to learn

LateStarter

Well, it's happened, somehow I'm on the verge of becoming mortgage free. Now I've got to figure out what to do with the money that was going to the mortgage payments - about £850 per month.


My immediate goals are to rebuild a cash pot/emergency fund. And use the next few months while I'm doing that to get to grips with investing. I've been on the Pensions board, and I'm somewhat intimidated both by the terminology and the amounts mentioned.



My first question is - am I too late to start investing? I'll be 53 in a couple of months, and I don't think I'll be able to retire early. I've got a pension through work, and I'll raise my contribution a bit.



I guess a SIPP or an S&S ISA are what I should be looking at? Oh, where to start..

Dazed_and_confused

My first question is - am I too late to start investing? I'll be 53 in a couple of months, and I don't think I'll be able to retire early

So you are looking at around 15 years.

Sounds reasonably long term to me so why do you think it's too late?

If you want suggestions you need to provide more information, particularly about your existing pension

Audaxer

LateStarter wrote: »

My first question is - am I too late to start investing? I'll be 53 in a couple of months, and I don't think I'll be able to retire early. I've got a pension through work, and I'll raise my contribution a bit.

You are late but not too late. As you now have £850 per month to put to good use, after you have an emergency pot, you should be increasing your work pension as much as possible and putting the rest in a SIPP. The easiest way is to put the SIPP money into a low cost globally diversified multi asset fund. Some examples of these funds discussed a lot on this forum are Vanguard LifeStrategy, HSBC Global Strategy and L&G Multi Index funds. All come with different versions from low to high risk. The higher risk version have a higher percentage of equities so will be more volatile and have bigger falls where markets crash as they will from time to time. A balanced fund with about 60% equities is medium risk and a good option in my opinion. You can find out more about these funds and DIY investing in general by searching on this forum and sites like Monevator.

LateStarter

Dazed_and_confused wrote: »

So you are looking at around 15 years.

Sounds reasonably long term to me so why do you think it's too late?

If you want suggestions you need to provide more information, particularly about your existing pension

Thank you for replying - I guess I used the phrase "too late" because 53 does feel old to start investing, especially after reading a few blogs on the Pensions and Savings forums (I'm not used to feeling quite un-knowledhable). I know I shouldn't be comparing myself to others, but...

Anyhow my pension was valued £150k a few months back - it was worth that amount at the start of the year too, I gather it's been a bad year for investments. It's in the company's default fund, and one of my goals is to know if that's good enough perforance-wise. I'm contributing 6%, and my employer 5%, so I'm now looking at raising my contribution to 15%. That'll be more than 12k a year (including employer's amount), which seems a lot to me.

I guess the money I invests in SIPPs etc is locked away for the "long" term until retirement. So I'm also looking at how to keep money available and working for the short and medium terms. Last year I opened a couple of regular savers, and I'll continue doing those, but what do you do with the money when those mature? Cash ISAs are pretty awful rate-wise (but better than nothing, I suppose). Is there anywhere else to keep cash safe but still get a return?


Cheers

OldMusicGuy

LateStarter wrote: »

I guess the money I invests in SIPPs etc is locked away for the "long" term until retirement. So I'm also looking at how to keep money available and working for the short and medium terms.

I wouldn't call two years the long term..... You can flexibly access SIPPs from age 55 (but once you start accessing them that can restrict your ability to put more in).

LateStarter wrote: »

Cash ISAs are pretty awful rate-wise (but better than nothing, I suppose). Is there anywhere else to keep cash safe but still get a return?

The best you can get right now is around 2.7% before tax on a five year fixed interest account. If you want more than that, you will have to risk investing it.

LateStarter

Audaxer wrote: »

You are late but not too late. As you now have £850 per month to put to good use, after you have an emergency pot, you should be increasing your work pension as much as possible and putting the rest in a SIPP. The easiest way is to put the SIPP money into a low cost globally diversified multi asset fund. Some examples of these funds discussed a lot on this forum are Vanguard LifeStrategy, HSBC Global Strategy and L&G Multi Index funds. All come with different versions from low to high risk. The higher risk version have a higher percentage of equities so will be more volatile and have bigger falls where markets crash as they will from time to time. A balanced fund with about 60% equities is medium risk and a good option in my opinion. You can find out more about these funds and DIY investing in general by searching on this forum and sites like Monevator.

Thank you for the ideas - that Monevator site looks particulary intruiging. I'll certainly look at a SIPP - as my company pension is with L&G, does it make sense to do the SIPP with someone else? I assume companies like L&G are inherently secure (well, as much as anything), but diversification can't hurt, right?

LateStarter

OldMusicGuy wrote: »

I wouldn't call two years the long term..... You can flexibly access SIPPs from age 55 (but once you start accessing them that can restrict your ability to put more in).

Ah, sorry if I was being dim, I assumed that as the SIPP is an investment, I shouldn't be looking to take anything out of it in the short term.


Plus I guess I'd be paying tax at 40% on anything I take out of a SIPP? (I'm certainly not in a position to retire in the next 10 years).

justme111

Well , why would you consider taking anything from your either investments or savings within those 10 years then if you will not be retiring?
You have emergency savings and anything else you should not plan to access in 10 years. You just had it pointed that if need arises/conditions change you could access it.

OldMusicGuy

LateStarter wrote: »

Plus I guess I'd be paying tax at 40% on anything I take out of a SIPP? (I'm certainly not in a position to retire in the next 10 years).

That's why you need to do a proper long term plan to decide how much you will need in retirement and thus when you will be able to retire.

So paying more into a SIPP, getting higher rate tax relief and leaving it invested for 10 years seems like a really good plan. Once you stop earning you can withdraw flexibly under the personal allowance so you don;t have any taxable liability (that's what I am doing). But you need to take into account your state pension and other pensions if you have them. You may not need to leave the SIPP invested that long term if it helps you retire early.

You need some clear financial objectives before you can decide what is the best way forward. You should also read up on SIPPs and understand how they work - a SIPP is not an investment per se, it is the pension wrapper under which you can hold various investments.

Albermarle

Most likely your workplace pension is the first place to start making more contributions , before you start thinking about opening another separate SIPP pension.
Normally you can get a password to enter the website of the workplace pension provider ( ask your HR dept) and change the funds the money is invested in , if you want to .

It's in the company's default fund, and one of my goals is to know if that's good enough perforance-wise

In very simple terms the default fund will be a medium risk/medium return fund. Most likely it will perform very similar to any other medium risk/medium return with any other company and will have dropped back a bit in recent months , like all the others . If you want better returns you will have to go for a higher risk fund.

Thrugelmir

LateStarter wrote: »

Thank you for replying - I guess I used the phrase "too late" because 53 does feel old to start investing, especially after reading a few blogs on the Pensions and Savings forums (I'm not used to feeling quite un-knowledhable). I know I shouldn't be comparing myself to others, but...

Many people don't repay their mortgage debt by the time their 53. Having access to £850 a month to save over say a 10 year period will mount up. Compounding is your friend.