Pension dilemma - sole trader, age 42

girlfriday09

I am a confused investor: single, 42 year old, self-employed sole-trader (I usually don't earn enough to pay higher rate tax but sometimes do). I won't have a business to sell on when I retire as it's not that kind of business, sadly, so retirement = no extra cash bonus from that.

Having finally managed to buy a property recently, I am trying to start sorting out my pension provision properly, now I have 3 months of living expenses saved and a cash buffer for other emergencies. I have an ISA at 1.4% and use two 5% regular savers, the Santander 123 account benefits to continue to build up any cash reserves for emergencies.

At present, I hope to qualify for the full state pension and should get a £2,000 civil service pension. I owe £52k on my mortgage (at 1.99% for another 3 years). That only gives me around £10k annual income in retirement at present.

I decided to go down the SIPP route last year. I hold an HL SIPP with £5,500 in it. It's divided, as follows:

• Legal & General International Index Trust - £2000
• LF Woodford Equity Income Fund - £1,500 (I am now thinking this was a mistake and I shouldn't add more to it).
• Vanguard Life Strategy 80% Acc - £1,750
• Vanguard Target Retirement Fund 2035 Acc - £250 (I am also thinking this wasn't a good idea for the best return).

I also opened a CS S&S ISA some years ago, with the aim of building up some longer-term savings and potential for accessing it prior to retirement if necessary. This has around £12,200 in it, divided between:

• Woodford Equity Income Acc: £3000
• Woodford Income Focus - £4,000 (again, this was probably a terrible mistake. I wish I'd put it in the VLS)
• Vanguard Small Cap - £2,500
• Vanguard LS 60% Acc - £2,700

I feel that I need a much more focused investing strategy and have got myself a bit confused. With the SIPP, I'm wondering if I just need to focus on the VLS80 and L&G fund and get some substantial savings into them before diversifying, with a heavier weighting of 70:30 towards the VLS fund.

With the S&S ISA, I like the VLS60 and Small Cap. Not sure about the Woodford Funds anymore.

I'm not sure what my best strategy going forward will be. Obviously I don't want to tie all my money up in the SIPP as I need some accessible longer-term funds. I am also having the normal urge to overpay my mortage a bit as it's 30 years long, which would take me to age 70, and I have no idea what the interest rate will be at renewal (obviously). But, I know that people often over-stress to much about getting rid of that debt at the expense of longer-term growth in other savings accounts.

Scary calculators tell me that I need at least £150k + in my SIPP by the time I retire, which is looking pretty impossible to achive over the next 25 years and means I'd be living in my one bed flat forever as I'd never have enough for a deposit to upsize. I'm not sure that's important now, but who knows later?

I know nobody here can give specific financial advice, but are there any thoughts or reflections on my investing strategies (for want of a better word?!)? I know I've left it a bit late to sort out my pension, but things have been too tight financially before and it's better late than never. I feel I need to give myself the best chance of investing wisely now rather than my current slightly scattered approach.

Thanks in advance for any help. :beer:

xylophone

Had you considered consulting an Independent Financial Adviser who would take a look at your whole financial situation?

https://adviserbook.co.uk/

justme111

Xylophone, it's as if you lived on another planet - I do not know any IFAs that would consider dealing with less that 50 k portfolio.
Op, don't panic.
A few questions -
- what is your income after tax at present and how much you can save?
-what calculations tell you that you need 150k+?

girlfriday09

Hi, I am already saving £500 in total across two regular savers, and can afford probably another £100 - 200 realistically. My earnings are around £40k a year.


The £150k figure came from an online pension calculator but I don't know which one.

justme111

Is 40 your take home pay? What is your mortgage?
What input did you give that pension calculator - it can not just "calculate" out of the blue?

girlfriday09

No, £40k is the gross salary, so before tax.
My mortgage is £200 a month, with a £53k debt and a 28 year term to run, until I'm aged 70.
The calculator would have had the £40k figure and the amount I'd be aiming to live on in retirement. I think I was conservative and suggested £20k. I can't quite remember. I recall thinking I was £10k a year short.

justme111

Right. So I put the amount of investments you have now and projected £700/month addition into a compound interest calculator and it says in 25 years time assuming growth 3% above inflation which I believe historically was even surpassed you will have 348 k, ie more than double of what your calculator said you needed. Here is a link.
https://www.thecalculatorsite.com/finance/calculators/compoundinterestcalculator.php
That is on one side. On another -
I am not sure I would call 20k number to live on without mortgage and without having to save conservative. What is your take home pay now ?

xylophone

Xylophone, it's as if you lived on another planet - I do not know any IFAs that would consider dealing with less that 50 k portfolio.

Is that really the case?

Those who are self employed are not necessarily pensions experts and they have to start somewhere.

They might well wish to begin a relationship with an adviser which would develop over time. More than just pension advice might be required, especially for the self employed.

Are there really no advisers who would consider taking on a client from the beginning?

The client's income might well increase and his need for advice as well


https://www.moneyadviceservice.org.uk/en/articles/pensions-for-the-self-employed

https://directory.moneyadviceservice.org.uk/en

Perhaps the directory above might be worth a look by the OP.

JoeCrystal

justme111 wrote: »

Xylophone, it's as if you lived on another planet - I do not know any IFAs that would consider dealing with less that 50 k portfolio.
Op, don't panic.
A few questions -
- what is your income after tax at present and how much you can save?
-what calculations tell you that you need 150k+?

I do know of one at least, the one I used to set up a pension scheme nine years ago and the same when I transferred 36k pot four years ago. There are indeed IFAs willing to do it on a transactional basis at least. Hopefully, the IFA will still be prepared to deal with me next year once I got more contributions into my pension pot.

dmelife

There are definitely advisers who will deal with smaller clients. We don’t have a minimum. Book yourself a free meeting with an IFA and see what they have to say. You may even get some ‘guidence’ at the first meeting.

girlfriday09

Thanks, everyone, that's very helpful. I had heard that IFAs don't usually touch you until you have at least £20k in your pension pot and advice has to be ongoing (rather than ad hoc), at a percentage cost each year that probably isn't worth it for a small pot. It seems I might be wrong.