Retirement planning newbie - any help gratefully received

Lady1981

Hi All, 
I'm 39 and have a small pension of about 23k. I've just started a new job following redundancy and the pension is 3% plus 5%. I wish to contribute about an extra £500 pcm to save for retirement. I hope this will increase on an adhoc basis in line with bonuses,maybe up to 5k per year. I'd be grateful for suggestions on what options I should research. I've been reading various forums but I'm more confused than when I started! I'm a lower rate tax payer and have a medium/highish attitude to risk currently. I'm happy to recalculate the % stocks and shares v bonds invested (for example) as needed, otherwise I'd currently prefer to be hands off. I'm very new to all of this and will speak with an IFA if needed, I just want to investigate some options first. I own two properties with my husband, both with mortgages. We live in one, the other is rented and the rent covers the mortgage . We have about 18 months of savings in case we decided to buy a new house but this probably isn't viable now. Some savings, say 5k max, could be paid as a lump sum towards retirement now.
Please let me know if you need more info and please be gentle! 
Thanks in advance 
X

Albermarle

The first and most obvious option to consider , is just increasing your current 5% workplace pension contribution, or adding a lump sum to it .
Whether this is the best option largely depends on 
1) The method by which your current contributions are taken , By salary sacrifice , or not ?
2) The choice of investment funds available in the workplace pension.
3) The charges.

Lady1981

Thank you for your response Albermarle, much appreciated.
I don't have any info on the pension yet, although I do know it's not salary sacrifice. I'll definitely look into increasing my workplace pension contributions but wondered whether it's good to diversify too? 

[Deleted User]

If I were in your position, I would get rid of the second property and invest everything in a  100% stock portfolio. Needs to be diversified, cheap and simple.  You can achieve all of it with a world tracker or whatever equivalent you can access.  I would keep putting more money in but otherwise ignore until I am within 10-15 years from retirement. Then reconsider asset allocation. 

Have you read Edwards “DIY pensions”? Good start. 

Lady1981

Thanks @Deleted_User. We're just finalising our tax return and potentially coming to the same conclusion regarding the second property. From what I've read so far (which isn't much) I was considering 100% or 80% stocks/20% bonds.  
Thanks for the DIY pensions tip. I'll investigate. 

[Deleted User]

Lady1981 said:

Thanks @Deleted_User. We're just finalising our tax return and potentially coming to the same conclusion regarding the second property. From what I've read so far (which isn't much) I was considering 100% or 80% stocks/20% bonds.  
Thanks for the DIY pensions tip. I'll investigate. 

At your age there is no real need for bonds/fixed income. You and your spouse have at least a couple of decades of employment income to look forward to. Your paycheques are your “bonds”.  On top of that, bonds are a bit of a nightmare right now.  You have to get imaginative just to try and ensure your bonds can keep up with inflation.  So, 100% equity portfolio is your answer but you need intestinal fortitude to stick with it as the value goes down. At some point it will. 

[Deleted User]

In general, everyone should read a few books on the subject.  Warren Buffett said: “the best investment you can make is invest in yourself”.  It will cost you a few quid and a few hours of your time. It will give you confidence and high quality information from the best experts in the whole wide world. Far better quality of advice than what you can get in a forum or by paying an IFA.  Its a few hours well worth spending on your family’s financial security. 

JohnWinder

Couldn't agree more. But if it was only one, it might be Tim Hale's 'Smarter Investing'. Good luck.

hugheskevi

Lifetime ISA may be well worth considering as you do not have salary sacrifice and are not a higher rate taxpayer.

Perhaps a Stocks and Shares ISA may also be preferable to investing in a pension now? The investment can then be moved into a pension at a later date (indirectly, by contributing to pension from earnings and reducing/not increasing ISA), when the tax advantage from doing so may be larger? It can make a big difference if you think you may have access to salary sacrifice or pay a decent amount of higher rate tax in the future.

Lady1981

Deleted_User said:

In general, everyone should read a few books on the subject.  Warren Buffett said: “the best investment you can make is invest in yourself”.  It will cost you a few quid and a few hours of your time. It will give you confidence and high quality information from the best experts in the whole wide world. Far better quality of advice than what you can get in a forum or by paying an IFA.  Its a few hours well worth spending on your family’s financial security. 

Thanks @Mordko, that makes sense about the bonds. I'll definitely have a read of a couple of books. Really appreciate you taking the time to comment, thank you. 

Lady1981

JohnWinder said:

Couldn't agree more. But if it was only one, it might be Tim Hale's 'Smarter Investing'. Good luck.

Thanks @JohnWinder, I'll take a look at that one.