Invest or Pension?

Brricktop69

Hello, 
Newbie just looking for some advice.
At the end of February I will be paying off my mortgage, this will mean I have £660 a month that I want to utilise the best way I can.
I am unsure what would be best, do I put this money into my Pension, do I invest it in my Vanguard account, am I better splitting the money to do both or is there something else I should be considering. I don't plan on having to touch this money and so am looking at a commitment for the next 10 years.
A little out myself.
Married - My wife and I are both 51 years old. Kids have left home.
Joint Family income after deductions = £40k
Employment: We are both in secure long time jobs both with over 17 years service.
Savings of £9k, and I am saving around £700 each month into this account.
Vanguard account £1k, only been running since August so I am still learning.
Pensions: I have a company pension with £116k in the pot, i'm paying 9% as is my employer, this is the highest % they will pay but I have the option to put in more if I want. I also have a small pension with a pot of £7k, my wife works for the council and is forecasted to receive around £9k a year when she retires.
Debts: The only other debt I have is a loan of £2.5k which is on 0%
We have no plans to retire early but I would be open to doing so if the opportunity arose.

Any advice would be appreciated.

Albermarle

do I put this money into my Pension, do I invest it in my Vanguard account, 

If your current workplace pension is a typical DC ( Direct Contribution ) pension then your money is invested within the pension . So the choice is actually do you invest more in the investments inside your pension or outside your pension . Any money going into your pension has a minimum tax benefit of 6.25% compared to outside the pension due to the tax relief. The drawback with pensions is that the money is tied up until your mid Fifties which for you is not an issue .

£123K is not very high at your stage in life for a pension pot but putting in 18% is good ,and putting in 28% would be even better. , Your wife has a DB pension ( defined benefit ) which is good news. Just FYI to buy a guaranteed income of £9K linked to inflation would cost around £400K , so she is well ahead of you ! The pensions benefit to public sector workers is often very underestimated.

Two other points are ; Are you aware of how your pension is invested ( usually you can see online ) as you may wish to change it. Secondly your cash savings are too low in case of unexpected emergencies , so I would continue with the £700 per month into them for another year or two. 

Brricktop69

Thanks for the comments, it has helped me understand the differences between pensions.
What I didn't raise was that we have been working to a budget for the last 18 months to account for where our money goes and we have worked hard to clear other debt's as such we do have more disposable income that I haven't stated.
When I pay the mortgage off next month we will have 50% of the household income going to saving / investments.
If I was to retire tomorrow with all of today's costs in place I believe we would need a joint income of £22k a year but as a safety net I would be more comfortable planning on around £27k. Assuming that the state pension continues and matches inflation then in today's money I believe I will need around £13k - £15k a year allowing for tax in additional income from our two pensions. 

Albermarle

With a DC pension in drawdown , the rule of thumb is that you can safely extract 3.5% pa from it , inflation linked , assuming it is sensibly invested . In this case there is a very good chance that it will last to a ripe old age and most likely will be something left for someone to inherit. So for example if you want to take £5k pa from a DC pension pot starting in your sixties you need a pot around the size you have now .
However if you wanted to retire before SP age then you would need quite a lot more obviously.
Also £22K joint income is pretty low to have any kind of decent retirement , unless you are pretty  frugal types.

planteria

Brricktop69 said: At the end of February I will be paying off my mortgage, this will mean I have £660 a month that I want to utilise the best way I can.

congratulations. as Abermarle says "If your current workplace pension is a typical DC ( Direct Contribution ) pension then your money is invested within the pension . So the choice is actually do you invest more in the investments inside your pension or outside your pension". a combination of Pension and ISA wrappers is usually recommended, and as outlined above, use of Pensions has real benefits. ISAs provide accessibility if needed for some reason, and fwiw i've tended to max my ISA allowance first each year on the basis that 'when it's gone it's gone'. in ideal world we want substantial assets within our pension pots and substantial assets outside our pension pots. without debt, 50% of your household income enables you to contribute to both.

Notepad_Phil

Brricktop69 said:

If I was to retire tomorrow with all of today's costs in place I believe we would need a joint income of £22k a year but as a safety net I would be more comfortable planning on around £27k. Assuming that the state pension continues and matches inflation then in today's money I believe I will need around £13k - £15k a year allowing for tax in additional income from our two pensions. 

Don't forget to plan for when there is only one of you. You'll obviously only then be in receipt of one state pension, any db pensions may be reduced depending on who is no longer around and you'll only have the one personal allowance etc to use. There's also the case that the partner may not be 'into' financial/investment matters and so the remnants of any portfolio may need to be derisked and hence result in lower returns.

Regarding the £22k income, for many people that will plenty to live on, especially if you've got your own house and have never lived the high life needing the latest shiny things etc. However do make sure that your budget includes all of the purchases that you'll need to make during your retirement - e.g. you'll possibly want to buy a replacement car every so often, get a new kichen or bathroom, etc, etc. If your £22k income only covers the 'normal' years then you may find yourself in a bit of a bind when those items come up.