Are we on the right track?

MaxiRobriguez

vivster said:

On pensions, there won’t be much in my current pot as I’ve only been in my current job for two years. I put in 5% and my employer 10%, which is the maximum they offer. There’s £128k in Standard Life from my last job (obviously it fluctuates a bit). Should I transfer it to my current pension?

Quit the £1k mortgage overpayment and use the money instead to push into your pension. That'll mean around £1.6k going into your pension thanks to the higher rate tax relief. Even if your pension investments are poor over the next 15 years or so, the tax relief alone is going to outperform interest saved on overpaying mortgages. If investments do reasonably well you will be significantly better off.

You'd still had £1k left according to you after that, so use that as a mix between ISA and overpayment and enjoying your life - perhaps 1/3 each.

Albermarle

Quit the £1k mortgage overpayment and use the money instead to push into your pension. That'll mean around £1.6k going into your pension thanks to the higher rate tax relief. E

Although increasing pension payments to gain not 40% tax relief has been mentioned by several posters , I do not think the OP has mentioned their actual salary , except to say they are a higher rate taxpayer . Probably worth noting for the OP that they can not claim more higher rate relief than the higher rate tax they pay .

On pensions, there won’t be much in my current pot as I’ve only been in my current job for two years. I put in 5% and my employer 10%, which is the maximum they offer. There’s £128k in Standard Life from my last job (obviously it fluctuates a bit). Should I transfer it to my current pension?

Combining the pensions or not is not going to make much difference either way .

However researching more into what they are invested in, and what alternatives are available within each pension would be much more useful.

vivster

 So an extra 5 years for your invested money to grow could be significant. Essentially by delaying saving for your retirement until your 50s you have more limited time for that money to compound and compounding is the magic for making investments grow.

The money in my ISA could now pay off the mortgage several times over but there is no point paying it off when rates are so low.

This is a really excellent point and one I hadn’t considered, so thank you.

vivster

JohnWinder 

This might flesh out the big picture by guiding you on how much to save/invest from now/whenever.

Try to estimate how much you'll need to take from you investments when you retire, eg you'll need £20k/year because your 'guaranteed' DB and state pensions will provide £15, and you can live on £35k/year. To make it easier, ignore inflation for all estimates, and use today's pounds.

Find an estimate of how much you can safely take from your investments at retirement, without running out of money before dying. It might be about 4%/year. Don't be discouraged by the likely inaccuracy of all estimates. Your investments thus need to be worth 25 times £20k at retirement.

Now estimate how much your investments can return each year (before inflation, might be 3% on average), how much they're currently worth, and how much you can add to the investments each year. Put these numbers into an online compound interest calculator for the number of years left to retirement, and see if it gets you to 25 times £20k.

Then do a sensitivity analysis: put in some figures which are at the 'optimistic' boundaries of your estimates (£15k instead of £20 because you're prepared to retire on beer not champagne; 4% return/yr etc) and re-do the compound interest calculation. Then do it for 'pessimistic' boundaries of your estimates. Repeat this each couple of years as your investments grow (shrink!) in order to make adjustments which will ensure you get to your goal of 25 times £20k.

Lastly, don't give up readily on getting the knowledge or confidence to be your own investment guide; it's not that hard, and likely worth it for you.

Super helpful, thank you.

I do have an FT subscription via work so maybe I should start reading it! 

I had a look at my Standard Life account last night. It’s got risk rating of 4 out of 7 and is in a multi-asset fund. Looks like mainly equities (UK, European, American, Japanese) but also some cash and ‘fixed interest’. Presume I have options to, say, up the risk profile?