FIREside Chats

TimSynths

Love this thread! I have 7.5yrs to go and approx £45k on the mortgage, I've just turned 47 and I live on my own with zero dependents. I've never been in a position to overpay my mortgage or accrue substantial savings but this all changed in June last year when I received a ppi pay-out for £4k. I was able to clear the last £2.6k of a second mortgage that I had which freed up £150 pm.

I have been saving into pensions since I was 19 and have built up £163k as of October 20. I have three pots including my current employee scheme into which I pay 6% and they pay 15% so I save 21% per annum- a great scheme and I review my investments every October. I will also qualify for the full state pension to when the time comes but now I have started to put some thinking and effort into my future and potentially retiring sooner.
So I have started to overpay the mortgage- although in reality I haven't.....

Plan 1-The £150 freed up from clearing the small second mortgage I was going to make a monthly overpayment which would knock off nearly 2 years and save me £1246 in interest in the process- not to be sniffed at! But I thought that I could do better than that so I have used the left over money form the ppi payout to open a Vanguard S&S ISA and I also pay via monthly DD £100, it has just over £3k in it currently and has grown by 15% so far.

Plan 2-I am in various company share save schemes at work. Firstly get matching shares, I buy £30pm to which the company matches with £40 worth. Secondly are the sharesave schemes they last for 3 years I have an option to buy a set amount after three years at a discounted price I am currently in all three running schemes and aim to buy in every year when they start. At the end of the 36 months if the shares have performed badly (and its bank stocks so they have) I can simply get my money back, but 2/3 schemes I am currently in are doing well on paper because the bank stocks have performed badly. This leads me onto Part 3 of my plan and is my most favourite/reckless/ biggest gamble.- edit to add this has a current value of  approx £11k.

Plan 3- Crypto. On Jan 1st I bought £75 in bitcoin. By the end of that week I had cashed in an old poor performing ISA and some savings and had £3,500 invested. Wow! what a ride! By the end of Feb my £3.5k was nudging £6k, then there was a big market correction and I was back to about £4k overnight. Not nice to see on paper but i'm cool with it. I've since contacted a chap @ work through a friend of a friend who has helped me balance out my portfolio and I've been back upto £4.9k although today its shrank back to £3.8k- not great but ive not lost any money and its been a rollercoaster of fun so far. It has already done better than the ISA it was in and the crazy part is I think in a year this part of my 3 plans will be in a position to clear the £45k mortgage balance- yes, in a year. Now if this were to happen in a years time am I likely to cash it all in a clear the mortgage- of course not! But I will have options. Exciting times!

Grogged

So glad you started this Ed.

Why

We realised looking at our numerous pension statements just how poorly they were performing and that apart from wanting a 'nice' retirement, had no real idea what that was or how to afford it. That was about 8 years ago and we have 12 left.
What
We didn't know about FIRE, so just did what seemed natural to us. We worked out our monthly needs and quickly realised we'd never be able to save enough to live off the interest only.
So we worked out if we could save enough to take a lump sum annually and we thought so.
How

We consolidated our pensions into two pots, MrsG and mine.
Both started as Vanguard SIPPs, but rather than invest in the life style or pension funds, we chose to directly invest in the global underlying funds. Partly because it was slightly cheaper, partly because we had more control and finally because we'd learn something.
I've moved mine to ii, mainly for the fixed costs, which are cheaper for the size of the pot.
We both pay in monthly, with the simple plan of leaving it invested for the long term.
We don't invest directly in companies or follow trends.
We invest in either UK equity funds, global equity funds and a global bond fund in roughly 10%, 70%, 20% split.
We've learned through various blogs like monevator.
We're SIPP heavy to get the tax gain and be able to invest more now, rather than an ISA, etc. to get the tax advantage later.
Is it working?
So far yes, the big win has been the performance compared to our traditional pension plans.
Whilst the performance is only a few percentage better, over time that adds up.
We check every month following our normal monthly top up and balance according to our plan.
We don't sell, just top up each fund as needed.
We've made mistakes, our only lucky break was Vanguard launched their SIPP at just the right time.

As with everything the first step is always the hardest.
Good luck with your plans!

glass_half_full

Hi all,

Thanks Ed for starting this thread, its such an important topic. I hope its ok if I pull up a chair and take part in the chat?

Why am I investing? 

I am 54 and although I enjoy my job I want to achieve financial freedom. I may not retire but more likely move to part time or semi-retired. I have worked at least half a day to a day most weekends for the last 10 years. I have had to do that in order to get my work done to a standard I am happy with. I know I will not be alone in this. Like many jobs, mine isn’t getting any easier! OH is 52, she loves her job. 

How much do I think I'll need? 

I’m working on achieving an income of £25,000. This would be more than sufficient I think once the mortgage is gone.

How am I going to get there

I have a few old DB pensions that will pay out £4K when I am 65. I have a DC pot which is now worth £150K from an investment of £50K I made when I was in a higher paid job for a few years. I’m so glad I did this. I now work in a University so am in the USS.  @ElmoR has described this very well. I joined the scheme one week before they did away with the DB option. Thus I have a mixture of DB and DC. Its quite confusing (to say the least!) but this will be the other source of income. My calculations suggest I will need around £400K in total in addition to the DB pension. In order to save enough in this scheme I need to make large contributions, 40-50% of salary for the rest of my career. I am less than a year away from mortgage freedom so once that is achieved I could increase the pension contributions significantly. Just as an aside, there have been two strikes (at least) recently in HE over the pension and the way the Universities were trying to downgrade the benefits.

How long do I have? 

My absolute backstop is 60. I would like to be able to finish sooner, say 57-58.

Other thoughts

How did we get here?

DB schemes became unaffordable, I suppose because we are all living longer so that is a good thing. Many of my parents generation retired on 1/40ths schemes so retired on 2/3 of final salary. I remember working with people where their salary was artificially inflated in their last year by various means to maximise their pension. Its sobering to think that in today’s money many of these pensions would need massive pension pots to buy the equivalent income either through annuity or by drawdown. However, it seems to me that as well as outsourcing the cost and risk of these schemes, organisations have also outsourced the complexity. So now its down to the individual to navigate their way through this. Of course, the majority are not managing this and so are not going to have enough provision when they reach retirement.

I think this thread is an important discussion. Its great if you can get started early on this. I am getting closer to the finishing line and thus options are more limited. I’m so glad I saved the money I did into the DC pension. This was from 2004-2011 and the power of growth since that time has turned £50K into £150K. For anyone in their twenties, thirties and forties, it is still early enough to commit a reasonable amount of money per month to the pension and achieve a reasonable income in retirement.

Although I have spent a lot of time thinking about this, reading and researching, I feel I am pretty clueless. Unfortunately, my eyes tend to glaze over a bit with talk of funds etc. Looking forward to reading the posts on this thread and seeing how others are approaching this topic.

edinburgher

@TimSynths - it sounds like you're going great guns with the pensions, that is a fab employer contribution rate and you have built up a great pot. Have you considered paying your cryptocurrency money into your pension? You'd get tax relief on the contributions. It sounds like you're currently up 10% or so. Fab, if that went into a SIPP it would take you up to £4,800. Cryptocurrency a bit rich for my blood as part of an investment portfolio. No criticism intended - I like a gamble as much as the next person - I just try and keep it to the Lottery or a few bets on Cheltenham

@Grogged - welcome - I liked the "is it working?" section. I also got very lucky when Vanguard launched their SIPP. We transferred into the teeth of a stock market crash, missed the whole thing and are up about £20k since then. I am a firm believer that everyone gets the odd really big lucky break and this was one of ours. I don't have a regular payment into my SIPP any more (just dribs and drabs), but it's equal to something like 6 years of Mrs E's current contributions via her employer! How are you finding II?

@glass_half_full - hi there - interesting to see another member of the USS scheme (wasn't your timing fortunate)?   I know what you mean about schemes being watered down over time. I spent most of the last decade working for a joint venture that was owned by a local authority and a FTSE250 company (thankfully the JV is now defunct). When the JV inevitably reached its end, there were a series of strikes to protect the rights of council staff being TUPEd to the new employer (a multinational). It was very hard to feel motivated to fight the good fight to protect the rights of colleagues with final salary pensions while thinking about our own DC pensions! Luckily I voted with my feet before TUPE took place and now have a DB pension.

I am also a bit bored by talk of funds. I'm ok, however, with concepts of diversification and the fact that more equities typically leads to a better outcome over long periods. I'm also aware that the UK is a small island and that although I live (and spend) here, I don't want to be massively overweight to UK shares. As it happens, I am overweight UK equities by virtue of using a Target Retirement product, but I can live with that.

Grogged

edinburgher said:

@Grogged - welcome - I liked the "is it working?" section. I also got very lucky when Vanguard launched their SIPP. We transferred into the teeth of a stock market crash, missed the whole thing and are up about £20k since then. I am a firm believer that everyone gets the odd really big lucky break and this was one of ours. I don't have a regular payment into my SIPP any more (just dribs and drabs), but it's equal to something like 6 years of Mrs E's current contributions via her employer! How are you finding II?

Our percentage gain in Vanguard is about double what I'd expect, I presume this will average out as the pot increases, but it was a welcome gain.
Whilst ii has more bells and whistles and you can invest in virtually anything from all over the world, I think I still prefer the VG style.  It's a lot cleaner and gives as much info in an easier way.
Personally, for what I need, it's a bit overkill and the portfolio still follows the broad plan used by MrsG.
But it is cheaper by £10 a month.
The other big advantage of VG (IMHO) is that by tying you into their world, it's difficult to go wrong, most of the risks of following trends or buying XYZ because you fancy it aren't there.

TimSynths

I too moved approx £28k from one pension provider (Aviva) to Vanguard once they launched their SIPP as their fees were lower and after opening my ISA with them I liked the website, its ease of use and the choice of funds on offer. I think the process took about ten days over Christmas and I had some great help from them also, so far dead chuffed and will look to see how its doing come October.

powerspowers

Good thread!
im very early on in thinking about this, one of my goals this year is to
look at pensions and try to make some plans. Mortgage free seems much easier to get my head around as there is a fixed target! 

I work in the public sector so feel the best thing I can do pension/investment wise is to stay in my current line of work! If I did full time to retirement age I’d have a very good pension and we would manage on that. However, I love my job but I’m not sure I want that to be the whole plan for the next 34 years. We have vague dreams of owning a campsite one day and travelling in the winter. So not retiring but may need something to keep us ticking over! That big obstacle isn’t the 5-10???? Years with no income, it’s that those years won’t be building
up the pension pot. 

OH is older than me and suspect has quite poor pension ( we have no idea, that’s what we want to find out). I think I’d like to know that we had a joint plan and that we aren’t just relying on that I’m going to stay in the same job and prop us up. 

I currently chip £50pm into an AVC with prudential but suspect my money could be used better. My student loan isn’t that many years from being paid off so will look at that going straight to a pension/investment of some sort. 

That was quite vague, it’s really useful to read more well established plans!

Staffordia

@Staffordia - I am not a "shopper" either, but I think my tastes are high falutin'. For example, food, whisky or beer tend to be the posher varieties or the limited edition. I think I tend to justify this to myself as "my vice", but actually it's several vices (wasting money, eating and drinking too much).

Ed, my GF tells me that whisky is a perfectly acceptable vice and she has a variety of single malt bottles to prove it!

OhIJustLostMyShoe

Just saw this - great idea!

Why am I investing? - I'm hoping that I can free up time to be around for my child(ren)'s time growing up.  Step 1 is to have enough to pay off the mortgage (although I won't rush into that), step 2 is to then be able to pack in my day job and decide whether I want to freelance / part time / take time off each year as suits my circumstances at the time.  

How much do I think I'll need? - £500,000 seems like a good figure to aim for, plus whatever is left on the mortgage.  I'm not too tied to a figure though, since I don't feel that comfortable predicting my annual expenditure too far into the future.  Right now that would be overkill, but we'll see!

How am I going to get there? - In investing terms it's pretty simple really, just a combination of ISAs and pensions that are invested in global trackers.  Otherwise it's a case of minimising expenditure and trying to find small ways of making a little extra that don't suck up big amounts of time (surveys got ejected pretty early on!).  

How long do I have? I'm 29 and objective is to retire from full time no later than 40, but it can be flexible.  

greent

Hello everyone! Apologies for what has ended up as a very long post....

I like the idea of FIRE - although we're not aiming for particularly early. DH leaves all the money stuff to me and is much more of a spender than I am. Both of us come from poor backgrounds (single parents, poor council housing in deprived areas, paid weekly in cash/ on benefits, no car/ a car which was on its last legs and bought for £50 type thing) so have had no financial help/ been left money - so what we've achieved we have done so through our own work. 

We are both 51 and have 4 children, DD is 23 and has just started her first job post uni and a Masters (has approx 70k student debt) She is sensible and has no debt other than the student loans and is no a spender in any way - her outgoings are £225/ mth to us, her phone bill (sim only) and bus fares to work (maybe £25-30/ mth, as she can wfh sometimes). DS1 is in his last year of his undergrad degree and is potentially going to do a MSc next year. We pay his rent - approx £100/ week - which is very sad, as he's lived in his student house for approx 10/11 weeks this academic year!! - and top up his living spends if necessary (in reality this is actually a big food shop/ cleaning/ toiletries for him each semester + some new clothes (not expensive - he is an unbranded jeans a tshirt person)) DS2 is 15 and will almost certainly go to uni. DS3 is 11 - who knows what he'll do!  

We are MF since 2015 - house value is appx 500k for a 5 bed - could theoretically downsize at some future point, I guess. I work very part time at 2 local schools (total income maybe £4-5k pa at best - I usually save it all, as we don't use it in any budgeting) DH has a good job. He is a HR taxpayer and we do not really minimise this - we need to get better here

Why am I investing? - as above, we both come from poor backgrounds and this certainly affects us. Because we kept on having children DH is unlikely to retire before 60 - thankfully he enjoys his job and it pays well. At this point DS3 would be 20 and we assume the other 3 would be earning by then.... fingers crossed!! I want to help out our children with things as they happen. Plus DH is a spender.... he wrote his car off last week - the one he wants as a replacement is 33K... (plus tax etc) If I didn't take a more sensible approach than DH I don't think we'd have savings. Savings (will) give us options - and that's what I like!

How much do I think I'll need? - I'm not entirely sure...... Hopefully only 1 child will be financially dependent upon us when we are 60 - children are definitely expensive! £25K pa is doable - but possibly a little basic (I want to spend more in our 60s when we will still hopefully be young and fit enough for some travel etc) 

How are we going to get there? - a mix... DH has an old DB pension - the CETV is over 900k but predicted pension is around £25K pa at 60/a bit less and a lump sum. We may transfer this!! (spouse and dependents benefits are relatively small and so still make a transfer very appealing) He also has a Vangua*d SIPP made up of 2 old work pensions – current value is approx. £34K. We occasionally put a small bit in this. He also has a Pension from his current employers (he’s only been there 19 months) – he contributes the %age to get max employer contribs.  And has a share scheme with them (£100/ mth)  

I also have a DB pension – can’t get up to date values, as I’ve locked my account and need to contact the administrators to reset it…. However, my estimate based on past values would be a CETV of £400K, with a pension at 60 of around £9k (pesky part time working/ career breaks….) I then have a small AVC worth a total of approx. £1k, a small LGPS from a year of pt working at a school before having DS2 which is about £150 pa (whoo!!! ) and a V*nguard SIPP of £8.5K. And a tiny teachers pension from casual hours work which is probably worth only a few £00 in total, so pennies pa. I have a S&S ISA which I contribute £300pm to (current value just under £13k) and also another £65k in premium bonds/ regular savings accounts (about £60k of which is in my name only, £5K in DH’s)

We also have a BTL – but have exchanged contracts on this, so will actually have more cash in the next few days instead of teh property. After repaying mtge, the fees and allowing for CGT we should clear another £60k. I will likely stick 35k of this into premium bonds (25k in my name to max my allowance out, 10k in DH’s) whilst figuring out what to do…. (25k will go towards his car.... sob....)

Having checked again today, we both have 35years of NI contribs, so will both get full state pensions of £9140+ pa from our 67th birthdays (5 months apart)

Funding the gap between 60-67 will be from DB pensions if not transferred or from SIPPS if we transfer them out.

I think we should be ok… but am rather cautious.

 

How long do we have? – DH is 52 later this year, I was 51 last month. Assuming we both go @ 60 we have 8.5 + 9 years. Although my very part time work works well for retirees – so I envisage that I could continue that for the social interaction.

Any comments/ suggestions of how to do things differently/ how to improve/ ideas to minimise DH's tax etc etc are all very welcome!