Embarrassed 40 year old - no pension.

Albermarle

sho_me_da_money said:

Thank you all.
I just learned that I had a pension in a very old company worth £6K and its just been sat there doing nothing. Would you
1. Transfer it to the current pension provider
2. Transfer it to something called a SIPP - can I take the 6K and throw it all on a stock?

A SIPP is just a pension , like your current workplace one . The difference will probably just be the SIPP has a wider range of investments to choose from , too many for most people.
'Throwing it all on a stock' is akin to putting it on a dead cert in the 2.30 at Chepstow.
Almost certainly you would be safer to transfer it to your current pension.

steampowered

sho_me_da_money said:

Slightly off topic and focussed on the mortgage. If you had the money to pay off the entire mortgage - would you? Im curious more than anything to know how your strong financial minds work. Is it better to pay off or better to continue and invest the money elsewhere. Just a curious question.

It is almost always better to invest the money elsewhere, for the following reasons:

1) The stock markets have historically returned on average 7.5% per year - more than you will pay on a mortgage.
2) Interest rates are at record lows. It makes no sense to rush to repay a mortgage when you are paying a 1.5% interest rate. 
3) Mortgages are usually taken out over long time frames (10 years plus). This provides plenty of time to ride out the ups and downs of the stock market.
4) Investing can be tax efficient because it allows you to make the most of pension contributions (40%+ uplift from the taxman for higher rate taxpayers) or stocks & shares ISAs (invest up to £20k a year, returns are free from tax).

That said, if you only have a small mortgage, it can be easier to clear it just to avoid the hassle. 

MX5huggy

sho_me_da_money said:

Thank you all.
I just learned that I had a pension in a very old company worth £6K and its just been sat there doing nothing. Would you
1. Transfer it to the current pension provider
2. Transfer it to something called a SIPP - can I take the 6K and throw it all on a stock?

It’s not doing nothing, it’s invested in something and growing (or shrinking). It will also be occurring fees, which may or may not be competitive. Find out what the investment is and the fees before deciding what to do. 

LHW99

MX5huggy said:

sho_me_da_money said:

Thank you all.
I just learned that I had a pension in a very old company worth £6K and its just been sat there doing nothing. Would you
1. Transfer it to the current pension provider
2. Transfer it to something called a SIPP - can I take the 6K and throw it all on a stock?

It’s not doing nothing, it’s invested in something and growing (or shrinking). It will also be occurring fees, which may or may not be competitive. Find out what the investment is and the fees before deciding what to do. 

Also, at the moment under current rules, as it is below £10k (and if it remains so at age 55), you could withdraw the whole amount under the "small pots rule" without triggering the money purchase annual allowance,

See the second half of this page

https://www.litrg.org.uk/tax-guides/pensioners/how-do-i-cash-my-small-pension

michaels

ON 1st Jan 2016 my pension pot was 250k, now it is about 780k despite having underperformed the market - if you are willing to 'live like a monk' and maximise contributions( I was lucky, I was able to maximise use of carry forward allowance, the pip/tax year change etc to maximise contributions in a tax efficient way) for a few years you can really turn around your retirement prospects.

sho_me_da_money

Morning MSE Family,

I just wanted to say a big THANK YOU to all that have contributed to this thread and have helped align my future, I wish you all joy and blessings for as long as you live. Seriously people, I love you all 

Surprising Success Story

I also want to share something that took me by surprise today.

On Friday, I received a statement from AVIVA titled 'Yearly Review of your Pension Plan'. As you can imagine, I was like - what the hell is this? It turns out that my employer was was with AVIVA and flipped to Legal and General recently. To my surprise I learned that my employer and I had been contributing to the AVIVA pension to the tune of £4,500! RESULT!!......but wait there's more. 

I called up Aviva for advice on how I can transfer my pension to my current provider (L&G). They explained the process and informed me that I simply needed to inform L&G of my account number and of the total sum being transferred across - £26,000...cough cough what?....I told the advisor that the statement I have says £4,500. The advisor further explained that £4,500 is the sum for last year only. The total balance is £26,000, and it has been accumulating since I started contributing from 2016!! 

At this point, my embarrassed 40 year old a$$ started doing a stand-up MC Hammer style breakdance. I could not believe it!!

Summary

• I have £26,000 built up in a pension since 2016 that I did not know I had until today
  
• I have £6,000 built up in a pension that i contributed to about 15+ years ago
• I am now (thanks to you) salary sacrificing £1030 per month with my current pension provider (AVIVA) to get the full 40%
• I am now (thanks to you) updated to a new pension product with a slightly higher risk profile than the default plan I was on.

I used an online calculator and providing I have entered the numbers in correctly, I am on track for the following at 55. This is way way way more than I expected when I started this thread.



This whole thing has just made me feel truly blessed. I am thankful to God and to all of you for supporting me. Cheers guys and I hope you equally receive blessings such as this.

  

ex-pat_scot

great stuff.
The transfer is straightforward.
At the moment, it's best to plan on the inputs - what efforts you are making - rather than looking too far forward to the outputs (what might I have, and by when) - as there are still many variables at play.
You need to be considering the following:
- what to do with your existing funds, once transferred. What's your investment risk appetite and approach?
- minimise the costs, and keep an eye on them
- choose suitable funds into which to invest

Then what to do with current/future contributions:
- how much?
- what is efficient from tax perspective?
- what can you afford?
- are you making best use of employer contributions / matching?
- what are the investment fund options? What are their costs?

It's tempting to look forward to the "when can I retire and how much will I have", but your pension has 17yrs+ to get there, and whatever you plan will be way off!

MaxiRobriguez

Yes the range of possible outcomes is massive over such a timeframe, even with 0.5% variances here and there.

Best thing to focus is indeed on the inputs - maximise your contributions, cut your waste, reduce your fees etc. Whatever the markets do then you can at least rest assured you couldn't have done any more.

Good luck to you - nice to have a poster come back after receiving a lot of advice with all that detail.

sho_me_da_money

michaels said:

ON 1st Jan 2016 my pension pot was 250k, now it is about 780k despite having underperformed the market - if you are willing to 'live like a monk' and maximise contributions( I was lucky, I was able to maximise use of carry forward allowance, the pip/tax year change etc to maximise contributions in a tax efficient way) for a few years you can really turn around your retirement prospects.

This is amazing Michaels. How the heck where you able to 3X in 5 years? What does living like a monk mean and curious to learn what the rest of the Jargon means above carry forward etc. Of course, please feel free to explain it to me like a 5 years old.

sho_me_da_money

MaxiRobriguez said:

Yes the range of possible outcomes is massive over such a timeframe, even with 0.5% variances here and there.

Best thing to focus is indeed on the inputs - maximise your contributions, cut your waste, reduce your fees etc. Whatever the markets do then you can at least rest assured you couldn't have done any more.

Good luck to you - nice to have a poster come back after receiving a lot of advice with all that detail.

Is it worth getting an advisor? To tell you the truth, I am an absolute newb to this stuff and how to focus on inputs, what cut your waste means, how to reduce my fees etc.

I really want to make sure I am doing the best i can be possibly doing. To really get the most out of this, do people review every 3 months, 6 months, yearly?

Is the easiest way to ensure I am doing all I can to get a pension advisor?