Embarrassed 40 year old - no pension.

Jonesy1977

sho_me_da_money said:

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?

You probably do not need an advisor - there is a wealth of information out there including You Tube if you want to spend the time.  If your company DC pension is with L&G and is salary sacrifice then run this calculator below .............. get the balance right and Salary Sacrifice could be a really great way to maximise payment (and reduce tax)  for example does your company share 50% (even 100%) of employers NI savings? ask the question. Just bear in mind that you may also only be able to make a change to your amount once per year..............https://www.legalandgeneral.com/retirement/saving-for-retirement/workplace-pensions/calculators-and-tools/salary-sacrifice-calculator/ 

MaxiRobriguez

sho_me_da_money said:

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?

An advisor is one way to increase your fees.

They can be useful if you can't/won't do the leg work, but for most people the advice doesn't really differ that much:

1) Cut your non-essential outgoings: Costa Coffee? Make your own. Want some new clothes? Check a charity shop first. Need a new car? Buy a less luxurious one if it gets you from A to B.
2) Take advantage of tax breaks: Utilise pension income tax dodge - push as much as you can into that first before other investment vehicles like S+S ISA's which aren't quite as generous, especially for HRT's.  For some even going so far as reducing mortgage payments to create cashflow to allow more money to go into a pension may be warranted.
3) Understand when you will need the money you've invested and your tolerance for risk. If you're 20 years from accessing it and you can sleep OK with wild swings in value, then you should be seeking out maximum total return - that means no bonds, no gold and a healthy allocation to riskier equity classes like emerging markets. (Do vice versa if you're horizon is shorter or your tolerance less).
4) Look at the funds you're invested in. Is there a similar one that you could have which has a lower ongoing fee? The difference between a 0.2% fund and a 0.5% really eats into your profits over 20 years - like 25% of the final total.
5) Keep going. It takes time for your money to build. Early on it's all about capital injection, getting in as much money as possible. As the pot grows, compound interest starts to take a bigger impact. Michael's has 3x his money in four years - I have a similar story going from £30k to £120k in 4 years (and that £30k took me 7 years to build up). 

Edit: Personally I don't think you have the money in the pot to make an advistor worthwhile just yet. They'll only work for a certain amount and it'll be a big % of your pot. It might be worth considering later down the line when you're >6 figures, but by then you may have gained the experience you need to be more confident.

sho_me_da_money

MaxiRobriguez said:

sho_me_da_money said:

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?

An advisor is one way to increase your fees.

They can be useful if you can't/won't do the leg work, but for most people the advice doesn't really differ that much:

1) Cut your non-essential outgoings: Costa Coffee? Make your own. Want some new clothes? Check a charity shop first. Need a new car? Buy a less luxurious one if it gets you from A to B.
2) Take advantage of tax breaks: Utilise pension income tax dodge - push as much as you can into that first before other investment vehicles like S+S ISA's which aren't quite as generous, especially for HRT's.  For some even going so far as reducing mortgage payments to create cashflow to allow more money to go into a pension may be warranted.
3) Understand when you will need the money you've invested and your tolerance for risk. If you're 20 years from accessing it and you can sleep OK with wild swings in value, then you should be seeking out maximum total return - that means no bonds, no gold and a healthy allocation to riskier equity classes like emerging markets. (Do vice versa if you're horizon is shorter or your tolerance less).
4) Look at the funds you're invested in. Is there a similar one that you could have which has a lower ongoing fee? The difference between a 0.2% fund and a 0.5% really eats into your profits over 20 years - like 25% of the final total.
5) Keep going. It takes time for your money to build. Early on it's all about capital injection, getting in as much money as possible. As the pot grows, compound interest starts to take a bigger impact. Michael's has 3x his money in four years - I have a similar story going from £30k to £120k in 4 years (and that £30k took me 7 years to build up). 

Edit: Personally I don't think you have the money in the pot to make an advistor worthwhile just yet. They'll only work for a certain amount and it'll be a big % of your pot. It might be worth considering later down the line when you're >6 figures, but by then you may have gained the experience you need to be more confident.

Hey Max, what is the pension income tax dodge. Im basically sacrificing everything over the 40% threshold tax rate (>£50K)

LHW99

I would have put MaxRobriguez's point 5 first. As you have found - when something is going into the pot, it can build up nicely even if you don't know anything about it.

Other than that, points 1 and 2 are definately high on the list IMO, 3 and 4 you could work on over a longer timescale.

Good luck!

ex-pat_scot

sho_me_da_money said:

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.

Mine's a similar journey.

Jan 2016 £270,000 to now £870,000.
There's no trick.

We've been the beneficiaries of a sustained (+10%pa) wave of confidence in the market, swollen by sustained QE and buoyed by (in my case) £40,000 contributions each year.
That tallies up to +£600,000 in 5.5 years, with £220,000 contributions.

The numbers would have been much more impressive, if we'd have started from Dec 2008, but sadly I had my peak earning and contributing years after that.

Albermarle

ex-pat_scot said:

sho_me_da_money said:

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.

Mine's a similar journey.

Jan 2016 £270,000 to now £870,000.
There's no trick.

We've been the beneficiaries of a sustained (+10%pa) wave of confidence in the market, swollen by sustained QE and buoyed by (in my case) £40,000 contributions each year.
That tallies up to +£600,000 in 5.5 years, with £220,000 contributions.

The numbers would have been much more impressive, if we'd have started from Dec 2008, but sadly I had my peak earning and contributing years after that.

Even though I am not invested aggressively , mine still went up from £320K to £750K  over that period ,including £200K of contributions . It's amazing really .

Albermarle

What does living like a monk mean and curious to learn what the rest of the Jargon means above carry forward etc. 

Living like a monk, means living on bread and water ( but probably not literally in this case )

Carry forward is the ability to carry forward unused pension allowance from previous years. So if you have not used up the full £40K  allowance in the last three years you can use it this year . However you can only do this if you have sufficient taxable earnings this year to take advantage of it . 

Hey Max, what is the pension income tax dodge. Im basically sacrificing everything over the 40% threshold tax rate (>£50K)

I think that is what he meant - make maximum use of generous tax relief , especially for 40% taxpayers .

MaxiRobriguez

Albermarle said:

What does living like a monk mean and curious to learn what the rest of the Jargon means above carry forward etc. 

I think that is what he meant - make maximum use of generous tax relief , especially for 40% taxpayers .

Indeed.

sho_me_da_money

Albermarle said:

ex-pat_scot said:

sho_me_da_money said:

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.

Mine's a similar journey.

Jan 2016 £270,000 to now £870,000.
There's no trick.

We've been the beneficiaries of a sustained (+10%pa) wave of confidence in the market, swollen by sustained QE and buoyed by (in my case) £40,000 contributions each year.
That tallies up to +£600,000 in 5.5 years, with £220,000 contributions.

The numbers would have been much more impressive, if we'd have started from Dec 2008, but sadly I had my peak earning and contributing years after that.

Even though I am not invested aggressively , mine still went up from £320K to £750K  over that period ,including £200K of contributions . It's amazing really .

ExPat and Albermarie.

Surely the way anyone can do this is being able to put away the max £40K per year right? On my wage, I could never do that. Forget living like a monk, I would need to live like a monkey swinging from tree-to-tree.

sho_me_da_money

Also just a follow up to the last question. This is something i cannot get my head around.

If I salary sacrifice everything over £50K then I avoid paying 40% on my take home pay. Thats because the 40% tax comes into play for anything over £50K.

What advantage is there if I salary sacrificed to say £40K per year? Sure I get another £10K into my pension pot per annum but can someone help me understand if that benefits me in any other way please? Is there a tax benefit to this with my take home pay? Apologies if this is a dense question but just trying to learn the effects of pumping in more today and how that affects my life today.