Is this something a Financial Advisor can help with?

DaveyKnow

I am new to the Forum and was hoping someone could offer me some advice,

I am 43, I am not the greatest with numbers and I have no idea on what I should do to try and get myself in a good position for the future. I have

• Pension with approx. £30k now contributing approx. £1400 per month (£17k per year) salary sacrifice
• ISA around 10k – now contributing £175 per month (2k Per year)
• 40% income tax payer
• 0 cash savings (other than 3k that is in current account)
• Residential Mortgage with approx. £65k remaining – Repayment fixed until 2027 @ 1.7%
• 2 Buy to Let Properties only interest only mortgages

1. One worth approx. 90k  with £40k mortgage 2.44% fixed until oct 23 – 8year left can I remortgage this and put it onto repayment? Can I remortgage to a longer term?
2. One worth approx. £130k with approx. £80k mortgage 2.44 fixed until oct 22 – no idea on time left I cant get access to the provider so waiting for letter

I have been going along without considering what I will do in the future, and I am now wondering what is the best way to approach paying of the mortgages getting a decent pension.

 

I have been reading but I am just not confident and want to make the right decision, so I was wondering if a IFA would be someone who could help me, but I am not sure if this is what they do? and if they do if I am “wealthy” enough to use one?

• Do I put the BTL on repayment – I would be liable for the tax which I would cover from wages
• Put more into my pension – can’t increase to 40k as most of salary is overtime but even if I put into a private pension that money is locked and my work is based on contracts (construction) currently on 5year contract
• Overpay residential mortgage
• Concentrate on savings

I am clueless, I can see the pension being a good option as I get the tax relief but then what happens with the BTL – I was hoping the income from them would be part of my pension? These are the types of questions I have but as I say is that what you use a Financial Advisor for?

Any thoughts greatly appreciated 

El_Torro

To be blunt I would say you haven’t really got enough assets to make the best use of an IFA.

I think the most urgent thing to do is build up your cash savings. You own 3 properties (including the one you live in) and £3k won’t get you far when boilers break or other repairs need doing. Typically you should have somewhere between 3 and 6 months worth of expenditure in cash. With 3 properties I would err on the side of more rather than less.

Why do you want to make your BTL mortgages repayment? I don’t think there’s any urgent need to do this.

You can put more in your pension. As I mentioned above focus on your emergency fund first though. You already seem to understand the pros and cons: pensions are very tax efficient (especially for a 40% tax payer) but you need to wait to access the money. Making use of Stocks & Shares ISAs may be a good halfway house.

I wouldn’t worry too much about your residential mortgage, as long as you’re comfortable with when you’re going to pay it off. I would prioritise your currently very small pension for now. Not forgetting the emergency fund in cash

DaveyKnow

Blunt is good with me. Makes things much easier

This is really helpful thanks @El_Torro

I am building my cash savings, I have actually just depleated them as I had a new boiler in one of the BTL and I also had 6 months out of work thought a cycling accident! I should have 6 months emergancy in a few months

I think the accident has made me really look into my finances and the BTL fix ending soon is another kick up the nether as I didnt want to lock in for 5 years without considering my position

The thought of paying the mortages off asap was to have a safety net if anything like this happened again i.e.

• If I didnt have to pay my residental mortage, then my outgoings are reduced. It is only £400 a month as good LTV % but every little counts if you aren't earning
• If the BTL were mortgage free that would provide income which I could use I could pay my bills and not starve longer term, in the case of being out of work (accident / reccession etc), because of the rental income I wouldnt be entitled to any benefits. Once they were paid the full rent could go into my pension to benefit from the tax relief and this could stop if I needed money to live off

My current monthly take home (after pension salary sacrifice) approx £4k a month - Monthly survival outgoings (bills and food) excluding BTL house is circa £1.5k, that is a bare bones figure that doesnt include any leisure, clothes etc but even including "fun" it still means I can do something with the £1-1.5k remaining cash to help my future

BTL dont really add much as once interest only mortgage, insurance, management agent and tax are taken (tax is the major one as it is all 40%) it works out at about 3k per year left over, I probably could up the rent as it hasnt changed in a very long time but I am not going to do that at the moment (I have long term tenant one of whom is struggling and I know they wouldnt be able to find anywhere else at their current rent, which they are sometimes behind on, Both of the tenants are nice people, who will stay for the long term and dont cause any issues)

I think that is the main concern, I am not getting any younger, work in a physical role, and my lack of invincibility has come to the forefront of my mind after the accident - everything is great if I can earn but it is the what if....

El_Torro

Paying off your mortgage early (whether it's a residential one or a BTL one) is certainly a popular choice. If you explore this forum there is a whole section dedicated to people who want to be mortgage free. However on this Savings & Investments sub forum most people (myself included) prefer to focus on their investments, including pensions. The reason for this is that the stock market tends to outperform mortgage interest rates over the long term so by the time you retire you will be better off than if you had focused on paying the mortgages off early.

Ultimately it's up to you. There's a lot to be said for not having to worry about how you're going to make next month's mortgage payment, especially if you're currently out of work. 

One thing you can do is check a pension calculator to see how much money you will have when you retire, also have a think about how much money you will need in retirement. The calculator I usually use is https://www.hl.co.uk/pensions/pension-calculator There are many free and good ones out there.

Based on the figures you have stated (a pension pot of £30k, £1.4k going in a month and 43 years old) you should have about £750k in your pension in today's money when you retire, assuming you keep up your pension payments and you retire at 68. If you want to retire earlier your pot will be smaller of course.

If you take 3% of the pot every year that's £22.5k a year, plus whatever state pension you've accrued. If this is enough, or more than enough, then great. If not then you might have to make some difficult choices about how much you invest and how you invest it. 

DaveyKnow

thanks @El_Torro.....

This is exactly the other view I was looking for, I had considerd alternatively putting any disposable into S&S ISA and then taking it out at a certain point or return (for example perhaps after the 5 year fix term expiry, end of mortgage term, or @ 10% increase etc) and then get the best of both worlds....at least in my uneducated view 

I did try to buy some crypto and stocks (forgot to include them in the asset) a while back but ended up doing very badly as I clearly dont have the expertise to chose investments of stocks, probably at about 2k now and I have made again the uneducated to decision to leave them be and hope for the best......!

I think I am too concerned with the right decision, but it is helpful to hear other people view as it is confirming that maybe there isnt an absolute right decision? 

Thats what I was hoping the IFA might be able to give me....."this is absolutley financially the best thing to do"

Thanks for the pension info, definitley something to think about, I do expect to have an inheratance some point down the line of circa £200k but hopefully that will be a lot later down the line 

thanks again for the input! I now at least feel more comfortable that I do have a basic graps of the benefits and risks and I am not missing anything or completly on the wrong path 

El_Torro

DaveyKnow said:

I think I am too concerned with the right decision, but it is helpful to hear other people view as it is confirming that maybe there isnt an absolute right decision? 

Thats what I was hoping the IFA might be able to give me....."this is absolutley financially the best thing to do"

An IFA won't tell you "This is what will definitely give you the best return over the long run". Mainly because they don't know any better than we do. Some people erroneously think that IFAs sell get rich quick schemes. If they knew how to get rich quick with 0% risk they'd all be retired and not bother selling their services to people like us. If you were sitting on hundreds of thousands of pounds worth of cash, with no clue what do with it, I'd certainly recommend you see an IFA. Based on what you've said about your current situation I don't think it's something you would benefit from though.

Stocks & Shares ISAs do have their place. Remember though that they're not as tax efficient as a pension. I personally invest in both, I sacrifice some tax efficiency for the flexibility that an ISA gives me. 

I wouldn't feel bad about not being successful at investing in crypto and individual stocks. Many have come before you and been as unsuccessful. Personally I've been investing for a couple of decades and never bought individual stocks. I'm happy with the return that funds give me and stick with them. If you do take a more active interest in your investments you do need to do some reading up on how to invest in funds though. It's not hard, just need to avoid the pitfalls. The main issues are being diversified and understanding the volatility. For many people investing in their employer's pension scheme in the default fund is good enough.

enthusiasticsaver

DaveyKnow said:

I am new to the Forum and was hoping someone could offer me some advice,

I am 43, I am not the greatest with numbers and I have no idea on what I should do to try and get myself in a good position for the future. I have

• Pension with approx. £30k now contributing approx. £1400 per month (£17k per year) salary sacrifice
• ISA around 10k – now contributing £175 per month (2k Per year)
• 40% income tax payer
• 0 cash savings (other than 3k that is in current account)
• Residential Mortgage with approx. £65k remaining – Repayment fixed until 2027 @ 1.7%
• 2 Buy to Let Properties only interest only mortgages

1. One worth approx. 90k  with £40k mortgage 2.44% fixed until oct 23 – 8year left can I remortgage this and put it onto repayment? Can I remortgage to a longer term?
2. One worth approx. £130k with approx. £80k mortgage 2.44 fixed until oct 22 – no idea on time left I cant get access to the provider so waiting for letter

I have been going along without considering what I will do in the future, and I am now wondering what is the best way to approach paying of the mortgages getting a decent pension.

 

I have been reading but I am just not confident and want to make the right decision, so I was wondering if a IFA would be someone who could help me, but I am not sure if this is what they do? and if they do if I am “wealthy” enough to use one?

• Do I put the BTL on repayment – I would be liable for the tax which I would cover from wages
• Put more into my pension – can’t increase to 40k as most of salary is overtime but even if I put into a private pension that money is locked and my work is based on contracts (construction) currently on 5year contract
• Overpay residential mortgage
• Concentrate on savings

I am clueless, I can see the pension being a good option as I get the tax relief but then what happens with the BTL – I was hoping the income from them would be part of my pension? These are the types of questions I have but as I say is that what you use a Financial Advisor for?

Any thoughts greatly appreciated 

If you are investing a significant amount into your pension then you are doing something right as you are a 40% income tax payer.  Is this your employers pension scheme presumably if it is salary sacrifice? 

Building up a cash emergency fund should be a priority especially if you have BTLs so might have maintenance costs on both those and your own property. The ISA is a good idea but I would look into investing more in this only after building up some savings. Look into funds (multi asset funds) are diversified and much less volatile than individual stocks and crypto which personally I would not touch. 

I expect you would be able to  restructure the BTL mortgages  given you have a good amount of equity in both and change to repayment but BTL mortgages are usually more expensive than residential. Be aware there may be early repayment fees especially on the one fixed until next year. You can normally move within three months so talk to the current lender about the one due up this October.  It is difficult to say which would be better - investing in your pension or repaying the BTL mortgages as no one has a crystal ball so we do not know how long the stock market will remain in a bit of a slump or what interest rates will do.  I would hedge your bets and maybe do a few of the things you are considering. 

Definitely overpay your pension to maximise the tax benefits and your employers contribution. 
Focus on building up some savings. 
Speak to your lender about the BTL mortgages and if a choice between them or your residential I would focus on them given they are more expensive. 

I don't think  an IFA is appropriate given you are using your employers pension scheme and I am not sure how involved in mortgages they get. 

I would say that none of us can be sure we are making the right decisions as what is right for one person may not work for another.  You can get predictions from your pension administrator as to how much your pension pot will be worth at the point you intend to retire and your mortgage broker will help you with information about the BTL mortgages and whether it is better to overpay these or at least restructure on to repayment rather than interest only. You need to have an end goal in mind ( what level of income will you need in retirement?) and given you are 43 that is a good time to consider.  When would you like to retire and how much would you need to raise from your pension?  If you are considering keeping the BTLs presumably these will be part of your retirement planning? You are already in a fairly good position although the pension is a bit low for someone of your age.  Have you any old pensions anywhere? 

Albermarle

I am clueless,

You are clearly not, so probably best not to think like this.

You just need more of a plan, but otherwise you seem more clued up about finances than 80% or 90% of the population, who truly are clueless on this subject.

Linton

I agree with the others that a plan is essential.  Putting together a retiurement plan is pretty straightforward with a spreadsheet. If you arent familar with their use perhaps you could find a Financial Planner.  Planning is something that an IFA should have the skills to undertake but whether they would want to I dont know.  If not perhaps they could put you in touch with someone appropriate.