FIRE Girls Pension Diary - Aim High & Dream Big

Cornish_mum

Hi LL I would really suggest you read up abit about types of financial risk them decide what you feel is the best thing for you.  There are different types of risk investment, inflationary, longevity related to retirement or any other type of long term savings. 

I have choosen to put my IB mostly into equity because of my timeframe and my concern about inflation risk not because I expect to make a massive return. I fully understand I am exposing myself to investment/market risk and my IB pension is likely to have periods of deep negative growth losing perhaps 50% of it’s value and taking perhaps 5-10 years to recover. I plan to build up 5 years worth of income in the final years leading up to retirement in low investment risk high inflation risk (ie cash/gilts) as I don’t feel comfortable about how I would react that close to retirement if there is significant market down turn without cash on hand. 

LL_USS

Thank you @barnstar2077 and @Cornish_mum. Really appreaciated.
When I leave money in Investement Builder with USS pension fund, I have only just aimed to benefit from some tax-free/ reduction perk and any growth is hopefully just to balance inflation. Quite low expectations I suppose.
To follow your advice, I will read up further, definitely have to look at investments as long-term, starting with lower level of risks and management first.
We are in "cash as king" era for a bit longer so I hope to have time before the time turns again, to educate myself about Stocks and Shares.

Firegirl

@LL_USS I don’t think LISA is the best idea when the property is being bought in London because the purchase price has to be below £450k.  What to do though, is if you think he might be able to make use of it, get your son to put £1 in a LISA to open it. Once open the clock starts ticking.  You need to have it open at least a year before buying your first home.

Here a link with detailed info and info about penalty.

https://www.moneysavingexpert.com/savings/lifetime-isas/

I would def suggest getting an IFA before committing to stocks and shares. They will help you understand your attitude to risk. It does cost but the idea and hope is they make you more than they charge so it’s worth it.  If you get the right person then you’ll be able to relax about your finances. First thing to do is make sure your making full use of company matching if you have a pension at work.

LL_USS

@Firegirl
Thank you. I'll definitely try to open a LISA for my son soon (still a bit put off dealing with identity checking and other paperwork after struggling to get Natwest pay Child Trust Fund to his current account with another bank). Young adults do not have a history of credits like us so it takes longer to start, but we need to help them start building their profile with bank cards and accounts. Thanks for the link for LISA. I've been following this website for a long time for all sort of money issues, it's good isn't it.
I'll look around for an IFA too, thanks.

Firegirl

@LL_USS for identity checks.  Find out what you need and have it gathered before you apply.  I think young people are so used to instantaneous world that if there’s any stall in the process they get annoyed and give up.  My 16 year old was going mad trying to open a savings account but when he eventually let me help I realised he was trying to open an over 18s account. When he chose the over 16 accounts to it was literally 4 clicks to open.  Between all that he’d tried opening Revolut and Monzo! I was like you need to be careful what your doing.  Does a 16 year old have a credit file! 

Firegirl

Interesting article on bbc news today - pension income needed to retire jumps as family costs rise.

https://www.bbc.com/news/business-68222807

barnstar2077

@LL_USS - I would suggest you do your homework first, as most people would not require an IFA just to open a stocks and shares ISA and invest in a globally diverse index fund.  You would just be giving your money away, unless your financial situation is particularly complex.

Pensioncraft are a good place to start:

https://youtube.com/watch?v=KKdW5W14Czo

Lots of good videos, with very clear explanations, by a guy who literally wrote the book on finance.

Watty1

Frightening how low most peoples retirement savings are.    I've been working out my figures (harder now I'm single).  I need a few months more data.  I am mortgage free but I think I'm probably £250,000 off retirement which is slightly depressing given my age.                           

LL_USS

barnstar2077 said:

@LL_USS - I would suggest you do your homework first, as most people would not require an IFA just to open a stocks and shares ISA and invest in a globally diverse index fund.  You would just be giving your money away, unless your financial situation is particularly complex.

Pensioncraft are a good place to start:

https://youtube.com/watch?v=KKdW5W14Czo

Lots of good videos, with very clear explanations, by a guy who literally wrote the book on finance.

@barnstar2077 I am watching this video and thinking if one only draws out 16,000k/year from pension fund to max tax allowance benefit (4K tax free, 12K allowance) and draws the rest of money they need from ISA, keeping the pension invested for longer. This is valid for a pension fund that is not defined benefit right? Because if someone at retirement has 20K/year as defined benefit, i.e. income for life, they should take out 20K, paying a bit of tax. But if not taking it all then the only reason is to leave the leftover in the pension fund to be inherited by family?

Sorry it may be a naive question. I am just working my head around with pension recently.

barnstar2077

LL_USS said:

barnstar2077 said:

@LL_USS - I would suggest you do your homework first, as most people would not require an IFA just to open a stocks and shares ISA and invest in a globally diverse index fund.  You would just be giving your money away, unless your financial situation is particularly complex.

Pensioncraft are a good place to start:

https://youtube.com/watch?v=KKdW5W14Czo

Lots of good videos, with very clear explanations, by a guy who literally wrote the book on finance.

@barnstar2077 I am watching this video and thinking if one only draws out 16,000k/year from pension fund to max tax allowance benefit (4K tax free, 12K allowance) and draws the rest of money they need from ISA, keeping the pension invested for longer. This is valid for a pension fund that is not defined benefit right? Because if someone at retirement has 20K/year as defined benefit, i.e. income for life, they should take out 20K, paying a bit of tax. But if not taking it all then the only reason is to leave the leftover in the pension fund to be inherited by family?

Sorry it may be a naive question. I am just working my head around with pension recently.

As mentioned in the video, the combination of ISA and SIPP is a very tax efficient way of retiring.  The ISA adds a lot of flexibility, as you can live off of money from an ISA years earlier than you can access a SIPP (and still use the ISA as an emergency fund in the meantime.).

My current plan is to retire at 55, live off of my ISA for a couple of years, then take money from my SIPP at 57 (which should be almost entirely tax free), leaving what is left in my ISA as my boiler replacement, new fridge etc fund.  At 67 I will reduce my SIPP withdrawal as it will just be used to top up my state pension.

If you should pass away before the age of 75 with a SIPP the contents can be left to a beneficiary of your choice.  If the money is taken as a lump sum or income by the beneficiary within two years of your death, it would also be tax-free (as long as you died before age 75.)  They can still remove money if you were over 75 (fingers crossed! :  ) or if they take longer than two years to decide what to do, but they would pay income tax.

With a DB scheme, you would have to read the scheme rules, but it is my understanding that fifty percent being paid to a spouse is not uncommon upon death.