The other side of a flippant and immature mindset. First steps. Could be long.

Marcon

BrotherUuurgh said:

@Marcon - you sound like my dad! I understand your phrase very well, heard it a lot. What happens when I go to the gym (after not going for a while, falling off the wagon as it were) is that it starts to become another laser focus. I can't seem to help or control or allocate my levels of focus properly. It's all or nothing with me, and so introducing the gym will hurt my current financial goals. I need to get this debt gone and can't lose that focus, not yet. When money is in a better place, I can start to think about physio or chiropractors, not just constantly taking pain relief.

I'm with your dad on this one - and if you look again at what I've said, I'm not suggesting you do go to the gym...

Storcko14 said:

Re exercise - as Marcon says there will likely be something you can do that could potentially help or at least not hamper your back.  You could think about something low impact like cycling.   It might not be cycling for you but there will be something.

Anything which can safely reduce your pain/painkiller intake is going to help you focus even more on your finances.

barnstar2077

BrotherUuurgh said:

Apologies if this is the wrong forum, but this is mostly pension related so felt it the best fit... I'm feeling more and more stressed so need to get this off my chest at the very least.

My teens twenties were an overall terrible time for me. I can honestly say that. Without a life story, I got sucked into the darker side of the big boy's world. Smoking, alcohol, gambling, payday loans, the law and all those joyful things were in some way a significant part of my life, and really helped shape what this period in my life became.

After an ultimatum delivered to me by the universe itself, I found a rock bottom but some stability as well. These years left me with a real hateful, selfish, ignorant outlook on life, as well as a five figure debt. I'd been in and out of work, paid small amounts into various workplace pensions but eventually opted out of them because I'd need the cash more. I won't make it to retirement age. Even if I do, the Government will HAVE to keep me. I'll have paid all my taxes, it'll be time for them to pay for me. Blah blah blah. I'm currently 32 with an effectively zero pension pot and five figure debt again. 

Up to today, I've gradually shifted this parasitic mindset and I'm now seriously thinking about things. How to play the big boy's world game properly. My personal finances are now dominating most aspects of my every day life. I'm actively clearing my debt, making overpayments, refinancing to better rates, my reckless spending is hugely reducing. I'm starting/learning to form good saving habits, and thinking about my financial future. The first few points are a relative walk in the park compared to preparing for the future. This is why I'm posting here to start to draw on different points of view, advice, experiences to try and get a better understanding of where I am now, where I want to be, what it'll take to get there. So, I believe I could commit to one or the other here - a property or a pension. I am doubtful of being able to achieve both, but to do one or the other to a good standard would be enough for me. I struggle with articulating my thoughts properly and critical thinking as it rapidly turns into stress and anxiety so please bear with me.

Questions, thoughts, in no particular order:
1) I'm trying to start to figure out what sort of final pot value I need to aim for. Let's say I'd like today's standard of living when I retire. When I use calculators to forecast a pension pot, and I input that I'd like £30k/yr, is this number the same as £30k in today's value of £30k? eg, £100k 100 years ago was only £100 or whatever..? Will I actually need to aim for a higher annual amount than that to account for inflation? Whichever one this is obviously makes a huge difference to the overall approach required, and how realistic this number might be.

2) I'm currently enroled in my workplace pension (WP). I salary sacrifice (I think, I'll have to check) 5% and my employer contributes 3%. According to PensionBee's calculator, with compounding interest and State Pension, the pot would be around £154,000. It won't even last 10 years. Sweet. I could double my contribution, sure, I could even triple it, but even then, at £360,000 it'll only last 20 years. That level of contribution would start to have an impact on everyday life, with the cost of living and all. This is even without a 25% TFLS. I'm not convinced that the SP will be a thing by the time I reach retirement, so that figure will be even lower still. I could 5x my contribution and end up with a half a million pot that lasts past my 100th birthday, but then I won't have a great quality of life in the mean time, and probably not even at retirement with the state my body will be in. It just seems bleak. Is the workplace pension worth hitting hard? Then there's the "how do I buy a house" thing...

3) At 32, I feel like it could be too late to purchase a property. I'm not sure how I could get a good enough deposit together to buy a house. Rates are high, prices are even higher, but I could make it happen for the right house. Thing is, with the deposit, mortgage and other ongoing costs, it'd probably have to be my sole focus financially. A proper pension would probably suffer. With a tiny pension as a result of the costs of owning a property, I'd have to use the property itself as a pension - sell it, cash in and live off that money. Is this an option? That makes me think, what's the point in it all in the first place? I could probably suffer it though, if I could build a sizeable pension on the side, but I really do doubt it's doable.

4) I honestly believe I'm going to have to retire early due to health. My back is already causing significant issues in life and I don't think it'll ever get better. I don't like the idea of having to live off benefits if that time comes, so I'd like to have something on the side that's accessible immediately - something like a cash ISA. Top of my head, I could pour spare money into a S&S ISA to try and force some growth, then nearer the time transfer it to a normal cash ISA to protect it from losses. As I understand it, it's a savings account, the money that's been paid into it has already been taxed, and anything and everything that is withdrawn from that account would be tax free. I could draw on that essentially at any age. I feel like this might be the most suitable contingency for forced early retirement?

Sorry if this is a little hard to read and understand, I just wanted to get my thoughts out and get a dialogue going. To start to actively plan and do something about my retirement before it's too late. My thoughts come out best when I'm in conversation and others are asking me questions. I just need some help. I've always needed help.

Just a last note, I've signed up to PensionBee to trace those small WP pensions from previous employers and put them into one place. I'm hoping this small pot will be a useful tool to help me learn a bit more about pensions as a whole, investing the money in the right way etc. Thank you so much for taking the time to suffer reading this.

I have heard much worse.  I know people in their sixties who opted out of the company pension, with no savings, and spent their life down the pub.  Now they have no choice but to suffer at work without any options.  You are so young, you have loads of time to get yourself sorted, and you are already one step ahead of millions of people who just live each day as it comes never thinking about the future.

As others have said, I would look into paying more into the pension and how it is invested inside the pension itself.  Most pensions these days have a way to log in and select the funds you want to use yourself.  As you are so young you should consider going 100% global equities, which is unlikely to be the default fund.  Funds tend to be made up of equities, which are slices of companies, and bonds, which are kind of loans that pay back small percentages in exchange for lending the money out.  You can Google all about them, but all you really need to know is that a globally diverse 100% equities fund tends to have the highest returns over the long term (many, many years.)  They will go up and down a lot though, so you have to be able to invest the money regularly and not worry too much about the price on a day to day basis.  If you are unsure, copy and paste the name of your available funds into this thread to get people's opinions on them.

I would also do as someone else suggested and look into what kind of exercises you can do, and also what you shouldn't do.  I had such a bad back years ago I had to go and see a physio in the end.  When I told him I was resting because I was getting nausea and pain doing anything, he told me sitting down was the worst thing I could be doing!  So it is definitely worth seeking some professional advice on the subject.  Plus, healthy body, healthy mind etc.  We all want to have a long happy retirement, and our minds and bodies need to be in good shape for that to happen.

Pension predictions tend to be almost worse case scenario these days, there was a time when you would be promised the moon, and that has led to predictions being overly pessimistic in most cases now.

I started getting my act together in my early forties and my assets started to increase much quicker than I expected.  The early years are the hardest.  Once you have £100k+ then growth starts to do the heavy lifting for you.  5% growth on £10k is £500, but 5% on £200k is £10k, more than you could have dreamed of when you are just starting out.

I understand it isn't an easy decision though, because if you own your own home then you can practically live on the state pension alone as you won't have any landlords trying to squeeze the life out of you.

Maybe do a LISA and increased pension payments when your debts are paid off, then it opens up the option of buying a home with someone at a later date.

All in all, not a bad place to be really, give yourself some credit for getting your act together and changing your mindset, millions (possibly billions) of people never do it!

400ixl

I put some figures into Guiide.co.uk to get some context. But go and fill it in for yourself as it is pretty good for getting a view and includes things like the state pension in its calculations.

At age 32 and retiring at 68 it predicts that a £30k income today will be £88,300 in 36 years time

To get to a pot of the size you will need you will need to be paying £500 a month into your pension. That may sound like a lot today, but as time moves forward and salaries etc increase it will become easier to achieve. So you have time to do this.

I would focus on first of all getting rid of the debt. If you can do that by the end of 2025 along with getting the 8% into your pension then this year will have been a good year. You can then focus next year on how do stabilise your spending so that you can increase the amount you pay into your pension.

If you increase your pension contribution does your employer match it to any level? Even if not, do they allow you to increase your contribution? This may be a better route than a SIPP or LISA as it is all pre-tax and NI deductions.

LHW99

Would it be a better idea to take it for granted that SP will still be a thing?

I understand your scepticism. However, pensioners vote, and any party that proposed to abolish the state pension would have a very short future themselves.

I suspect there will be changes, probably to SP age and how it is increased year to year, but something will be there. If not SP, then pension credit itself would have to be massively increased to support those who haven't managed to make adequate provision though whatever bad circumstances.

Give yourself a pat on the back for starting to put your mind to this now - all too many don't until it is far to late to make any difference.

BrotherUuurgh

@barnstar2077 - I have worked with several people who left themselves like you said. Most recent was a poor old fella, poor health, lost his wife while he was at work, next to no money and totally trapped and dependant on having to work. He was 77. I'd be lying if I said that working with him didn't make me think about my own future every now and then.

I will up my contribution to WP but happy enough to leave it at the baseline until DF. Having browsed over the PensionBee app, I'm getting a rough idea of what sort of options there may be in the WP and what they mean. Thank you for the advice about equities. I wasn't sure if it should be 100%, but I have no issues going down that route. I will be looking for the plan with the highest growth potential. What might my options be if the WP doesn't provide the product I'm after? I'd imagine it's a bit of a paperwork and HR juggle to transfer it somewhere else?

I am happy enough renting through housing associations. The experience we've had with ours has been mostly top notch. They can drag their heels a little when it comes to things that need attention like plumbing, but we've only been left a bit hard-up once - the boiler broke down and we were without heating/hot water for two weeks. In January. It wasn't fun, but probably a little less worse than having to pay for an engineer call-out and replacement boiler. The LISA is a tempting option as the 25% top up is pretty sizeable, and it leaves both options (house/pension) open should things change in the future, inheritance for example. Thank you for your kind words.

@400ixl - £30k being worth north of £88k by the time I reach retirement. Wow, that's huge... That answers one of my questions. £88K/yr for 30ish years is around £2.5mil. It seems like fantasy land, but with some steady moderate sized contributions and some compounding interest doing some heavy lifting, maybe it could be reached. I am indeed focused on paying off my debt before all else. I consolidated two loans into a lower interest one without any fee which has, on paper, brought my DF date forward by a month as well as saving more money overall. Thank you for the "being a good year" comment, I appreciate that. On the side I'm trying to build good saving habits and have opened several saving products. I have a small premium bond account (NS&I), a S&S ISA (Trading212), a highish interest Easy Access saver and a regular saver both with nationwide. The Easy Access is for my wife and I's emergency fund and the other is somewhere to put spare change, money from studies and surveys etc. All really just to get my feet wet and see what all the fuss is about, as it were. Unfortunately my employer won't increase their contribution. It's 3% and that's that. Hard to swallow this, as recently a colleague left for a new job where the pay, as well as employer pension contribution, was significantly higher. It is what it is. I believe they will allow increased employee contributions, but I shalln't explore this just yet. I'd like my wages to be going towards my debts.

@LHW99 - Good point. Perhaps there might be some sort of 'reform', but it wouldn't be in the pensioners' favour. I'd only expect that number to get smaller and smaller, and further and further away from birth, so I feel like I'd want to treat it as a bonus of sorts. I'll get myself sorted with my own pensions, and if there is still a SP then great, if not, never mind.

Thank you for the discussion, it's helping  

barnstar2077

BrotherUuurgh said:

@barnstar2077 - I have worked with several people who left themselves like you said. Most recent was a poor old fella, poor health, lost his wife while he was at work, next to no money and totally trapped and dependant on having to work. He was 77. I'd be lying if I said that working with him didn't make me think about my own future every now and then.

I will up my contribution to WP but happy enough to leave it at the baseline until DF. Having browsed over the PensionBee app, I'm getting a rough idea of what sort of options there may be in the WP and what they mean. Thank you for the advice about equities. I wasn't sure if it should be 100%, but I have no issues going down that route. I will be looking for the plan with the highest growth potential. What might my options be if the WP doesn't provide the product I'm after? I'd imagine it's a bit of a paperwork and HR juggle to transfer it somewhere else?

I am happy enough renting through housing associations. The experience we've had with ours has been mostly top notch. They can drag their heels a little when it comes to things that need attention like plumbing, but we've only been left a bit hard-up once - the boiler broke down and we were without heating/hot water for two weeks. In January. It wasn't fun, but probably a little less worse than having to pay for an engineer call-out and replacement boiler. The LISA is a tempting option as the 25% top up is pretty sizeable, and it leaves both options (house/pension) open should things change in the future, inheritance for example. Thank you for your kind words.

@400ixl - £30k being worth north of £88k by the time I reach retirement. Wow, that's huge... That answers one of my questions. £88K/yr for 30ish years is around £2.5mil. It seems like fantasy land, but with some steady moderate sized contributions and some compounding interest doing some heavy lifting, maybe it could be reached. I am indeed focused on paying off my debt before all else. I consolidated two loans into a lower interest one without any fee which has, on paper, brought my DF date forward by a month as well as saving more money overall. Thank you for the "being a good year" comment, I appreciate that. On the side I'm trying to build good saving habits and have opened several saving products. I have a small premium bond account (NS&I), a S&S ISA (Trading212), a highish interest Easy Access saver and a regular saver both with nationwide. The Easy Access is for my wife and I's emergency fund and the other is somewhere to put spare change, money from studies and surveys etc. All really just to get my feet wet and see what all the fuss is about, as it were. Unfortunately my employer won't increase their contribution. It's 3% and that's that. Hard to swallow this, as recently a colleague left for a new job where the pay, as well as employer pension contribution, was significantly higher. It is what it is. I believe they will allow increased employee contributions, but I shalln't explore this just yet. I'd like my wages to be going towards my debts.

@LHW99 - Good point. Perhaps there might be some sort of 'reform', but it wouldn't be in the pensioners' favour. I'd only expect that number to get smaller and smaller, and further and further away from birth, so I feel like I'd want to treat it as a bonus of sorts. I'll get myself sorted with my own pensions, and if there is still a SP then great, if not, never mind.

Thank you for the discussion, it's helping  

When the time comes, I'm pretty sure that your works pension will offer something very close (if not exactly), that would offer you better long term growth.  As I said, if in doubt mention some of the options in here.

On the other hand, as my works pension only offers Salary Sacrifice on the default contribution (SS means you don't pay National Insurance on the contribution), and as my company do not match my contribution above a certain amount, I have opened a SIPP on Vanguard.

Vanguard don't take a fee upfront as I understand that Nest do, instead they charge an annual fee of 0.15% which is taken quarterly.  I then invest in their FTSE Global All Cap fund and the 25% uplift from the government is applied for and added to the account automatically.  I leave a small amount of cash in there to cover the charges, which goes up by a small amount every quarter as my pot grows, making how much cash to leave in there easy to guesstimate (I leave a slight buffer of course.)  Vanguard only offer their own products, but as they offer more than enough of a selection for what I am trying to achieve I am happy to use them.  There are also probably cheaper platforms, but this is one that I switched to from Hargreaves Lansdown who charge(d) significantly higher fees, so am happy not to shop around for now.

As you have said, you may find it easier just to continue with your works pension for now and give it a bit of thought and investigation when you are debt free.

My strategy is also high risk, high reward, as I would not be able to retire at a reasonable time without doing so.  As I said, you will be surprised how quickly it can add up, but even if there is a slump in the stock market you will just be buying that monthly contributions stocks a bit cheaper than usual, with twenty to forty years to go you can afford to look at the bigger picture.

BrotherUuurgh

barnstar2077 said:

My strategy is also high risk, high reward, as I would not be able to retire at a reasonable time without doing so.  As I said, you will be surprised how quickly it can add up, but even if there is a slump in the stock market you will just be buying that monthly contributions stocks a bit cheaper than usual, with twenty to forty years to go you can afford to look at the bigger picture.

This is the direction I'll more than likely be going in. As 400ixl above said, £30k today is around £88k at retirement, so an enormous pot is going to be needed. The only way that'll happen is with heavy contributions, high growth and a bit of luck in between. I've been scrolling over Trading212 at the various markets and their performance graphs. You can see 2020 as an obvious, massive drop, but then a couple of years later most of the markets had recovered and exceeded their pre 2020 point. One video I watched said about regular monthly deposits. They said even when the market takes a turn for the worst, hold tight but keep buying, as you're now buying those shares/equities (whatever the correct term is?) a whole lot cheaper, so they've a lot more potential to grow. It's a paradoxically exciting thought. As someone who's not been afraid to waste thousands gambling, a high risk strategy should do me well at least for the first 20 years (needless to say, I very rarely gamble these days, and understand that investing and gambling aren't quite the same thing, but do share a common risk of losing your money).

barnstar2077

BrotherUuurgh said:

barnstar2077 said:

My strategy is also high risk, high reward, as I would not be able to retire at a reasonable time without doing so.  As I said, you will be surprised how quickly it can add up, but even if there is a slump in the stock market you will just be buying that monthly contributions stocks a bit cheaper than usual, with twenty to forty years to go you can afford to look at the bigger picture.

This is the direction I'll more than likely be going in. As 400ixl above said, £30k today is around £88k at retirement, so an enormous pot is going to be needed. The only way that'll happen is with heavy contributions, high growth and a bit of luck in between. I've been scrolling over Trading212 at the various markets and their performance graphs. You can see 2020 as an obvious, massive drop, but then a couple of years later most of the markets had recovered and exceeded their pre 2020 point. One video I watched said about regular monthly deposits. They said even when the market takes a turn for the worst, hold tight but keep buying, as you're now buying those shares/equities (whatever the correct term is?) a whole lot cheaper, so they've a lot more potential to grow. It's a paradoxically exciting thought. As someone who's not been afraid to waste thousands gambling, a high risk strategy should do me well at least for the first 20 years (needless to say, I very rarely gamble these days, and understand that investing and gambling aren't quite the same thing, but do share a common risk of losing your money).

I wouldn't worry too much for now about how much you want to end up with or what it will be worth etc.  Crack on with your plan, get those debts dusted this year and you can start building a new and exciting future for yourself!

Inflation may also not be as terrible as predicted.  I have been monitoring my outgoings for decades and until recently (post covid and Ukraine war) it's affect on my finances have been negligible.  I can't speak for others, but I have been living with the same amount of spending money for many, many years and haven't found it too difficult (Extra money goes into my investments instead of lifestyle creep.)   It is only recently that bills and food price increases have been noticeable for me (caused by the before mentioned global events.)

BrotherUuurgh

Some more thoughts. I'm starting to think that maybe I'm not fully appreciating the amount of money that I earn, and that could be because of the amount of money that I pay towards debt, seemingly endlessly. If I didn't have such large outgoings, I'd probably appreciate my wages a bit more. Going with this, I'd be a lot happier committing a much larger percentage to my WP, but I'd like to see if I can be taught to make sense of it. Below is a reply to a post on another site:

"If your new company is salary sacrifice, and you want to contribute 9% then it’d be 9% of your gross salary : £5148. This all sits in high rate tax but is taken off before tax. So your pension gets £5148. Company matches £5148. Total contribution to pension - £10296. If you hadn’t contributed that, you would have received £2985 (£5148 - 40% tax - 2% NI). So it’ll cost you £2985 per year to get £10296 in your pension. Not a bad return. That’s £248 per month net."


This has been written in a way that I sort of understand, at least, as far as there are input numbers and output numbers. I could ignore the math a little and have a rough idea of "I'm this much better off on this percentage versus takehome" etc... Are there some smart brains around that could integrate my own numbers in the same sort of way? What would the above numbers be based on a £41,000 income?

HedgehogRulez

You really need to start upping your pension contributions to at least a a couple of thousand a month. As you say: time to put your big boy pants on.