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  • FIRST POST
    • Sam James
    • By Sam James 22nd Oct 19, 12:46 AM
    • 14Posts
    • 0Thanks
    Sam James
    48 No pension and panicking !
    • #1
    • 22nd Oct 19, 12:46 AM
    48 No pension and panicking ! 22nd Oct 19 at 12:46 AM
    Over the years I have been self employed and tried different careers. I have never really been in the position to save into a pension as I seem to have spent most of my life just about getting by. I went into debt starting my current business which has become a success giving me 50K a year and working from home dont have to pay child care costs. Debt has been paid off. I am now sweating I should have started a pension by now but even when I look online I quickly get lost in detail, I dont even know why do I start a pension or just save money.
    I can put £200 month into pension at the moment which I know wont equate to much but need to start something and can possibly add to over time. I have just signed up a mortgage and have two children so looks like things will still be tight but need to start something.
    Each time I search online I get info on people wanting to draw on pensions at my age not start them, its very depressing!

    Any help appreciated
    Many Thanks
    Sam
Page 1
    • JoeCrystal
    • By JoeCrystal 22nd Oct 19, 5:16 AM
    • 1,963 Posts
    • 1,382 Thanks
    JoeCrystal
    • #2
    • 22nd Oct 19, 5:16 AM
    • #2
    • 22nd Oct 19, 5:16 AM
    Do Not Panic.

    I do not know much about the self-employment aspects of the pension schemes, but you still got twenty years until your state pension age, so you got loads of time to build up your pension fund. You can even expect a state pension by 67 (atm), likely to be worth at least £8,767.2 in today's money, providing you paid your NI contributions of course.

    First of all, you need to think about how much you want to retire on and then work your way backwards. There are a few pension calculators online you can try to help you out.

    But, in my opinion, £200 per month is not going to be enough for someone who starts late. It is only less than 5% of your gross income, the minimum auto-enrolment for the employees, for example, is 8% combined from the employees and the employer. So you are going to need to be realistic.
    • cfw1994
    • By cfw1994 22nd Oct 19, 8:37 AM
    • 486 Posts
    • 435 Thanks
    cfw1994
    • #3
    • 22nd Oct 19, 8:37 AM
    • #3
    • 22nd Oct 19, 8:37 AM
    Nothing in life is worth panicking over! Whatever your age, the best time to start is now!

    I think you can check https://www.gov.uk/check-national-insurance-record to see how many years pension you have: you may be able or need to top up there if you have “empty” years.

    Remember the government add to your pension payments, so definitely worth starting something up.

    Others will likely chip in with pointers: I have a work scheme so I don’t know so much about setting up your own, sorry.
    Enjoy the family & hope the business goes well
    • DairyQueen
    • By DairyQueen 22nd Oct 19, 8:40 AM
    • 996 Posts
    • 1,775 Thanks
    DairyQueen
    • #4
    • 22nd Oct 19, 8:40 AM
    • #4
    • 22nd Oct 19, 8:40 AM
    Your sense of urgency will be helpful. The good news is that you have realised that you need to focus hard on saving and the best thing you can do is to make saving a priority. Review your current spending in order to identify where you can cut expenses in order to max your savings. Every pound that you invest now (thanks to compounding) will be worth more in retirement.

    Firstly, check your state pension forecast online. Make sure that you have sufficient future years of NI contributions to hit the maximum.

    Do you have an emergency fund? This should be a priority. Aim to stash 6 months net income in cash. This buffer to a sudden loss of income and/or unexpected major expense is an insurance policy that we all need.

    Having addressed the above basics, focus on stashing as much as possible inside a pension wrapper. This can be achieved very simply using, for example, a SIPP. As you are self-employed, you will benefit from investigating the various tax-efficient ways that you/your company can pay into your pension.

    Keep the pension simple. At this level of saving (£200p.m.) a low cost, global tracker held inside a SIPP on a mainstream platform will do the job. This forum is full of information about SIPPs, SIPP providers and passive funds.

    If you save £200p.m. (plus £50 tax relief at 20%) for the next 18 years, and receive a modest average 3% return (net of fees), your pot will be worth £72,000. However, if you increase the £200 by inflation each year (also assume 3%) the total increases to £91,000.

    If your starting amount is £220p.m., (plus £55 tax relief) increased by inflation at 3%, the total pot jumps to £100,000.

    This could sustain an income of between £3k and £5k p.a. (depending on many factors, not least when you begin drawdown and your life expectancy at retirement). However, that's in today's value. Inflation will increase the cost of living over the next 18 years and, in real terms, it will be worth less.

    I use these as examples to demonstrate the magic of compounding. Investing as much as possible monthly over the next 5 years will be of much more benefit than the equivalent invested in your 60s.

    You are already aware that, unless you are able to save a substantial monthly amount from now (much more than £200p.m. net), it is too late to expect a retirement income anything like the average. Better to know this so you can plan to, for example, work for longer or live frugally.

    As Joe mentioned, retirement planning usually begins with having an idea of how much income you will require and the size of pension pot needed to provide it. Monthly contributions are then calculated with this income aim. However, I think such an exercise would increase your panic. Better to accept that your retirement income will be low unless you can substantially increase the monthly contribution.

    No magic wand can be waved but it is definitely worth you saving into a pension. The tax relief makes this a no brainer. Any retirement income above SP will make life easier.

    The Pensions and Lifetime Savings Association have published a very useful guide to retirement living standards and income. Note that the values given are net of income tax and assume no mortgage or rent payable in retirement:
    https://www.retirementlivingstandards.org.uk
    • Triumph13
    • By Triumph13 22nd Oct 19, 9:24 AM
    • 1,595 Posts
    • 2,248 Thanks
    Triumph13
    • #5
    • 22nd Oct 19, 9:24 AM
    • #5
    • 22nd Oct 19, 9:24 AM
    A few key questions to ask yourself:
    -Will you have other sources of income in retirement eg a spouse with own pension?

    -Do you have realistic expectations that you income will increase significantly in the future or your expenses will decrease allowing for much higher savings?

    -Can you expect any significant lump sums in the future eg inheritance or selling your business?


    Absent the above, unless you are happy to accept a massive drop in lifestyle when you retire the aim of the game is to work out what level of spending you can sustain for the rest of your life - which is going to mean cutting back a lot now in order to build a pension for later. The often-quoted rule of thumb is to take your age at the time you start saving for a pension, divide by two and that is the kind of percentage of income you need to be saving - that would suggest 24% in your case which probably sounds terrifying / impossible. Your realistic aim probably needs to be a smaller percentage now, building to a significantly larger one over time.
    The £200 a month is a start and it's great that you are doing that. The priority is to get that higher over the next few years through some combination of increasing earnings and decreasing expenditure. The second of those is, in many ways, the more powerful one as the less you are accustomed to spending, the less you need to save to support that lifestyle in retirement.
    You have demonstrated by building a successful business that you have the drive and determination needed to build a successful retirement for yourself. Don't panic, but recognise that this has to be an increasingly important priority for you and work out a 'business plan' for what you need to do to get to where you want to be. Think about how your income and expenses are going to vary over the next two decades (children, mortgage, etc) work out how much you need to invest and when in order to balance your lifestyle now with your lifestyle in the future then commit to those plans. There are plenty of people on here who would be happy to help you run the numbers. You can do this!
    • Spreadsheetman
    • By Spreadsheetman 22nd Oct 19, 10:08 AM
    • 312 Posts
    • 375 Thanks
    Spreadsheetman
    • #6
    • 22nd Oct 19, 10:08 AM
    • #6
    • 22nd Oct 19, 10:08 AM
    Triumph13 makes some good points. Another thing to consider is getting the mortgage paid off, essential if income is going to drop massively in retirement.
    • barnstar2077
    • By barnstar2077 22nd Oct 19, 10:11 AM
    • 228 Posts
    • 384 Thanks
    barnstar2077
    • #7
    • 22nd Oct 19, 10:11 AM
    • #7
    • 22nd Oct 19, 10:11 AM
    A SIPP is also a good way to help your family should you die before your 75th birthday (and without having accessed the pension) as they will be able to take the whole thing tax free, or leave it invested to draw an income from. This has given me some real peace of mind, knowing that my ex will be okay If I am not around to look after her.

    Hargreaves Lansdown are a good place for beginners to start as their website is considered one of the easiest to use. Their costs make them less favourable once your pot reaches 50k, but then you can always transfer to another provider. A lot of people recommend using Vanguard's Life Strategy funds as your base. You could open your SIPP today and drop some money in the VLS 60 fund while you continue to read up on things. Just get started!

    https://www.youtube.com/watch?v=p-O3d6mel28
    If you don't have your own plan, then you're following someone else's!
    • Sam James
    • By Sam James 22nd Oct 19, 11:44 AM
    • 14 Posts
    • 0 Thanks
    Sam James
    • #8
    • 22nd Oct 19, 11:44 AM
    • #8
    • 22nd Oct 19, 11:44 AM
    To say I am grateful for these responses would be an understatement I have this lingering concern over me for some time but want to enjoy family life and dont want to find myself drinking the odd glass of wine here and there just to feel upbeat.

    Here is my situation with NI from the website

    Summary
    24 years of full contributions
    19 years to contribute before 5 April 2038
    8 years when you did not contribute enough


    My goals
    -----------
    In my retirement I have lots of low cost hobbies and interests to pursue, my main concern is not costing my children money or make them feel I am poor . I am not looking to go traveling or have luxury holidays etc both me and my wife are happy with simple living.

    We will of course have to maintain a car pay mortgage etc, house repairs and birthday christmas presents etc.

    My outgoings
    ---------------
    We got caught up in London on high rents when we had our baby and got stuck in the trap of not making a deposit to buy while paying the cost of living. We had to stay for my wifes job, we gave away £140K on rent in the last 7 years which should have been half way through a house but we are not, we just signed up on 10% deposit on £306K with £5K owed to parents to pay for stamp duty but we will have this back to them before January.
    No child care to pay out as i work from home and have them here.

    Working life
    -------------
    I can happily taper down my work and be working late in years I guess something like 20K a year at 65 without too much stress health permitting, I wouldn't want to forecast past that but might go further.

    Other info
    ------------
    My wife has a good pension set up but this is also part of my concern, I dont want to be funded by her or feel I am holding her back from doing what she can afford, but again we both have simple needs in terms of days out and what we see ourselves doing in retirement.

    Both our parents own their own homes split between 3 of us on each side but we always assume we might have to pay for care homes and see them out nicely so dont really add this into our plans.

    Many thanks any more info that would be a help let me know will start on the super advice given here and feedback as I go but in the space of one day I have moved very much forward in my mind..... Thanks every one !
    Sam
    • atush
    • By atush 22nd Oct 19, 1:37 PM
    • 18,001 Posts
    • 11,437 Thanks
    atush
    • #9
    • 22nd Oct 19, 1:37 PM
    • #9
    • 22nd Oct 19, 1:37 PM
    First congrats for having your lightbulb moment.

    second
    My wife has a good pension set up but this is also part of my concern, I dont want to be funded by her
    Forget this. You are a couple, a financial unit. She will not be funding you, she will b e helping as you do fund your joint life. Given your type of work, she may retire before you, and you will be funding her?

    So start your pension asap, with your 200/m (which will be 250/m after TR. More if you go into HRT. Open a Sipp or PP online and choose a low cost global equity fund or mixed asset fund. High diversification, low cost. Add more to your pension as soon as you can afford it.

    Talk to your accountant. If you earn 50K you might be better off becoming a LC and paying your pension as a business expense. And taking some of your salary as dividends rather than income.
    • Spreadsheetman
    • By Spreadsheetman 22nd Oct 19, 1:45 PM
    • 312 Posts
    • 375 Thanks
    Spreadsheetman
    First congrats for having your lightbulb moment.
    ...
    Forget this. You are a couple, a financial unit. She will not be funding you, she will b e helping as you do fund your joint life. Given your type of work, she may retire before you, and you will be funding her?

    ...
    Originally posted by atush
    ..and also think about what happens if one of you dies early/first. i.e. deceased state pension stops, the deceased DB pensions reduce to survivors level (often 50%). How much money will the survivor then have to live on?
    • pkpk
    • By pkpk 22nd Oct 19, 1:47 PM
    • 50 Posts
    • 3 Thanks
    pkpk
    Would the Vanguard VLS60 be a good place to start? It can be bought through HL I think so there are options to choose other funds.
    • DairyQueen
    • By DairyQueen 23rd Oct 19, 8:01 AM
    • 996 Posts
    • 1,775 Thanks
    DairyQueen
    The info you give suggests that you are a very decent bloke. You don't want to be a burden on your kids. You want your wife to 'enjoy' her pension. You don't want your part-ownership of parental homes to impact on the care your parents receive in their old age.

    All excellent aims.

    However, your's and spouse's priority for retirement is to ensure that your household income and assets are sufficient for both of your needs throughout the remainder of your lives. That includes the survivor of you two. It means that your wife's pension will be required to support the household. You are a partnership and it sounds as if her retirement income is likely to be higher than yours.

    A couple of things you mentioned were amber signals:

    You have only recently bought a house and have indicated that the mortgage duration is past your retirement age. Paying a mortgage in retirement is perfectly OK if you have sufficient income to sustain it, or plan to switch to a lifetime mortgage (i.e. equity release). Your pension alone (unless dramatically increased above your planned contribution) will not sustain a mortgage or rent in retirement.

    It would be helpful if you could give us info on your wife's pension as it's likely that her retirement income will be important to your joint wellbeing.

    If you part-own parents' property/ies and have now bought your own home then CGT raises its ugly head. Only your main residence is CGT-free.

    Your children are still young? If so, they will become more expensive to support as they hit teens. However, don't be tempted to divert savings for their non-essentials as they grow older. Your pension savings (lack of) are such that providing cars and house deposits. supporting through uni., etc. can be achieved only at the expense of an already minimal retirement income. These are the kind of temptations that you will need to resist to avoid becoming a burden on anyone in your dotage and ensuring that the retirement you want is affordable.

    Please check the link I attached in my earlier post. It provides a good indication of the level of income (net of tax and minus mortgage) required to support types of lifestyles in retirement. It indicates the kind of lifestyle sustainable on different incomes. It looks like you are aiming for somewhere between minimal and comfortable. Whether that's do-able will depend on your wife's pension and how much you are able to save between now and retirement.

    The good news is that you are on course to receive max SP. Is the same true of your wife? If so, then whilst you are both alive, and with wife's pension, your retirement aims look do-able. Having said that, the SP could make-up so much of your joint income that the survivor may struggle on first death.

    Good luck.
    • atush
    • By atush 23rd Oct 19, 12:20 PM
    • 18,001 Posts
    • 11,437 Thanks
    atush
    Would the Vanguard VLS60 be a good place to start? It can be bought through HL I think so there are options to choose other funds.
    Originally posted by pkpk
    It is fine, but given you have 0 pension, and are years behind, i'd be looking at the VLS80. More volatility short term, higher growth long term.
    • LHW99
    • By LHW99 23rd Oct 19, 3:12 PM
    • 2,245 Posts
    • 2,091 Thanks
    LHW99
    To add to the positive - you started your business with debt - you have paid it off. That means you have persistance and organisational skills. Apply those to the next planning stage.
    Since you have children, I guess you will have been a major breadwinner when your wife was on maternity leave / the children were young? In retirement, as said above, think of yourselves as "Sam James plc" - you wouldn't run a business / self-employment without some outside input, even if its only a bank account / accountant. Don't expect to be the sole person in charge of your retirement finances, do it together as far as you can, and if the children are a suitable age, don't be afraid to talk about some aspects with them - may help you with some different viepoints and them in thinking of their own plans.
    • jsinc
    • By jsinc 23rd Oct 19, 4:21 PM
    • 204 Posts
    • 99 Thanks
    jsinc
    ...The Pensions and Lifetime Savings Association have published a very useful guide to retirement living standards and income. Note that the values given are net of income tax and assume no mortgage or rent payable in retirement:
    https://www.retirementlivingstandards.org.uk
    Originally posted by DairyQueen
    Thanks for the link. Breakdowns are really handy for mum's retirement planning
    • Anonymous101
    • By Anonymous101 23rd Oct 19, 4:25 PM
    • 1,439 Posts
    • 1,177 Thanks
    Anonymous101
    In retirement, as said above, think of yourselves as "Sam James plc"
    Originally posted by LHW99


    I tend to think this is a good way to approach life in general.
    I think of myself as a company. I have incomings and outgoings and need to cut my cloth accordingly whilst maintaining a level of service to both my customers (employer) and board or directors (family). It just gets me in the habit of thinking logically rather than spending emotionally like lots of people tend to do.


    Back to the OP - its great that you've begun seriously thinking about this now. Don't panic and don't beat yourself for not doing it sooner, you can't change that now but you still do have plenty of time of effect your future.
    As others have said, and back to the business analogy, you need to take stock and plan out what and when you'll have coming in in future and calculate what cash flow you require. Then go about hatching a plan to bridge any gaps.
    • enthusiasticsaver
    • By enthusiasticsaver 23rd Oct 19, 5:27 PM
    • 9,440 Posts
    • 21,882 Thanks
    enthusiasticsaver
    As others have said you can beat yourself up for not doing something about this earlier but some circumstances obviously made that difficult but make today the day you start to put things in place for the future. You know you are on track for a full state pension but that will only give you a very basic living standard.

    So start a pension. If you are self employed do you have an accountant? There are very tax efficient ways of saving for those who are self employed so exploring that and putting some sort of SIPP in place will maximise tax advantages and you can start to build up a retirement pot. Most invest in SIPPs and stocks and shares isas as a multi faceted way of funding retirement especially if they want to retire before 55 but realistically that is not going to happen for you so I would just focus on a SIPP.

    As others have said concentrate on reducing outgoings as the lower the outgoings the less pension you will need. The priority should be getting rid of the mortgage before you retire. That is for most the biggest expense and being mortgage free means your pension and investments/savings only need to cover living expenses rather than mortgage and or rent. Also don't take on debt and if you have any focus on getting rid of it. That is the biggest way to ensure financial stability whether working or retired. Learn to live within a budget.

    As you have children I would also focus on other means of saving as no doubt at some point you will have to help them with university, driving lessons etc. We could have retired 5 or more years earlier if we did not have children but helping them become financially independent and stable was important to us. We don't regret that but you do need to factor that into your future planning.

    I think someone else mentioned emergency savings account so if you do not have savings I strongly recommend that too.

    So in conclusion

    Live within a budget.
    Don't take on debt and pay off existing debt.
    Start a SIPP
    Save an emergency fund and a pot for the future.
    Overpay the mortgage.

    If you do all those things you will very quickly see the financial future looks a bit brighter for you.
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • DairyQueen
    • By DairyQueen 23rd Oct 19, 5:33 PM
    • 996 Posts
    • 1,775 Thanks
    DairyQueen
    It is fine, but given you have 0 pension, and are years behind, i'd be looking at the VLS80. More volatility short term, higher growth long term.
    Originally posted by atush
    I agree. The percentage of my portfolio aimed at drawdown in 15+ years is invested in VLS100. OH is also 100% equities on his long term portfolio. If OP resists the temptation to jump when the next crash hits then he should benefit proportionately by increasing equity exposure and perhaps moving a higher percentage into less volatile assets within 5 years of retirement.
    • Andyjflet
    • By Andyjflet 23rd Oct 19, 5:34 PM
    • 153 Posts
    • 128 Thanks
    Andyjflet
    To say I am grateful for these responses would be an understatement I have this lingering concern over me for some time but want to enjoy family life and dont want to find myself drinking the odd glass of wine here and there just to feel upbeat.

    Here is my situation with NI from the website

    Summary
    24 years of full contributions
    19 years to contribute before 5 April 2038
    8 years when you did not contribute enough


    My goals
    -----------
    In my retirement I have lots of low cost hobbies and interests to pursue, my main concern is not costing my children money or make them feel I am poor . I am not looking to go traveling or have luxury holidays etc both me and my wife are happy with simple living.

    We will of course have to maintain a car pay mortgage etc, house repairs and birthday christmas presents etc.

    My outgoings
    ---------------
    We got caught up in London on high rents when we had our baby and got stuck in the trap of not making a deposit to buy while paying the cost of living. We had to stay for my wifes job, we gave away £140K on rent in the last 7 years which should have been half way through a house but we are not, we just signed up on 10% deposit on £306K with £5K owed to parents to pay for stamp duty but we will have this back to them before January.
    No child care to pay out as i work from home and have them here.

    Working life
    -------------
    I can happily taper down my work and be working late in years I guess something like 20K a year at 65 without too much stress health permitting, I wouldn't want to forecast past that but might go further.

    Other info
    ------------
    My wife has a good pension set up but this is also part of my concern, I dont want to be funded by her or feel I am holding her back from doing what she can afford, but again we both have simple needs in terms of days out and what we see ourselves doing in retirement.

    Both our parents own their own homes split between 3 of us on each side but we always assume we might have to pay for care homes and see them out nicely so dont really add this into our plans.

    Many thanks any more info that would be a help let me know will start on the super advice given here and feedback as I go but in the space of one day I have moved very much forward in my mind..... Thanks every one !
    Sam
    Originally posted by Sam James
    Nobody has to have a car payment ? save for a runaround when you retire. Or better still, now, then you can target any car payments towards your pension.

    Also you could work to pay off your house before you retire. Aim to retire say 68, 20 years left to pay it off ??
    Baby Step 1 - £425 saved for emergency fund
    M&S Loan £14708 inc interest full term
    Santander 0% CC £1283
    Sainsburys 0% CC £2618
    Hitachi Loan 0% £220 ends March 2020
    • Triumph13
    • By Triumph13 23rd Oct 19, 5:37 PM
    • 1,595 Posts
    • 2,248 Thanks
    Triumph13
    Overpay the mortgage.
    Originally posted by enthusiasticsaver
    A lot of people will disagree with you on that one. 'Have a plan to clear the mortgage before you stop work' might be better. The best plan will probably be to pay extra into your pension then use the TFLS to clear the mortgage.
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