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  • FIRST POST
    • carolineclair
    • By carolineclair 6th Apr 18, 11:01 AM
    • 4Posts
    • 1Thanks
    carolineclair
    35 yrs old and no pension, advice
    • #1
    • 6th Apr 18, 11:01 AM
    35 yrs old and no pension, advice 6th Apr 18 at 11:01 AM
    Hello

    As the title suggests I am 35 with no pension. I have worked in a freelance industry since I left university always as PAYE on Fixed term contracts varying between 4 weeks and 3 months. Though I am not short on money coming in to my bank account I havent got a pension and my savings tends to go on holidays as I havent had another focus to save.

    But now im scared and I want that to change asap!

    I have a nutmeg ISA with a very modest amount but I know this money is at risk, therefore when looking at pensions I feel like i should be looking for a fixed interest pension? I have a mortgage and I have a standard HSBC account, should I tie a pension into either of the companies my mortgage or bank account are with?

    I have looked at money.com etc and they all tend to say capital at risk and have yearly fees. Is this common? I know this is a naive question but as I said this is my first attempt at looking into this. I dont want to pay a yearly fee and have capital at risk, I already do that with nutmeg.

    I spoke to the money advise service online but they just sent me links to pages id already read.

    Am I better, considering i dont want to risk a second pot of money, just saving in a cash ISA? That I eventually then turn into a pension later in life?

    Thank you for any advice
Page 1
    • Prism
    • By Prism 6th Apr 18, 11:17 AM
    • 437 Posts
    • 357 Thanks
    Prism
    • #2
    • 6th Apr 18, 11:17 AM
    • #2
    • 6th Apr 18, 11:17 AM
    If you want to save enough over your working life to ensure that you have a decent pension in retirement then you have to put that money into equities and bonds - hence your money is at risk. There is usually some short term risk that over the next few years the value drops. However over the long term (you have at least 20 years) it will almost certainly go up, and possibly quite significantly. Cash will not come close.

    It is common to pay yearly fees, though these can be low. The main difference between using an ISA as you are currently and a pension is the tax benefit of a pension. However a pension cannot currently be accessed until you are 55. By the time you get near retirement this could be 57 or more.
    • dunstonh
    • By dunstonh 6th Apr 18, 11:25 AM
    • 93,986 Posts
    • 61,788 Thanks
    dunstonh
    • #3
    • 6th Apr 18, 11:25 AM
    • #3
    • 6th Apr 18, 11:25 AM
    But now im scared and I want that to change asap!
    Good as you are now behind by around 35k (ballpark figure of what you would expect someone to have in a pension by your age).

    therefore when looking at pensions I feel like i should be looking for a fixed interest pension?
    No. That would be truely awful. You would be subject to inflation risk and shortfall risk and would need to pay in around 2-3 times more than a pension using conventional investments.

    I have a mortgage and I have a standard HSBC account, should I tie a pension into either of the companies my mortgage or bank account are with?
    No. Banks are awful at financial products that are not their core area.

    I have looked at money.com etc and they all tend to say capital at risk and have yearly fees. Is this common?
    Yes, that is normal. Everything has fees. Even your savings account. Some fees are explicit (you are told them). Some fees are implicit (you cant see them as they are taken before you are told the rate. Nothing is provided for free.

    I dont want to pay a yearly fee and have capital at risk, I already do that with nutmeg.
    You either need to change your mind or be prepared to be poor in retirement. What you want to do is not what you should be doing.

    Am I better, considering i dont want to risk a second pot of money, just saving in a cash ISA?
    No. You miss out on the tax relief and again, you would have to pay in upto 3 times more than you would in a pension using investments.

    Every option has risks. There is no such thing as a risk free option. You are going to be using this money in over 30 years time. Putting it into cash savings will suffer inflation erosion. Typically not keeping up with inflation. Yes your value will not zig zag but the spending power of that money will go down. e.g. getting 1% when inflatin is 2.5% means you are losing 1.5% of its value in real terms.

    That then leads onto shortfall risk as your cash at 1% is never going to increase in value by much. So, you need to pay more in to make up for the lack of investment risk. 2-3 times more.

    This is why you use investments. Yes, you get investment risk but the average return over the long term is around 5-7% p.a. You are unlikely to suffer inflation risk and will only suffer shortfall risk if you dont pay enough in.

    The charges on modern investments are lower than savings accounts. One you see. The other you do not but investments are lower.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Linton
    • By Linton 6th Apr 18, 11:28 AM
    • 9,574 Posts
    • 9,787 Thanks
    Linton
    • #4
    • 6th Apr 18, 11:28 AM
    • #4
    • 6th Apr 18, 11:28 AM
    Keeping a large amount money in cash ISAs for the very long term would be foolish. The ISA may well not even keep up with inflation and so you would end up with less in real terms than you paid in.

    The only approach with an extremely good chance of significantly beating inflation is to invest. This usually means buying shares in companies from across the world. Rather than doing this directly it is better as a small investor to buy funds which hold shares in hundreds of companies and so you would not be badly hit if one went bust.

    If you invest sensibly in funds "capital at risk" means that the value of your investments will go up and down over time, but would normally be expected to go up significantly on average. Prices dropping whilst you are drip feeding money into your investments is a good thing as it means you get more shares for your money.

    Assuming you were investing sensibly it would need an invasion of the zombies type global catastrophe destroying the world economy for everything to be lost. But under those circumstances s in an ISA probably wouldnt be worth anything either.

    Given that you will need to invest to be sure of having a reasonable income in your old age, doing this via a pension scheme provides the greatest tax benefit.
    • xylophone
    • By xylophone 6th Apr 18, 11:31 AM
    • 26,135 Posts
    • 15,486 Thanks
    xylophone
    • #5
    • 6th Apr 18, 11:31 AM
    • #5
    • 6th Apr 18, 11:31 AM
    https://www.moneywise.co.uk/investing/first-time-investor/easy-tracker-fund-portfolios-2018-and-beyond

    https://www.hl.co.uk/free-guides/free-guide-to-sipps

    https://www.charles-stanley-direct.co.uk/Our_Services/SIPP/

    https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/

    https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

    http://monevator.com/how-to-retirement-plan/
    • xylophone
    • By xylophone 6th Apr 18, 11:34 AM
    • 26,135 Posts
    • 15,486 Thanks
    xylophone
    • #6
    • 6th Apr 18, 11:34 AM
    • #6
    • 6th Apr 18, 11:34 AM
    You can take advice - a fee will be charged.

    https://directory.moneyadviceservice.org.uk/en
    • carolineclair
    • By carolineclair 6th Apr 18, 11:57 AM
    • 4 Posts
    • 1 Thanks
    carolineclair
    • #7
    • 6th Apr 18, 11:57 AM
    • #7
    • 6th Apr 18, 11:57 AM
    Thank you for all the responses, understood now that what feels safe in my mind is the wrong thing to do so thank you for explaining it so clearly.

    So next question would be, should i speak to and pay a financial advisor to find a pension plan or should i just use the online resources to try and work out which is best? As a newbie to investments I don't want to do the wrong thing but I also don't currently have a FA.

    Thank you again, the responses have made everything very clear in terms of what I shouldnt be doing and what i need to adjust my mind set to!
    • carolineclair
    • By carolineclair 6th Apr 18, 12:05 PM
    • 4 Posts
    • 1 Thanks
    carolineclair
    • #8
    • 6th Apr 18, 12:05 PM
    • #8
    • 6th Apr 18, 12:05 PM
    "You can take advice - a fee will be charged."
    Thank you I will do this to make the most of the time and money i have available!
    • dunstonh
    • By dunstonh 6th Apr 18, 12:13 PM
    • 93,986 Posts
    • 61,788 Thanks
    dunstonh
    • #9
    • 6th Apr 18, 12:13 PM
    • #9
    • 6th Apr 18, 12:13 PM
    So next question would be, should i speak to and pay a financial advisor to find a pension plan or should i just use the online resources to try and work out which is best?
    That is like anything in life. Do you DIY or pay someone to do it for you. iF you DIY well, you can save money. If you DIY badly then it can cost you far more than getting a professional to do it.

    As a newbie to investments I don't want to do the wrong thing but I also don't currently have a FA.
    If you decide to get advice, you do not want an FA. It should be an IFA. This is important. An FA has restrictions on what they can advise on. Typically this the product range. Often limited to their own brand or a panel of providers (in the old days, they would be called sales reps). An IFA is whole of market and not linked to a provider or panel. It should be an IFA that you seek if you need advice.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Brynsam
    • By Brynsam 7th Apr 18, 11:49 AM
    • 1,440 Posts
    • 1,034 Thanks
    Brynsam
    Start by having a look at TPAS's website then ring and have a natter with them for some general guidance. They don't give financial advice but sometimes all you need is information (which will certainly cut down the amount of time you need to spend with a financial adviser/help you understand anything they might suggest): https://www.pensionsadvisoryservice.org.uk
    • louloubelle79
    • By louloubelle79 7th Apr 18, 1:48 PM
    • 350 Posts
    • 184 Thanks
    louloubelle79
    https://www.cavendishonline.co.uk/pensions/stakeholder-and-personal-pensions/aviva/
    • carolineclair
    • By carolineclair 13th Apr 18, 3:54 PM
    • 4 Posts
    • 1 Thanks
    carolineclair
    Thanks again for all the advise.

    I have been to an IFA today and hoping to meet with another next week. But I have been sent the Cavendishonline link (above) by a few people now and I just have a few questions as I would like to omit the large fee to the IFA company, however I dont want to be hasty and make a decision based just on not paying a fee if an IFA will be a better option.

    Why is this so popular as opposed to other companies or going via Aviva direct?

    Is it essentially the same as allowing a FA to invest on my behalf but without the additional large set up fee to the company?

    Again im sure there are very simple answers to these questions but as a novice to financial decisions I just prefer to ask than guess and assume!
    • dunstonh
    • By dunstonh 13th Apr 18, 4:14 PM
    • 93,986 Posts
    • 61,788 Thanks
    dunstonh
    Why is this so popular as opposed to other companies or going via Aviva direct?
    Going direct to Aviva (or most other insurers) does not get you the cheapest version of the product. The IFA version is the cheapest. Cavendish make that version available to you. Not that many IFAs use the products that Cavendish retails any more as they are starting to get long in the tooth.

    Is it essentially the same as allowing a FA to invest on my behalf but without the additional large set up fee to the company?
    Not quite. The IFA will do the investments as well. Cavendish will not. You must select investments. This is why it is cheaper. You are DIYing.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
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