If you are over 40…How big is your retirement pot?

[AnIndianWoman]

Just that really. If you’re over 40 how much have you earmarked for retirement? My pensions are approx 200k and I have another 200k in stocks and shares ISAs. Even then I won’t come close to the £50-60k a year income we will need in retirement and so can’t think of stopping working before 70.

I was thinking of investing more but not sure what size pot I should be aiming for. I’m 40.

42 and have £48k. And an enormous mortgage with 24 years left on it, and two small DC of nursery age. I’ve got a five-year plan, though, which (broad brushstrokes) entails targeting a job with a good pension and staying there . My salary is OK – above average but not a MN high earner, and I’ve got the potential, I’ve just been prioritising other things/a creative sideline/being part time/etc. Finished having babies now so it does feel like the time to focus on the long-term goal.

As well as the £48k I’ve got all my eligible years ticked on NI so barring disaster will be eligible for full state pension, plus I have a limited company for the creative sideline whose only expenditure is an accountant, and whose income could expand if I can do the creative thing – easier once children are bigger. And I’d never want to retire from it.

I think some of this depends on your plans re downsizing.

We will definitely downsize from our four bedroom house in London which will free up quite a lot of capital.

We plan to move to a low maintenance house at that point so our running costs are lower than they are now.

I’m not saying don’t use ISAs, I’m suggesting you use part of your ISA allowance to invest, ie transfer some to a S&S ISA.

Are you expecting 5% cash interest rates to persist for 20 years? Maybe they will, seems unlikely. Have you been getting 5% interest over the last 20 years? I certainly haven’t, but I have been getting 10-12% returns from investments as well as dividends - all reinvested of course. Inflation is running at over 5% so you’re making a loss anyway.

You should be aiming for a million at retirement in ISAs given how well you have done so far - aim high!

https://www.fidelity.co.uk/stocks-and-shares-isa-calculator/

I'm 50 and have 20.16% the old LTA in teacher pensions. I think another £35K ish in AVCs (I only made payments in my twenties when I was FT). This adds up to approx. 250K. I didn't start paying in until I was 24 and have only worked 6 years FT - the rest is PT (and a couple of those years I didn't pay in at all). I seriously considered going back FT for the pension but as DH's pension is so good we decided against that.

DH is also 50 and has £1.5M in pensions. He started paying in at 18 though. He has full control over most of that - so I will inherit the full pot if he dies before me, and then our DC after that. Our other savings are fairly low compared to that (excluding the house equity) - probably about £120K joint in ISAs etc. We did set up the DC with a savings pot at 18 though.

@pelargoniums that sounds like a good plan.

Do you mind me asking what he intends to do if Labour reintroduce the LTA (or what he intended to do before Hunt abolished it)?

@WeAreBorg if I move cash to stocks ISAs how do I choose the right stocks? Or can you simply choose a fund to follow?
Do all dividends and returns get put into that S&S isa?

Thanks for the guidance - total novice with this stuff, I've simply saved as much as I can to date in cash ISA and c30% contributions into a pension.

@JewelDragon I'd also be interested in this - what's the plan if labour re-introduce the excessive tax over £1.1m on pension withdrawals?

@Mia85 & @5thCommandment . I think it will increase the chances of his retiring at 55 or at least earlier.

He opted out of the pension scheme in a job due to the LTA, however his current employers pension contribution is very generous so it still made sense to continue - he thinks. That decision was made before the budget.

I think there is bound to be some kind of protection in place (as with previous LTA changes) - quite what I'm not sure, of course. People have made decisions to continue to working due to the last budget.

It is hard to know what do. He would've been annoyed that he had opted out of his employer's pension when the LTA was lifted...well maybe not on balance with the potential overall positive. Hard to know where the tipping point is as he was already over the LTA when he realised he was.

@5thCommandment wow all that money and you've not set up a pension for your wife. And she doesn't work because childcare is "a ripoff" according to you 😮😮 I would divorce you mate.

Before you get nasty triggered out of jealousy, try and apply some logic, it's not tax efficient to put funds into a pension from take home pay. It's better to keep it in one post pre tax. she will get my whole pension when I die and benefit from it when we draw down in the meantime so your argument is just tosh.

I'm not jealous - I've got my own pension. Unlike your wife LOL 🤣

Yes you are probably right that they will include some kind of protection. Hopefully if they do restore it they will put it closer to the value it had before Osbourne started cutting it. It'll probably tip lots of people into early retirement if not.

Is she a SAHM (i.e, without her own earnings)? You do know that she can still get tax relief on up to £2880 in a pension a year? Then when she comes to withdraw she'll also be able to use her personal allowance and tax free amount. It's not a lot but it's a tax efficient thing to do, as well as giving her some security.

Hi @mia yes, thank you for the constructive response, we have various things in place. I came on here to ask about investments, but am on the cusp of reporting other users, there is no need for such comments who don't even know full circumstances. Thanks

But wouldn’t she get the tax benefit from the payments into her pension?

Are any of the ISAs in her name - if not, why not? Doubles the allowance.

All her eggs very much are in once basket aren’t they

We've put the 150k total across our ISAs. My plan there is to get them to 250k by retirement. At 5% interest that's 12k/year.

You won't consistently get 5%. Interest rates on cash accounts are always below inflation, so your return will frequently will be lower than you expect and your capital (and income) will constantly dwindle in real terms.

You really need advice on this. If you don't think you can find an IFA you trust, just go to the banks☆ you have your ISAs with. They will have stocks and shares ISAs and can help you transfer and choose funds. You won't get the range of choice you'd get with an IFA, and the fees may not be the lowest available, but it will be better than what you currently have.

☆ You do have it spread across more than 1 bank, don't you? Because you are only covered up to £85k per bank.

Reporting - for what? No one has broken talk guidelines.

Thanks, I'll look into that.

What on earth should anyone be reported for? Pointing out that they aren't jealous of someone who doesn't have their own pension? Genuinely confused here!

The one I use for my kids JISAs is Fidelity Index World Fund (accumulation). It is cheap, dividends etc all automatically reinvested and once set up I ignore it. I’ve linked the info - you can see the growth over time but of course there are ups and downs (negative growth last year), so you need to be comfortable with the dips. I’ve picked it for the kids as I feel it’s pretty fail safe - risk is well spread and sensible. I’ve picked some random funds for mine but it’s just because I’m interested - I wouldn’t risk that for the DC!

I transferred a cash ISA over last year to various funds - had quite a bit in it and you do need to grit your teeth if you transfer a lot as it’ll most likely go down in value for a wee while, especially these days!

https://www.fidelity.co.uk/factsheet-data/factsheet/GB00BJS8SJ34-fidelity-index-world-fund-p-acc/performance

Yep.
Fidelity Index world ( no emerging markets)
and HSBC All World Index ( with emerging markets,
can’t go far wrong with them for long term investment.
Average growth over the last century has been 8% per year. You just have to realise that a 25% market drop is likely every few years but then that’s a good thing if you are drip feeding in, it means you buy more so better growth when markets recover.

@5thCommandment

Before you get nasty triggered out of jealousy, try and apply some logic, it's not tax efficient to put funds into a pension from take home pay. It's better to keep it in one post pre tax. she will get my whole pension when I die and benefit from it when we draw down in the meantime so your argument is just tosh.

You can contribute to a pension for your wife out of post tax income and you HMRC will top
It up With 20% tax relief.

www.mfpwealthmanagement.co.uk/blog/contributing-to-a-family-members-pension#:~:text=As%20long%20as%20your%20contribution,relief%20at%20their%20tax%20rate.

@BorgQueen

Where do you hold them for, its doesn't look like hargreve has fidelity?

Mine’s in Hargreaves.