Monthly investments for a novice

[Logoplanter]

I'm looking for help please.

In the next year our mortgage should be paid off and we are looking to invest the money that we currently pay into the mortgage but I've no idea into what.

I'm 46, DH is 47. I have a defined benefit pension which will pay out a decent amount if I work to state pension age and an ok amount if I work until 60. I can only see me working until 60. I also have a miniscule defined contribution benefit (20k pot)

DH has a very small defined contribution pension (about £40k pot). He's self-employed and if his work is still around would continue to work until state pension age.

We both have LISAs (mine is a S&S one) which I'm hoping will each have about £80-£100k in at 60.

We also have a healthy amount in premium bonds which we add to every month and is our emergency fund.

I'm worried about the gap between 60 and state pension age. Our money is joint so DHs lack of pension is my problem too as I won't give up work until we can afford it.

Longer term, if we needed to we could downsize and release equity in the house but I'd rather not have to.

We'll have about £1000-£1250 a month to invest possibly alongside the occasional lump sum if DHs work goes well.

Any thoughts? TIA

Remember you can't pay into the LISAs after 50.

It sounds as if pensions is the main concern, so - as long as there's a decent amount in the emergency fund - I'd concentrate on boosting those.

Focus on DC pensions contributions and if one or both of you pay tax at 40% I would favour that one until taxable earnings drop below the threshold.

Ditch the premium bonds. They are not a good investment. You should get a better guaranteed return in a cash ISA if unwilling to invest the money. Martin Lewis does not recommend PBs.

I’ve always prioritised ISA each year but I do have full £50k in premium bonds which is earning 4.1% year to date - more than I’d earn in a standard taxable savings account

Thanks for the responses, it is helpful.

In relation to the premium bonds, I'm torn to be honest. I like the thrill every month of thinking we might win and the return rate hasn't been bad - I can't remember the specific rate but over 4% I believe.

Any suggestions on pension providers to look at? I'm not sure the small ones we have are in the best place so if we'd be best adding to these or looking at starting a new pot.

Do you have a workplace pension? If so, does your employer offer matching if you increase the level of your contributions into that scheme? That would generally be the best option to consider first.

Look at the plan detail of the existing DC pensions - what are the underlying fees/charges for the product and the funds? There may be cheaper options available elsewhere. Also check what your options are for taking the pension benefits out - some older plans don't allow Flexi-Access Drawdown, which may or may not be important to you. Knowing this level of detail will help you to compare your existing plans against any alternatives.

Consider a global tracker fund or similar fund that invests in companies round the world and means you don’t have to pick your own. These can either be in the form of a mutual fund or ETF. They do the same job but how they charge is different

At age 47 hoping to retire at 60 I would consider your need and ability to take risk. You only have 13 years to make contributions if a nasty stock market bear market comes along close to your retirement date that could ruin your plans.
If you don't know what you are doing I would consider a Target Retirement Fund, putting all your money into a low cost global tracker could be to risky with your time horizon.

Thanks all.

My pension is a civil service pension so no additional contribution from them, but I was just looking before and I can buy added pension or do AVCs so I'll have a proper look at both of them.

I quite literally have no clue what I'm doing and am wondering if we should see a financial adviser, but how do you go about finding a good one? 🤔

It’s impossible to answer with any degree of relevance without knowing

-how much will you need to live on at 60?
how much will you get from your DB scheme at 60?
how much do you have in total in premium bonds?
what is your and DH’s forecast for state pension?

With this info you can work out how much you need, what you will have in guaranteed income and what the gap is between the two that you have to bridge and for how long.

Hey, i'd max out the workplace pension so he gets contributions from the company, any leftover open a vanguard account and put it into their all world index fund (10% a year give or take)

A financial advisor is no substitute for doing all the requisite learning. Without doing the learning, how will you know if the financial advisor is genuinely making good recommendations or just selling you a product they'll get commission on?

If I were in your shoes (my shoes are actually worse at this point as I don't have a DB pension), I would open up a SIPP, invested in equities (not bonds). You'll get 20% tax relief applied to anything you put in there, and you can claim back an additional 20-25% if you're a higher rate tax payer or beyond.

You'll be able to access it at 58 years old. If this isn't soon enough for you, I'd balance this with a stocks and shares ISA.

Now, I've gone rogue and have a DC pension and a shiny new ISA (I've never had one before) and I'm investing in dividend stocks as I think this may be a good way of getting an additional monthly income in retirement. This may prove to be a bad idea.

Anyway, do the research, and think about the risks involved and your appetite to weather a market downturn. Your mileage may vary. Moneysavingexpert has a good pensions forum with some very knowledgeable people in it.

There's tons of good YouTube channels too. Damien talks money would be a decent start.