Pensions and safety nets

[ScrubbyGarden]

Hello.
I'm normally fairly financially savvy, but I have a blind spot for pensions...
Both DP and I are self employed, mid thirties, and fairly low earners. A few years ago I inherited a big chunk of money, which has been a massive safety net for us, and allowed us to live beyond our means through two maternity leaves (and a bit in the early years- we are reining this in now though!). It has also allowed us to buy somewhere big enough for us to live comfortably, and we have just moved into it- so now the safety net is down to about 60k (poor us poor us- I'm v aware of how outrageously privileged we are)
We would like to extend the kitchen somewhat at some point, and I'm still half hoping for a third maternity leave (jury's out on that one though).

Neither is us have any sort of pension.
I'm considering putting the full 4K allowance into a LISA, but maybe we should just start SIPPs. It would basically be a case of gradually transferring our cash savings into a pension, as we don't have a surplus each month to play with. Aaaargh.
(Once the kids are in school our incomes will go up hopefully)

What would you do???

I think you should set off some time to really read up on pensions and what options are open to you. Don't give up until you feel you grasp the essence of it. Personally I have several sorts of pension schemes running (some being governmental, some being paid by the employer and some being paid by myself out of salary). I've read someplace (probably some American site like Dr. Phil's and his "pay yourself first" concept) that around 10% of the monthly income should be used for pension savings, but anything bigger than zero will help of course. Go over your budget and do some (perhaps a bit boring) calculations. Unfortunately there are no quick fixes, I wish there were, but I haven't seen any just yet.

Thanks visitor I've been trying to get my head round it all, I definitely need to read more, you are quite right! I've been through a obey saving expert- any recon
One of the few things that make me wish I were employed (that and sick pay, paid holiday...) is the simplicity of joining a pension and getting employer's contributions into it.

"obey saving expert- any recon"????
"Money saving expert - any other recommendations to read up on?". Argh...

This is just purely my opinion. I think those self employed pension schemes are unreliable to say the least. I know a self employed person whose fund pays out a third of what he was predicted. If you had a bit more capital I'd say invest in another property. That's what I'd do.

What you could do is to go over old threads here, I distinctly recall pensions being discussed a couple of weeks/months ago and some names were mentioned.

I know, it's tricky vivienne! Damned if you do and damned if you don't... Leaving it in cash for decades will just erode away with inflation, but as you say, it's not enough for property (although who is to say that the Great Property Crash isn't just around the corner- and maybe no bad thing??)

Thank you visitor I'll have a hunt...

Definitely don't leave it in cash in the bank in a 000000.1% interest account. But then you do see some of these very high interest schemes collapsing and people losing loads. I'm quite cautious. And right about the big property crash. But property does keep it's value in the long term if it's a decent one. that's what my Dad always said anyway. I think I'd stick to ISAs for the time being. Even those financial experts get it wrong. It's difficult.

LISAs may be an option but remember you can only pay in until you are 50. And can only access at 60. It's still very early days with them so the rules on them still have potential to change.

You might want to do a comparison on the tax you might save in the long run. Pensions give you a 20% tax relief, you can get 25% of you pension pot tax free at 55, plus if you take subsequent withdrawals from pension thereafter you'll only be taxed according to your earnings in that year.

Personally i see LISAs being a good option for those saving for first time home and for those who know they may be impacted by the annual allowance as an additional tax wrapper. I'm yet to be convinced they are a good retirement savings vehicle for most earners.

80 in the bank account is £100 in a pension if you're a basic rate tax payer you'd also get a tax refund on top if you're a higher rate payer.

ID certainly think about putting cash in a pension