Advise for 47yo with no pension

[lucillelarusso]

I'd really appreciate some advice as I have been reading and reading and am getting more confused if anything. I grew up suffering financial abuse with a very violent and aggressive father - I panic when I think about money and have, as a consequence been burying my head in the sand. Thank you

I have been self employed for 20 years, own our house with 6 years left to pay on mortgage. I have some rainy day savings in a cash ISA that is doing nothing in terms of interest. I have no debt other than mortgage.
I have now increased my income and have approx £500pm to save for retirement. I am unsure what type of savings pot to use - SIPPS or S&S ISA. Any advice would be much appreciated.

Thank you

*advice! sorry!

ukpersonal.finance/flowchart/

This is a helpful infographic. I'd suggest making sure you have your emergency fund before making pension contributions. Have you paid NI conts, to get state pension?

There's an explanation of different personal pensions plans (standard, stakeholder, SIPPS) on this site:

www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/personal-pensions

You won't get tax relief on contribution to a S&S ISA as it's not a pension scheme.

SIPPS is for people knowledgeable about investments and who want to manage their own portfolio. If you just want to invest in a broad fund then standard or stakeholder will be appropriate.

Thanks @Newchallenge Yes I am up to date with all contributions for NI and due to get a full state pension as things stand. I have a years salary in my 'rainy day' cash ISA - which is my emergency fund.
I am a good saver and sen sensible with money, but have a huge blind spot/panic spot when I think seriously about pensions/investing/long term saving.

@Plexie thank you, I have read this and stuggle to make sense of what would be best for me. I know nothing so standard and stakeholder seem likely

Hi OP I'm 45 and in a similar situation, just placemarking x

When you add money into a private pension tax is added on to it as a rebate so you benefit from that though it is taxed when you take it but a tax free allowance. You cannot access your pension until 55 atm and due to rise. This can be an issue if you like me get cancer, its all inaccessible whereas in an isa can access it. But if you have a years fund should be OK. For SSISAs I use Vanguard, they also do pensions and are low for fees. Moneysavingexpert is good for advice.

Sorry to hear about the cancer and pension situation Silkierabbit

Are there any other pitfalls to pensions instead of savings? What about the tax / tax free allowance?

@Silkierabbit

When you add money into a private pension tax is added on to it as a rebate so you benefit from that though it is taxed when you take it but a tax free allowance. You cannot access your pension until 55 atm and due to rise. This can be an issue if you like me get cancer, its all inaccessible whereas in an isa can access it. But if you have a years fund should be OK. For SSISAs I use Vanguard, they also do pensions and are low for fees. Moneysavingexpert is good for advice.

I am so sorry to hear that, and really appreciate your advice. I will look at Vanguard, thanks

@Orangesandlemons77

Hi OP I'm 45 and in a similar situation, just placemarking x

How do you feel about it? I am fine 99% of the time but recently my friends have all been talking about retirement pots etc and I am sat sweating and panicking!

I'm feeling similar.

In that case I'd suggest a stocks and shares ISA.
I have NO financial training so do not class this as financial advice!
I learnt a lot from Rebel Finance course run by the Rebel Business school. They explain stocks and shares well.

why not get some independent advice from a financial adviser . It will pay dividends long term .

Independent Financial Adviser ASAP. Then get started ASAP. You still have a good number of year to add to a pensions pot. They can also suggest transferring your cash ISA or at least part of it into a stocks and shares ISA which would give you a far better growth rate currently. Managed ones also asses what level of risk you are happy with.

I'd invest in a good IFA.

Disclaimer: I am not a financial adviser although I give general advice about money and other matters in my job.

MoneyHelper offers a free midlife pension review for self-employed people; I think this would be the perfect starting point for you:
www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/midlife-review-for-self-employed-people

Depending on how you feel after having this review and looking into your options, you could either use an IFA to help you choose and set up the pension (the easy/reassuring option) or you could do it yourself.

How to choose a financial adviser
www.moneyhelper.org.uk/en/getting-help-and-advice/financial-advisers/choosing-a-financial-adviser

If choosing yourself, I would suggest a standard personal pension. Some helpful links:
www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/choosing-a-pension-yourself
www.moneysavingexpert.com/savings/discount-pensions/

Instead of a managed pension, try having a SIPP. It is much easier than you may think. Pension is a tax wrapper. SIPP (Self Invested Personal Pension) is a tax wrapper in which you choose the investment funds.
You can keep that really simple by choosing a Global Multi-Asset fund which holds lots of stocks which are based around the globe. Depending on the fund you choose, it also contains Gilts/Bonds, Cash, Property.

Podcast episode: meaningfulmoney.tv/2017/01/18/how-to-choose-a-multi-asset-fund/

I have been self employed for 20 years
If you have a Limited Company, then paying in to a pension from the Limited Company can give a tax advantage over contributing to the pension personally, due to how corporation tax is calculated.

I have some rainy day savings in a cash ISA that is doing nothing in terms of interest.

I use NS&I Premium Bonds. The emergency fund is like insurance, you don't make money on it. What it needs to be is easily accessible.

I am unsure what type of savings pot to use - SIPPS or S&S ISA.
The answer to that is nearly always BOTH. What ratio you do towards Pension vs ISA is something that comes up in discussions all the time on investment groups.

Thank you all so so much! Invaluable and trustworthy advice!

I have really struggled with finding an IFA. I have tried and went as far as meeting 2 but both were very insincere and 'know it all' when I met them. Men in their 50s who were just talking at me and I struggled to understand all the jargon etc. I find it all makes me v anxious which is unhelpful.

@nannynick I have taken the plunge, set up a PB account with NS&I and moved half the rainy day fund into it. That's £20k. I will think whether to move it all or leave some on the cash ISA.

I am reading about SIPPS and SSISA now, it's so confusing to me but I am determined to get an understanding of this.
@AnotherEmma I am a sole trader atm but this may change as my business has grown considerably in the last 2 years.

Thanks so much for all the tips and advice. I will read and try to understand. Please don't worry about disclaimers etc - I am v cautious and wouldn't ever leap into anything but I do need a massive shove! Thanks

Once your mortgage is paid off you can also make more sizeable investments or pension contributions.

Some books which may help:
The Simple Path To Wealth by JL Collins
This is American but it is about investing in simple global funds.
The Meaningful Money Handbook by Pete Matthew - this is by a UK financial planner and is aimed at beginners. Budgeting, Protection, Investing. The investing part helps explain about the different tax wrappers and how funds work within those wrappers.
Invest Your Way To Financial Freedom by Ben Carson & Robin Powell. This is a new book which I have just started reading. It should help with explaining why you should invest money.

There are podcasts, YouTube channels, all sorts of things available that can help you to understand how investing inside an ISA or SIPP wrapper works.

Don't stress, OP.

Yes, it's less than ideal and you do need to get started - but better late than never.

Also, owning your own home and having a very short mortgage term left is great.

It's not the end of the world. You're in a decent financial position otherwise and you now know what you have to do.

As others have said, Moneysavingexpert will be a good place to start.

Pensions can be complex, but they don't have to be. In simple terms, it is just a savings pot that you add to while you are working, and then draw upon it when you retire. The money is invested, so it can get more growth than cash, and you get tax relief. This just means that you get tax returned to you that would have been taken off when you received the money. Or if it's taken direct from your salary it is just paid straight into the pension with no tax deducted - ie it's the same thing.

So that is the huge benefit over stocks and shares ISAs, the tax relief.

The only drawback is that you won't be able to access it in case of emergency until age 55 (but this age will probably rise) so make sure you have enough saved (and also insurances) in case of emergency.

Good luck XxX

I recall listening to an episode of the FT’s Money Talks podcast that looked at pension/retirement saving options for people in their 30s-40s who are getting started in their planning. The episode is called: “My life expectancy was 9 years old: why I never thought I’d need a pension” I found it very accessible and talked through the options which I preferred over reading tons of articles.

Hope this link works: podcasts.apple.com/gb/podcast/money-clinic-with-claer-barrett/id287031335?i=1000538293377