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Original poster

Pension Advice

26 replies

LittleTabby · 09/02/2022 21:13

Hello. I don't know where to begin with the next step, so advice would be appreciated!

My husband and I are self employed. Finally found an even keel after a rough time with our business during lockdowns etc.

We have managed to secure a more affordable mortgage rate and are overpaying a little here send there. Have rebuilt our savings so we are safe and secure. 3 children, one nearing university age (2 years away)

We are 38 and have no pension pots. What I really want to know is where I need to look and how much is needed to be invested to make it worthwhile by the time we are 65? I appreciate we are late to this, but unfortunately gave never had the offering of employee pension with employer contributions. We have fought hard to get where we are and on the property ladder abd currently are in as good a position as we can be. All the calculators say if I save £200 per month into a pension fund, I sm still only looking at £4k per annum on retirement. That seems a big sacrifice without any future security. Could someone spell it out for me please, the what, where and how much to make sure we can survive?

Thank you

OP posts:
Original poster
LittleTabby · 10/02/2022 10:05

Just a little refresh, in case anyone is able to help this morning.

Sorry for all the typos!

OP posts:
WouldIBeATwat · 10/02/2022 10:08

General rule of thumb is at least half your age at time of starting as a percentage of your income. So starting at 38 you’d be looking at 19% of your gross income each.

The later you start the more painful it is. :-(

Mia85 · 10/02/2022 10:24

All the calculators say if I save £200 per month into a pension fund, I sm still only looking at £4k per annum on retirement.

Are you looking at buying an annuity (guaranteed £4k a year) or drawdown? Annuity rates are awful at the moment so few people tend to buy them. If you are looking at those rates it may be quite pessmistic. The alternative is to keep money invested and draw down the money to live on but obviously you then still have the investment risk.

Mia85 · 10/02/2022 10:28

I would suggest that the best first step is to work out what you are aiming for. That's really tricky when you are looking 30 years away but research like this and this are very helpful in thinking it through.

I'd then look at your state pension forecast to check it is all on track and work out what shortfall you would have to make up to get to your target amount.

Unfortunately starting at 38 is going to mean some hefty investment if you want to get to a decent standard. In your situation I would want to talk to an IFA to put a plan together.

WouldIBeATwat · 10/02/2022 10:48

I’m mid 40s and not banking on any sort of state pension when I retire. :-/

Original poster
LittleTabby · 10/02/2022 13:50

@Mia85
Thank you. I will look through those links! I guess the estimates are annuity rather than drawdown. But realistically if we only build a pot of say £100k or so each, drawdown isn't going to be feasible for more than a few years either. I feel like our only option would be high risk investment, but also like that is far too risky too. I am relatively risk adverse. State pension are at full credits available so far for our age for us both. However I question whether there will even be a state pension offering in 30 years time anyway?

@WouldIBeATwat 19% each is absolutely unachievable. It would me £600+ per month x2. We don't have that sort of disposable income after mortgage, bills, children needs are paid for. Though I can see why it would be needed. A hefty lump might be beneficial if it comes out of gross income?

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ajandjjmum · 10/02/2022 13:58

Depending on how your business is set up @LittleTabby, you may be as well to open a SIPP which you can bung money in to when you have a really good year. This would come straight from the business, although you would need the cashflow to support it.

Our income always fluctuated, and this was the way we built a decent amount into our pension pot.

Mia85 · 10/02/2022 14:01

The state pension may or may not be here in the future but it's a lot less likely to be here if people give up on it and the political cost of removing it reduces! I don't have a crystal ball but it's difficult to see wholesale removal of the state pension without at least a reasonable transitional period. So many people rely on it to a substantial degree that if it were removed there would have to be an alternative benefit for those who would otherwise not have enough and that would have to be means tested. I think it's much more likely that a combination of removing the triple lock and raising the age will make it less valuable over time.

I certainly wouldn't rely on the state pension in the sense of not planning any alternative but all you can do now is plan with the facts as you have them and then adjust as they change.

What would be your ideal (reasonable) target income OP you need to know what you are aiming for to work out how far away you are.

Original poster
LittleTabby · 10/02/2022 14:15

@ajandjjmum that is a really good idea, I will look into that, thank you!

@Mia85 I agree, it would be impossible for them to find another solution for those who need it without a lot of extra work! I have just read through the links you provided above and they are brilliant, really helpful thank you. They give ideas of what is needed and what needs to be done within each age group to achieve that!
I am considering setting up 2 x private pensions with say £200 each as individual to get them going and then a joint SIPP to put excess profit in at the end of each year as mentioned by aj above! It would top up a state pension at least. I suppose it would take a few years to see where that might put forecast wise!
Also, I keep thinking of reducing my share in the business from 50% to 25% and starting a part time role within the NHS. That obviously comes with a pension scheme so maybe I need to think that through first also!

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HMG107 · 10/02/2022 14:26

If you're 38 you potentially have another 30 years of working before retirement. It sounds like you need to sit down and have a think about how you can increase your income to up your pension contributions and prioritise following that plan.

I'm the same age as you, have one daughter and am self-employed. I'm disabled, which has affected my ability to work. I'm now on the right medication and am having to save £1000 per month in a SIPP to give me the retirement I want.

I've found this calculator useful - www.pensionbee.com/pension-calculator

CocoCookieCream · 10/02/2022 14:36

SIPP is your best bet. Regularly contribute 10% of your pre tax pay, and you/most people will be okay.

Another alternative, is once you hit 50 get a/any job in the civil service and buy as much added pension as you can. Within 10 years, you could build up a decent pension.

Original poster
LittleTabby · 10/02/2022 14:39

@HMG107 our household income is currently quite high. We both have equal earnings as 50/50 joint business partners and pay higher rate tax. The issue currently is the amount of money that needed to be left left working capital into the business to try and repair some of the financial damage the pandemic has made on our business. Coupled with a high (but now recently more manageable) mortgage repayment we haven't had anywhere near that amount available to set aside. I am glad you are sorted now, I really hope we can find ourselves to that point too!

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Original poster
LittleTabby · 10/02/2022 14:41

[quote HMG107]If you're 38 you potentially have another 30 years of working before retirement. It sounds like you need to sit down and have a think about how you can increase your income to up your pension contributions and prioritise following that plan.

I'm the same age as you, have one daughter and am self-employed. I'm disabled, which has affected my ability to work. I'm now on the right medication and am having to save £1000 per month in a SIPP to give me the retirement I want.

I've found this calculator useful - www.pensionbee.com/pension-calculator[/quote]
That calculator is really helpful, thank you!

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Original poster
LittleTabby · 10/02/2022 14:42

@CocoCookieCream very reassuring, thank you! would NHS work in a similar way? Am definitely going to be looking into SIPP!

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Rotherweird · 10/02/2022 14:46

I am sure you have already thought of this, but do you also have the option of downsizing/moving to a cheaper area on retirement? That could release quite a bit of funds.

Original poster
LittleTabby · 10/02/2022 14:49

Could anyone recommend a SIPP please? Is it possible to set up a joint one, or would 2 separate ones be better?

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Original poster
LittleTabby · 10/02/2022 14:52

@Rotherweird

I am sure you have already thought of this, but do you also have the option of downsizing/moving to a cheaper area on retirement? That could release quite a bit of funds.
Our current mortgage still runs for another 25 years so we need to get to a point where it us paid off before that could be considered. It is a very valid point but we don't have a massive property, just a standard semi in SW England.
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CocoCookieCream · 10/02/2022 14:55

[quote LittleTabby]@CocoCookieCream very reassuring, thank you! would NHS work in a similar way? Am definitely going to be looking into SIPP![/quote]
From what I understand, you can buy added pension as well in the NHS.

Tbh, if you do work part time in NHS, you would be better off contributing as much as you can here opposed to SIPP, as you'll get a good guaranteed pension amount with the NHS.

Rotherweird · 10/02/2022 15:00

BTW, the Money Saving Expert forums on pensions are brilliant - really educational! Just ignore all the people who've already managed to save up £££. Huge kudos to you and your DH for getting your business through the pandemic, that must have been incredibly tough. If you can do that, you can definitely get on top of the pension situation.

Original poster
LittleTabby · 10/02/2022 15:01

@CocoCookieCream I'm not an NHS worker yet, but it's in thd plan for the next 5 years!

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Original poster
LittleTabby · 10/02/2022 15:07

@Rotherweird

BTW, the Money Saving Expert forums on pensions are brilliant - really educational! Just ignore all the people who've already managed to save up £££. Huge kudos to you and your DH for getting your business through the pandemic, that must have been incredibly tough. If you can do that, you can definitely get on top of the pension situation.
Thank you so much for that! We run a pub, it has been the biggest of challenges. We have survived! I will look at money saving expert, thank you. @Rotherweird
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Lincslady53 · 10/02/2022 18:28

We were self employed for 30 years. We bunged money into isas when we had a good year and set up small regular monthly payments into a personal pension. You have about 30 years of paying in. I think if we were your age now, we would set up a SIPP with Vanguard, Nutmeg or one of the others on moneysaving expert. You can pay a regular amount in and add extra when circumstances allow. Covid hit just after we retired, so we haven't dipped into our pension savings yet, as we have been unable to spend on eating out or holidays much. Don't forget your house. In 30 years it will almost certainly increase in value, so you will be able to downsize to release more funds if you need to.

OnceUponAThread · 10/02/2022 18:43

@LittleTabby

Hello. I don't know where to begin with the next step, so advice would be appreciated!

My husband and I are self employed. Finally found an even keel after a rough time with our business during lockdowns etc.

We have managed to secure a more affordable mortgage rate and are overpaying a little here send there. Have rebuilt our savings so we are safe and secure. 3 children, one nearing university age (2 years away)

We are 38 and have no pension pots. What I really want to know is where I need to look and how much is needed to be invested to make it worthwhile by the time we are 65? I appreciate we are late to this, but unfortunately gave never had the offering of employee pension with employer contributions. We have fought hard to get where we are and on the property ladder abd currently are in as good a position as we can be. All the calculators say if I save £200 per month into a pension fund, I sm still only looking at £4k per annum on retirement. That seems a big sacrifice without any future security. Could someone spell it out for me please, the what, where and how much to make sure we can survive?

Thank you

Just to say that £4K a year is a lot better than the alternative if you don't save - which is nothing.

State pension is just shy of £10k a year. Can you live on that? If you can't you need to get saving.

The earlier you start, the easier it is. Cumulative interest is your friend. And you'll get tax relief from the govt too.

Look at a the Vanguard SIPP (if you are Ltd. Directors you can contribute from the business too), and also places like Nutmeg.

Don't get drawn into choosing your own funds and / or stocks. You don't have the knowledge to diversify and manage it properly. So then it's like gambling. Places like Vanguard and Nutmeg have options where they do the choosing for you.

DicklessWonder · 10/02/2022 19:50

Your company can pay into a pension for you and you’d save 20% corporation tax.

If you’re higher rate tax payers it’s a no-brainer. You’ll pay less tax paying into a pension from gross salary or via tax return if you do it from net salary.

So £200 into your pension would cost you about £150 in real terms.

Original poster
LittleTabby · 05/03/2022 11:33

Sorry for disappearing!

I am back and have spent weeks looking!

Currently trying to decide between a Halifax SIPP, Penfold standard (or lifetime) private pension plan or going straight for a simple plan via aviva or similar?

I have a small lump sum of around £3k to kick it off and then will start £100 per month regular savings with the idea to increase as I can manage and add random payments as possible too.

I am also wondering if my husband and I should set up LISA? We need to decide soon though as 38 now.

We have premium bonds for easy access savings for house improvements etc and an emergency fund of 3 full months outgoings (or slightly over that) in an online saver linked to our current account so we feel quite 'financially tidy/organised' at least. No debt beside mortgage (which we regularly overpay) and new car PCP taken out this week.

I need to check my state pension, so will do that now!

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