Am I saving too much?

[Pensionpot123]

Hi all,
I'm always a bit concerned that I don't splash out - I am very frugal....am I too frugal?

Household income ~£100k in West Scotland. Wife and I are mid 30's.
One DC - 6 months.
Value of house - £600k, mortgage £200k with £50k savings. Plan to pay mortgage off in 10 years.

At the moment our pension is looking to be approx £76k/yr combined exc. state pension.
Long term plan would be to downsize on retirement to house maximum half the value of current home (if nothing changes, profit £300k from sale).

Should I be spending more? Am I leaving myself too much for later life?

At the moment we -
Don't eat out
Go on 2 good holidays a year (Florida, cruise, New York etc)
Don't do hotel breaks
Get a takeaway every ~3 months
Change car every 2-3 years to a new-ish budget car (Ibiza, Fabia, Clio etc)
Keep all other outgoings to a real minimum

Any opinions or serious advice about pension is welcome!
Realise there may be people who earn a huge amount more or have a much bigger pension pot.

@Pensionpot123

I stand corrected about the charitable giving because you really are doing a lot there for the less fortunate.

The part I can't grasp is when I put all my figures into moneyhelper's pension calc it says I have a shortfall of £7k a year for my pension. Then I come on here and everyone tells me I've got a huge amount.....

@Pensionpot123 The general rule is you want 2/3 of your earning income as pension income which I think you are more than on track for - esp if you include state pension. With household income of £100k and personal pension of £76k without state pension you are on track for the same income in your retirement as in your working life - but you'll be mortgage free and won't be saving for retirement. So you should have ample.

Just about... But certainly not as comfortable as some would have said on here which is what's caused me a bit of confusion. It looks like I'm just on track to have a similar lifestyle to just now but I wouldn't say we were ploughing everything in for an incredible retirement

@Pensionpot123 Well obviously it's all relative to your existing standard of living and income, but you're focusing so much on things like overpaying your mortgage that your current standard of living is probably rather lower than most people on your income would experience! Plus you'll have the same income in retirement as you will now, whereas most people accept that their income will be less in retirement. (and that their outgoings will be much lower). So based on that, you're actually on track for a much higher standard of living in retirement than you experience at the moment. That is much more than most people both aim for, and achieve.

That makes sense...

I never believe anyone that comes on here with big figures looking for 'advice.' Surely you have a financial advisor? If not why not?

Just to check -
"I never believe" - so you think I've made it up?
"Big figures" - well that's pretty subjective. Someone on here may celebrate having £50 in savings whilst others on here, who have said their household income is >£500k would look at my measly £50k and think they earn that in 6 weeks of work.
"Surely you have a financial advisor" - well, no because I've never seen that as an essential for a teacher. I'd be surprised if most teachers have a financial advisor.

Lastly - the thought of why someone would come on here and ask for advice. The purpose of the forum (taken directly from the website) is - Find financial and money saving discussions including debt and pension chat on our Money forum.

That's the purpose.

If you're on track for £76k teachers' pensions plus two full state pensions, that'll be £100k-ish combined. That sounds more than enough to me, but only you will know whether that will fulfil everything you want to do in retirement.

As others have pointed out, it's similar to what you're earning now but you won't be paying for a mortgage, pension contributions or national insurance when you're retired. If you want to buy a private yacht, a couple of horses and a second home in Monaco, then obviously it won't be enough; but I doubt that's really your style.

Like you I'm a natural saver and prioritised paying off my mortgage as soon as possible. It's a great position to be mortgage-free. I found it meant I didn't ever have to stay in a job I wasn't enjoying just because I had to, which is an incredibly liberating way to live.

You say you've got £50k in savings which is around 6 months of your joint income. That's probably a reasonable buffer and personally I wouldn't want less than that. It's amazing how life can throw up all sorts of unexpected issues and, as you know, money gives you choices.

I haven't read the full thread so apologies if these points have been made already, but these issues jump out at me:

a. Your predicted £76k joint pensions assume that you and your wife work full-time until retirement age. Either you or she might want/need to work part-time/quit work/take early retirement and that will impact those figures.

b. Your ability to save is massively helped by not having childcare costs, so make the most of it while it lasts! Who knows whether your in-laws will be happy or able to continue doing it as your DC gets bigger (i.e. more demanding) and your in-laws get older.

c. Children are more expensive than you can ever possibly imagine. I've spent significantly more on mine than I've ever spent on myself.

d. A really important question: are you and your wife genuinely happy with the way you live now? If so, carry on doing what you're doing (i.e. being frugal and saving hard). If not, you could afford to relax things a bit. When my DCs were little, I used to spend a fair bit on cleaners, babysitters, au pairs etc which I viewed as my "sanity money."

e. I don't think you need a financial adviser. Certainly I've never used one. There's loads of information online.

Brilliant thank you! So helpful.
We both enjoy life...my wife goes running several times a week, I play sport around 4 times a week. We are extremely busy, as mentioned above (which I didn't plan to mention) I do quite a bit of volunteering as well as tutoring etc. We just like to pack it all in and in fairness, I'm not sure where we'd find time to go out for meals 😂.

I'd love not to have to worry about money when I'm retired. If I want to go to South America and Japan then we go ahead and book it ..still with value in mind. Not all the time, but 2-3 really nice trips a year whilst we're fit would be brilliant.

My first and only thought

So how much do you think you'll spend each year on trips to S America/Japan? £20k? Bear in mind that if you're planning on paying off your £200k mortgage in the next 10 years, you'll be paying £20k (+interest) each year doing that, so as soon as your mortgage is finished you'll have that much "spare" each year.

Instead of paying off your mortgage quite so fast, another option would be to put part of the money into a SIPP instead. Unlike your teachers' pension a SIPP is a personal pot which grows and falls in line with the stock market/bonds (depending on what you chose to invest in.) There are tax advantages to investing in pensions and it may well keep you out of higher tax bands as your salary increases. The key advantage for you though is that you can get your mitts on the money 10 years before state pension age. I'm just thinking that with both of you signed into a scheme which (I assume) starts paying at state pension age, it might be nice to have another pot you can get earlier - to fund early retirement or part-time working, for example.

Finally, and just because I sense that you like a bargain! - if in any tax year you happen to have a spare couple of thousand looking for a home, think about setting up a pension for your DC (called a Junior SIPP.) You can pay in up to £2,880 pa and the govt tops it up to £3,600. Stick it in a world tracker fund and let it sit there growing until you choose to tell your DC about it.

That's food for thought thank you! Had never heard of SIPP's and always thought it would either be investments (stocks and share isa for example) or investing in property. What's the benefit of SIPP over S&S ISA?

I feel that you’ve had some really strange responses here OP.

I’m a teacher in London in my 30s and there was nothing in your OP that seemed implausible in terms of figures to me.

I sometimes have similar thoughts. We finished paying off our mortgage last year and have decided to start loosening the strings and plan to splurge a bit here and there on travel and experiences. We live a cheap lifestyle and are happy with that day to day. I don’t watch what I spend, I just have fairly modest tastes and don’t really get pleasure from buying “stuff”.

We have no kids and don’t plan to have any and it’s not like we can take our money with us, so there comes a point when you wonder what you’re saving for. I’m not going to suddenly change and become a habitual “spender” but do plan to upgrade to business class now and then, take more holidays, treat my friends and family to trips away, go to the theatre more etc.

Article on SIPPs v ISAs. As you're a Scottish taxpayer, the amount of tax rebate into a SIPP will be higher than the standard UK figures:

SIPP vs ISA - What are the differences? - Hargreaves Lansdown (hl.co.uk)

Also I don't know if it works the same way in Scotland, but here people lose child benefit once they earn over £50-60k. If you pay into a SIPP, the gross amount is deducted from the calculation of "earnings" meaning that if you earn e.g. £52k it can be beneficial to put say £3k into pension savings.

I've got to be honest...the thread hasn't went like I thought it would 😂. And some people say "live a little" but I would get 0 pleasure from going out and buying "stuff", like yourself.

Instead, again like you, once I'm ready I think I'd use it on experiences and holidays.

Thanks for the response!

That's the same here... although I think it's off our taxable income which wouldn't include my pension contribution which saves me. I do alot of extras which take me above £50k but with pension contributions I'd still sit under it for my taxable income. Will definitely look at SIPP's. I've been lucky this year to get very high interest rates (sometimes up to 7%) but that won't last forever so need to ensure there's still a good return long term

Go and see an IFA

I think you should let your self live life more. Eat out sometimes. Get a take out once a month. Do the odd weekend break or day trip out. You don't need to swap your car that often you could save money there.

I mean it sounds like you are saving loads for old age but I don't think you need to save as much as you are and your not living your life now while you are younger and more able bodied. Also like you might die tomorrow and never even make it to old age.

So yeah carry on saving for old age but like no need to live so frugally now. Live your life more.

Such wisdom here.

You never believe anyone who posts in a ‘money’ section for advice? Yet you believe teachers would routinely pay £2K to a financial advisor for advice about their PAYE circumstances. Okay.
Should he dash to the GP when he’s got a cold as well?

😂 this did make me laugh

@WeAreBorg financial advisors cost nowhere near £2000. They cost nowhere near £1000, actually!

Sorry I don't believe anyone who comes on to a Money forum only to tell people to stop talking about money 👌