Retirement

[Phil Pascoe]

When I was eighteen I had no intention of living this long.

 

[Shytot]

Got my annual pension review yesterday. £126 k in the pot and £165k estimated to be my total pot in 5 years . One example they gave me to expect was £44k lump some and £3.5 taxable yearly . Bit disappointed too be honest. I’m paying £300 ish per month . I finish my mortgage in 2 months and tempted to bang a extra £100 a month in my pension contributions or crypto

 

[marcros]

Got my annual pension review yesterday. £126 k in the pot and £165k estimated to be my total pot in 5 years . One example they gave me to expect was £44k lump some and £3.5 taxable yearly . Bit disappointed too be honest. I’m paying £300 ish per month . I finish my mortgage in 2 months and tempted to bang a extra £100 a month in my pension contributions or crypto

I find these statements quite unhelpful. that 126k will become 165k on their predictions, but that possibly ignores any contributions that you continue to make at the same level as now. That is how my annual statement works anyway, making it largely useless.

 

[Shytot]

My contributions increase every year by 2.5% every year . So glad I had this incorporated into my pension

 

[Flynnwood]

I remember when "financial experts" managed to lose 30% of a Company Pension in the recession of 2008/9.

If I had the opportunity (which I didn't) to turn it into cash when the crash started, instead of having to staying "invested" I would be better off (even allowing for inflation).

 

[mikej460]

It would have been much easier if we were born with an expiry date on our body, if you know the deadline then very easy to plan and spread the finance.

This reminded me of a sci-fi film where people have pre-determined lifespans and then 'terminated' anyone recall the name?

 

[Bristol_Rob]

This reminded me of a sci-fi film where people have pre-determined lifespans and then 'terminated' anyone recall the name?

Logan's Run

 

[Spectric]

I finish my mortgage in 2 months

There are a lot of people out there who could pay off their mortgage earlier if they just made a few cuts each month and paid extra off that mortgage, it reduces the capital faster and reduces the interest.

IE borrow 200K over 25 years at 3.5% you pay £99,768 interest or £4K a year.

Overpay £100 a month will save £15K interest and 3.5 years off term.

Overpay £300 a month will save £34.5K interest and 8 years off term.

Even if you only do this for the first few years it will make a difference, get the capital down and it reduces the remaining interest.

I worked this out because I hated giving money away to someone who was doing nothing apart from waiting, so I overpaid 20% min every month and lump sums every 6 months and saved 16 years off the term and a lot of interest.

 

[Lons]

That's exactly what I did Roy and having paid off my mortgage was a major factor in my decision to give up a well paid job, company car, holidays etc along with the stress of a job I hated to start my own business. I'd never have chanced that with a mortgage hanging over my head.

 

[Phil Pascoe]

My first mortgage was 14.7% when I took it out. Every time the rate went down I left the payments the same - it knocked years off quite quickly.

 

[Sandyn]

Bit disappointed too be honest. I’m paying £300 ish per month . I finish my mortgage in 2 months and tempted to bang a extra £100 a month in my pension contributions or crypto

How long have you been paying £300 a month and only 126k in your pot?
A pension gets greatest value from the money you put in early on. It has years to grow.
You get about 2% return from money you put in considering tax relief and only being taxed on 75% when you take it out. That's before any gain on the fund. You need to check the investment risk on the fund. If it is set to low, it will make very little. The level of risk is always a personal choice, I have all my pension pots split into different funds, normally 1/3 in low, medium and high, but select managed funds with a good track record over long term. As they say, funds go up and down in value, but they always recover. Pension funds are a long term investment, The risk is spread over many company shares, so it is actually quite difficult to 'lose your money' in reputable pension funds, but disasters do happen. I had two Equitable life pensions and the company got into trouble. Many people took their money out, but I held on right to the end and because of distribution of the with profits fund and some lucky timing, it worked out really well. I'm not normally that lucky. I did use the government investment advice site, but did all my research first so I could ask the right questions. I don't trust independent financial investors.

 

[Sandyn]

My first mortgage was 14.7% when I took it out. Every time the rate went down I left the payments the same - it knocked years off quite quickly.

That's what I did, it saved a fortune. Redemption day was wonderful, getting the title deeds passed to the solicitor

 

[Spectric]

That's exactly what I did Roy and having paid off my mortgage was a major factor in my decision to give up a well paid job, company car, holidays etc along with the stress of a job I hated to start my own business. I'd never have chanced that with a mortgage hanging over my head.

Yes it is great once you have secured that roof over your head because it gives you more financial control and something does change, money is no longer as important.

 

[NickM]

There are a lot of people out there who could pay off their mortgage earlier if they just made a few cuts each month and paid extra off that mortgage, it reduces the capital faster and reduces the interest.

IE borrow 200K over 25 years at 3.5% you pay £99,768 interest or £4K a year.

Overpay £100 a month will save £15K interest and 3.5 years off term.

Overpay £300 a month will save £34.5K interest and 8 years off term.

Even if you only do this for the first few years it will make a difference, get the capital down and it reduces the remaining interest.

I worked this out because I hated giving money away to someone who was doing nothing apart from waiting, so I overpaid 20% min every month and lump sums every 6 months and saved 16 years off the term and a lot of interest.

But I think many financial advisers will tell you that with interest rates so low it's better to put the money to work elsewhere. However, that doesn't factor in the psychological side of things. I paid my mortgage off ASAP (strictly, it's not paid off because it's an offset mortgage, but it's effectively the same thing).

 

[Shytot]

How long have you been paying £300 a month and only 126k in your pot?
A pension gets greatest value from the money you put in early on. It has years to grow.
You get about 2% return from money you put in considering tax relief and only being taxed on 75% when you take it out. That's before any gain on the fund. You need to check the investment risk on the fund. If it is set to low, it will make very little. The level of risk is always a personal choice, I have all my pension pots split into different funds, normally 1/3 in low, medium and high, but select managed funds with a good track record over long term. As they say, funds go up and down in value, but they always recover. Pension funds are a long term investment, The risk is spread over many company shares, so it is actually quite difficult to 'lose your money' in reputable pension funds, but disasters do happen. I had two Equitable life pensions and the company got into trouble. Many people took their money out, but I held on right to the end and because of distribution of the with profits fund and some lucky timing, it worked out really well. I'm not normally that lucky. I did use the government investment advice site, but did all my research first so I could ask the right questions. I don't trust independent financial investors.

I took my pension out when I was 22 I’m 56 now . I can’t remember how much I paid originally into my pension but about 5 yrs after taking my pension out I was advised to have a 2.5% increasing payment waiver . So it’s worked it way up ( it’s actually £311 now having gone up again) .

 

[Shytot]

Forgot to say about my yearly statement, my pot has increased from £112,000 in 2019 to £126000 in 2020. I’m quite happy about that . £3300 paid in

 

[Selwyn]

My first mortgage was 14.7% when I took it out. Every time the rate went down I left the payments the same - it knocked years off quite quickly.

How long was is 14.7% for?

 

[Phil Pascoe]

It was mid '80s, I don't remember. I know when it started to fall it fell by 1/4% or 1/2% quite regularly. When it went from 10% back up to 15% on Black Wednesday my cousin, who had a massive bank loan, phoned his bank manager. What on earth do I do? he asked. A minute's thought and then came the answer - call your first born (he knew my cousin's wife was pregnant) Derek. What if it's a girl? Call her Derek. Fortunately it dropped again quickly.

 

[Spectric]

But I think many financial advisers will tell you that with interest rates so low it's better to put the money to work elsewhere

But where can you get more returns than you are paying interest on a mortgage these days, it is because the rates are so low that is is even easier to hit it harder but this reduces the financial sectors returns. I never thought of it as a mortgage but a roof over my head that I wanted to own rather than leave it as debt.

The interest rates went through the roof under thatcher, great for savers but many people just gave their house keys back as it was not affordable, and this was after she allowed council tennants to buy their homes so they could not take part in union strikes without risking their home. I think she should have been burnt at the stake or put through a coal processing plant, I dare say there are many who would have partied for days. I recon that many would have retired earlier had she left them with a decent job rather than working till later in life.

 

[Glitch]

Interesting thread.

Sounds like Bob is in a very good position to 'retire' in 4 years time.
My advice is to take on board what people have said they are doing then make sure you get professional advice. Then you'll appreciate the mistakes and bad advice that people have shared, albeit in good faith.

A good IFA is not cheap but they'll help you avoid expensive mistakes, maximise tax efficiency and tailor your plans and investments to suit your specific requirements.

Some things to consider:

• Understand where your money goes today
• Work out what's essential and what is optional/luxury
• Work out how much you need to fund lifestyle you want
• Up to age 75 are the golden years (health dependent) when you are likely to need more money
• Check your state pension forecast
• Consider state pension top up to increase state pension if you have gaps in your contributions
• Consider deferring taking state pension - they'll increase it.
• Consider your health and risk of dying early, likewise for the wife/partner
• Maximise your pension contribution allowance in the final years of accumulation
• Make sure the pension money doesn't run out
• What do you want to leave your family when you die
• Keep the right amount in cash or 'cash type' products to ride out fluctuations in the markets
• The value of investments may go down as well as up

There is a good pension forum on MSE with plenty of sensible advice but as stated earlier, engage an IFA