Hi all,
I have searched on here and done some research prior to this post, your opinions and experiences would be greatly appreciated:
I am mid 30's and own my house (self built), and am employed. I'd like to put myself in a position to retire as early as possible (who doesn't). I thought the following 2 investment options seemed prudent?
I am keen with the idea of starting a FTSE tracker ISA as it seems a good, tax free investment that has the potential to outperform most savings accounts over a longer term. Hargreaves & Lansdown seem to be highly recommended on previous posts...
I am also looking at starting a pension - the government are offering tax relief for those who are starting pensions, in so much that they would receive a 25% contribution on top of my monthly payment (I'm not sure what figure this is this is capped at). This seems to be an attractive option.
I am not interested in buying another property to let as I don't want the commitment or hassle.
First off congrats on paying off your home mortgage!
I would probably recommend you speak to a good financial advisor. Most of the high street banks have one attached.
The ftse trackers isa is a good start but i believe these are classed as high risk due to the nature the way it tracks. Low costs though.
Pension definately a good idea as you say tax relief effectively tops it up for you.
Im sure others will chime in soon with some wise advice.
1) have a conversation with an FSA.
2) start an AVC or SIPP
3) stuff as much money as you can in it
4) repeat 3
£100k in the pension pot buys about £3k/year pension!!
each £ you put in an ISA might return 0.02p/year (if you are lucky). Each £1 you put in your SIPP will give you £1.25 in the first year + whatever return you get from the market - this is all tax free until you draw it. In which case you will only pay the prevailing tax rates - so the first £10k (£300k in your SIPP) is effectivity tax free. You can start accessing your SIPP at 55!
Hope this helps, but talk to an FSA.
Chaps
I am retired, so at least I have experience here. Also when retired people get together, you can guess the favourite topic - yes funding retirement.
Here are a few rules based on experience.
1. Avoid FSA's, their main aim is looking after number one.
2. Spread the cash about, never put all your eggs in one basket.
3. Priority number one (which the OP has done) is to buy the house you want and clear the mortgage. NEVER use your house to fund a pension, you want to retire in the house you like and sell it only when you genuinely want to downsize.
4. Retirement planning takes discipline, so save up between 3 - 6 months take home pay in a flexible building society account which you will keep for a rainy day before saving for retirement.
5. Equities are always the best long term bet but get out of them about 5 years before you retire as this will reduce your exposure to a stock market crash.
6. Trackers are without doubt the best way to invest and make sure you buy into them via an ISA. Check the running costs as these can vary.
7. Run two trackers, one in the FTSE 100 and the other in the FTSE 1000. This spreads your risk considerably.
A good retirement is expensive unless you want to sit in front of the telly all day as it is just as expensive as running a mortgage or bringing up children. Therefore start funding it NOW because it will soon be your turn to receive the gold watch from your boss.
Regards
Mick
Thanks, sound advice, would you suggest a 50:50 ratio investment split over these 2, or something more conservative say 30% FTSE 100 & 70% FTSE 1000?Originally Posted by Mick P
I'm personally more diversified than this and would recommend it. Google "index tracker diversification" or something similar and have a read.
You need to talk to an advisor. They are no longer allowed to receive commission on pensions and investments so will charge you a fee.
A tracker ISA is a good idea for long term and as you say Pensions have always attracted tax relief. Property may also be an option but I would take some advice from a professional rather than rely on what's said on a forum.
Most importantly take the time to learn about money and sort out your own finances, I have found I know far more than most so called advisers when talking to them informally.
As already stated equities do the best over time but convert to cash when they have served you well and are thinking of retirement.
SIPP's are definitely the way to go.
I retired at 50, I hope you can do better.
Cheers,
Neil.
You say you're employed. What pension arrangements do your employer have in place? If they contribute then get involved as I understand Pensions are becoming even more flexible.
Ticker
This is no real answer to this because they will always overtake each other. What tends to happen is that the FTSE100 is slightly more volitile whilst the 1000 is smoother. I go 50/50 purely because it is easy to do.
BTW trackers are usually in the top 25% of funds which is another reason for going with them and most managed funds load up with trackers anyway.
Regards
Mick
Some sound advice.
I can agree with the 50:50 split between the FTSE 100 (or 250) and maybe the All share. But only for your ISA saving/rainy day monies.
I think a proper pension should have more diversification. If you don't want to pay a pension company a whacking percentage of your money (compound interest is quite an eye opener) then you could start by reading an excellent book called Smarter Investing, by Tim Hale.
I used to pay a local firm to do my pension for me, but after reading this book and much www info, I decided to take the plunge into a self managed SIPP. I now have total control over my own finances and run it via Hargreaves Lansdown.
And fwiw, I'm 80% invested into just this one fund. (I play a bit with the other 20% - sensibly)
It's a very well balanced tracker "fund of funds" with a relatively high risk, equities biased structure.
http://www.hl.co.uk/funds/fund-disco...ulation/charts
My experience too.
I also endorse Neil`s view to make time to learn about finance and how it affects the worlds` markets. And even after you`ve made your investment choices, monitor their progress so that you can speak intelligently if you need to contact the managers about performance, etc.
One site I follow http://dailyreckoning.com/agora-fina...ree-e-letters/, keeps me up to date on topics which affect markets, and there are many more from which to choose.
Regards, Jim
Lots of good advice already on diversification, asset allocation, managing your own wealth etc, the only thing I would add is that in preference to a UK-only large cap FTSE tracker perhaps take a look at multi-asset funds, or even the multi-asset portfolios that the big platforms provide - they do a lot of the hard work for you.
Oh and be wary of the pension vs ISA advice above - the Telegraph had a good article on this at the weekend, and it is a marginal call which is the better vehicle (on the grounds that while you benefit from tax relief on contributions to a pension, you will pay tax when you draw the money on retirement). At your age, being able to access your money in an ISA and effectively 'retire' before 55 might be a considerable advantage.
http://www.telegraph.co.uk/finance/p...-the-sums.html
Last edited by nickk; 6th October 2014 at 21:20.
What I don't understand is why the annuity rates are so poor. I got my annual pension statement the other day, predicted pension pot at 68 of £800k but that will only give me an income of £24k pa?
Can see the attraction of drawing down the money and buying another property to give income and an asset to pass down to the kids eventually.
Whilst I have paid into a pension right from the moment I left Uni, I do not trust it'll allow me a retirement i feel I deserve; plus I only truely trust myself and significant other to look after ourselves in retirement with our own provissions. Thus I am slowly building a property portfolio (very slowly) but I am only forty. The aim is these will be my retirement fund whether I sell up or just collect the rent as an income.
Best regards
Darren
That looks like a good mix of funds, with low charges. Looking to open something for the Mrs so this might be the ticket.
I'm at a juncture where I'm trying to work out if I'm better putting more salary into my (MP) pension pot, over pay the mortgage or take out additional investments (including another rental property).
Coupled with thinking about leaving a long term employer to become a contractor - I think it's a midlife crisis!
Any pointers for resources to help map out the pros / cons / tipping points where things start to sway one way or the other?
Posting Permissions
Reply With Quote