Investment & Investing

You mean "be careful telling them to sacrifice a large amount coz you might not have any money for beer afterwards" if I forget they're still taking tax off the reduced amount later?

Aegon Default Equity & Bond Lifestyle Pension Fund
https://markets.ft.com/data/funds/tearsheet/charts?s=GB00B9M5YQ97:GBP

That's the default one. Dunno if I can add other funds or what. I have a SIPP from when I ran a ltd company that I could dump money into. But I'd just use tracker funds with little real idea of what I'm doing. It's making money but I've nothing to compare with so who knows.

That's the benefit of paying off the mortgage - you don't need to give a shit if things are going good or bad - it's simply "I owe some pricks less money now"

That doesn't look too bad.
it's basically 75% equities / 25% bonds.
charges aren't too bad, 0.05%

You may or may not want to be in bonds. And you could probably find slightly lower fees, but not much.

Indexing in a pension is not rocket science. If you read three articles and did a basic spreadsheet, that would do it.
Invest and forget is a good strategy. Beats dabbling more often than not.

did a basic spreadsheet

and for that reason... I'm out.

The simple fact is: I don't really care, which is a nice position to be in, but it means that generally me doing something is better than me doing nothing - even if the something is "wrong". Like, I'm not going to stick all my money into Marvel Comic design tea cosies or some shit, so if I can get it out of the bank and into any kind of fund it'll probably do better than if I just got cash and let it sit around.

Correct me if I'm wrong (which I am, a lot, to be fair), but can't you just transfer it all to your own sipp?

just use tracker funds with little real idea of what I'm doing

That's a far better idea than someone trying to play the market. Trackers are cheaper (some very cheap), and diversify risk relatively effectively without having to do too much about it.

Aegon, tho. I worked there for a bit. Maybe you want to reconsider on that basis...

A quick look at everyone’s pension performance the last 18 months

1 Attachment

Not easily if the employer is still paying into it, I think. Despite the funds not quite being to my tastes my employer match is pretty good so worth sticking with it. I could ask them to pay into a SIPP for me at the same rate I guess

My SIPP seems to be doing ok.

I was already doing a work salary sacrifice scheme for shares which was basically enforced saving so sticking extra in the pension fund is similar just with a longer duration and more chance of fluctuation in the resulting 'saving'. It's going to be hard to be worse off using that scheme.

My SIPP seems to be doing ok.

Similar, it went terrible for a bit but now back in green.

This is why I ignore it. I only look at it when I get an email saying I need to do something to it.

"If you are thinking of doing the Pension Salary sacrifice you cannot chop and change the figure – you need to commit for 12 months to the same value.

If you found after you’d signed up that you really could not afford it we do allow you to cancel but you cannot sign back up to the scheme for 12 months.

You salary cannot go below stat minimum pay but you choose either a set £ value or a % value whichever you prefer."

I think this is what you need to do to get a proper idea of what is going on:

1. find your job contract or emails or employee handbook which will state what the default auto-enrollment pension scheme is. This will be at least 3% from the employer and 5% from you unless you're some sort of weird contractor. That means each year 8% of your current salary before tax is invested in your pension.
   
2. Figure out what you're contributing now. This will probably be the 8% above unless you opted out. If you did opt out, you should almost certainly opt in, because you're throwing away free money (your employer's contribution). ie. you're choosing to have 100% of your salary instead of 103% salary.
   
3. Think about when you want to retire and how much money you will need when you do. For some complete arse-plucked figures if you earn £60k now you will probably be fine on £35k when you're retired with no mortgage and reduced costs from not having to work all the time. Check this thing out for some numbers. Ignore inflation at this stage.
   
4. Work out how much money you need to achieve that income in retirement. You can either have a big pot and sell off a chunk of it each year, or buy an annuity. With the former you get more money but there's a risk it runs out when you're 85 and then you're pretty boned. Annuities are shockingly shit though. As things stand you probably will get the £10k state pension but some people would say not to rely on it being there.
   
5. Work out how much you need to contribute to your pension each year to achieve that pot within the timeframe you want. Try this calculator. Also work out what kind of fund you want as that'll factor in to it with the assumed growth rate. If you're retiring in 5 years don't invest it in highly risky YOLO funds. If you're retiring in 30 years you can pick something that is more risky. Use a growth rate after inflation which will keep all the numbers in 2023 pounds. If the growth rate you're expecting is 6% and long term inflation is 3% then the net growth is 3% so use that in your calculator.
   
6. Work out how you achieve that monthly contribution within the salary sacrifice scheme your employer offers.
   
7. Cry at the results
   
   

Or just pick a big number (like 20%), tell HR that, move all your exisiting pension money into a fund you like the look of, and hope for the best

If you actually do all of that, you've basically sorted it for the rest of your life, so at that point you can completely forget about it

Wow. Nice chunk of info there. Thanks for that. I've asked about the current contribs because they don't add up to me and I'll have a look at the various calculators and stuff and then obviously dump the next round of questions in here..

I've done the moneyhelper calculator and it says I'm all good now at 50% of my current income, without adding any contributions. Congratulations hippy, you have passed pension pot pissing 101.

Obviously now I'm wondering what I've fucked up.

Now... to adjust retirement age to: next week

As in your existing SIPP and pension pot are already big enough to fund half your current income? Smashed it, well done! I'd be trying to retire before 55 if I was in that position...

I'm just trying to survive to 55 first.

Nah, I mean at current position, I can afford to retire at retirement age. I'd have to lift my game a bit if I wanted to retire early. Also depends how you define retirement. My old man has retired 3 times I think and is still working happily 70+. I'd love to stop work and be a bum for the rest of my life but I'm not sure how minimal I can go lifestyle-wise. Midget upkeep is spendy.

How are you earning at the moment? If you're through a limited, pension contributions have the additional benefit of reducing corporation tax and NI contributions.

PAYE. I have done the contracting dance.

Other than that, it's all about what realistic but unknown returns you can make on a pension fund (less costs), versus how much you can reduce a (known-ish) mortgage, and your relative risk appetite.

I'd imagined the tax free nature of pension contributions as part of salary sacrifice and the 25% tax free nature of pension withdrawal somewhat negates the 'will it return more than mortgage debt will cost you' equation. Perhaps I'm wrong, I haven't done the math, just an assumption.

Any reason why you can't do both to some extent?

No, but I don't have a whole lot left over at the end of the month, so it would be spread thinly.

This may be a stupid question but as someone who is in the following situation:

• Fixed mortgage for another 3 years at 1.5x% (around 60% LTV)
  
• Monthly SIPP investments + monthly work pension investments
  
• Monthly S&S ISA investments
  
  

I'm not sure how to go about the next period until the end of the fixed mortgage. Should I continue to pay the minimum and invest the rest on the basis that the expected return should be greater over the next 5 years or should I look into overpayments?

I'm putting it in fixed rate accounts and will pay off a lump when remortgaging.

The only reason to overpay is if you fear you might lack willpower to stock to the plan, and end up spending it.

I wouldn't invest any money I'm going to need in only 3 years time.

If you expect to be able to get more than 1.5% on your investments (which seems very likely, given the interest rate) and you are disciplined enough to not spend the savings, then it might make sense to put the money somewhere other than mortgage overpayments

The only reason to overpay is if you fear you might lack willpower

I overpaid because it saved me money on the mortgage without needing to make money by using the money some other way. It's almost a sure thing rather than hoping your investments increase in value, which looking at recent history you'd be in trouble with.

This is probably truer now that interest rates are higher. Sure you can make more money with investments but your mortgage will cost you more.

But if you have 3yrs left on a 1.5% mortgage and you can leave money in a savings account and get about 5% then that’s not particularly risky

Yeah, I guess. I was talking about the whole duration of my mortgage though - I just wanted that debt gone. I guess I'm more risk averse when it comes to this kind of thing and I also have no interest (pardon the pun) in managing investments to ensure I'm not fucked over when the last 3 years happen.

Also, if you pay the mortgage off sooner, then afterwards you will have more money to invest, maybe when rates are better, no?