(tax relief plus pension investment growth) vs (cost of borrowing interest plus increase in property value)at 40% tax relief I would be looking at building a secure pension early - it will be there later even if you have to stop work for any reasonalso worth considering what can be passed on if you die
Thought for a second you were going to drop that classic George Best line: ''I spent a lot of money on booze, birds, and fast cars. The rest I just squandered''.
It all depends on your circumstances but I would consider that, although pensions are important, they're a contingency for retirement and the money only becomes available to you at that point - a point at which your kids are likely to be independent or near-independent and you'll have paid off your mortgage.The money might grow more in a pension, but it might have more value in your life by spending it now on housing, preparing to start a family etc.If your income is >£50k then you probably have enough to do some pension catching-up and be doing some mortgage overpayments/saving simultaneously, it doesn't have to be one or the other.(I've assumed you're planning on having kids in the next 5 years because I think I've heard you mention that. I could be wrong).
You're not far away from me are you? If so Rog Hindle (the smartest dressed climber you'll ever meet) would be a good starting point for pensions advice.He also pointed me to someone for mortgage advice (after Shark's recommendation that was great retired) who has been brilliant; Peter Mullderig (the spelling may be off but I can dig out details).
One of your port of calls for good info on the ins and outs of pensions, mortgages, SIPS and ISAs should definitely be Moneyvator. Their content is top notch and you'll learn a ton of useful stuff there. Some of the contributors to the comments are very clued-up. Try this one for starters: https://monevator.com/sipps-vs-isas-best-pension-vehicle/Don't disregard your £20k ISA - if you think you might want to stop full time work before you're able to draw your private pension then ISA's are great to bridge the gap between the end of earning income and starting to draw income from a private pension, as ISA's can be drawn from whenever you want. Depending on needs and wants you could split your contributions between pension/ISA for a time. There is also a way to get your full £20k ISA allowance every year, over the long term, without having a new £20k each year, if you're in the position of being able to open an offset mortgage. Worth considering, especially for tax-sheltering any possible inheritance lump-sums in the far future. Obvs SIPPS and ISA require investing commitment and it can be overwhelming working out which fund to put money in. Again Moneyvator is your friend for useful information on tracker funds if you do decide to go down the SIPP route. A mistake some people make is trying to actively pick a fund theme - the general advice is don't. The no-brainer is to make regular auto-contributions into a global index tracker type fund with the lowest ongoing charge possible, and let global capitalism get to work compounding your money over the long term. That's not advice. As others have said, if you're 40% taxpayer then the pension is virtually a no-brainer. It's impossible to say what income tax rates will be in 30- years from now but you'll possibly/probably not be withdrawing your pension income at 40% income tax, so it's a deferred benefit on the way in and a possible 20% tax saving on the way out at current rates.
It's normal for ordinary professional people of my generation and the preceding one to 'have it all'. Owning a house, had a family, have a good works pension, extensive use of PEPs and ISAs, no student loans needed paying off (and Uni grants for the less well off). It sure makes expensive mistakes more manageable. I think the young are being screwed and I'd be uncomfortable advising anything too firmly. Pension options are much shittier now compared to my final salary DB pension. Housing looks a bit bubble like right now. ISAs are the same as ever but are risky and currently turbulent (but are less tied up in an emergency than property), cash is going backwards (but we all should have a emergency buffer if we can afford it).Despite all that, the advice above is good.
In a similar position and watching this thread with interest I'm about 5 years older, with 2 young kids and no spare income due to eye-watering childcare costs, but the youngest will be 3 soon so will get 30 free hours and then not long until school, when we'll be laughing. My pension contributions are pretty minimal at the moment but I'm keen to ramp this up and will be really useful to hear the views of those more informed.P.s. Hi James, I remember meeting you at Ceuse about 8 years ago and climbing together a bit. No offence if you don't 😂
Moneyvator is an interesting site, thanks Pete. I’ll have a proper look through it over the next week. I’ve put some savings into my Stock and Shared ISA to use up this years allowance before the tax years ends, though it’s basically just used to hold money at the moment as I’m not confident enough to know what to do. Is there anything that’s very low risk for investments in ISA’s? Low return but almost guaranteed cash/bond kind of stuff. Would be worth me doing that in the interim at the very least…
I’ve a lot to learn in this space. I feel stupid when my own investments go down, but don’t really mind when my current pension goes down as it someone who knows what they are doing is probably working hard to get it to go back up!
As a slight aside, can you claim pension relief for previous tax years?I.e. I didn’t work much this tax year, but for 21/22 i know i what would be available to offset against. At the moment im assuming that the coming tax year will allow me to make contributions, but theres every chance i might not find enough contracts (though i think it should be fine).
Note: I worked in pensiMost private personal pensions will give you a similar service; a spread of pretty typical investments that as you go towards a particular retirement age which you tell them, will move you to less volatile funds in order to aid in retirement planning.
