33 Years Old

A question about : 33 Years Old

Hi,

Hoping I can get a bit of advice. Ive had a look online, and read through the forums, and tbh I feel none the wiser!

Im not sure what pension scheme I should do, so below is my history and my situation:

History/Background

Pension History

I have recently left Asda who had a pension scheme, they matched my contributions (I was only with them for 2 years). My new employer only has the NEST scheme, and I am presuming that they only put in the current minimum of 1% (I have emailed them for confirmation) - I have only been with them for 3 months.

I now have a couple pensions from previous employers:

1/. M&S - I had a pension with these when I was younger, as I did 7 years with them from when I turned 16. Im not sure what was paid in, or how much it was, or if it started when I was 16?

2/. Asda - Paid in for 2 years at a total of 6% (Ј3,720 over 2 years)

3/. The New NEST auto enrolment scheme - Currently only at the minimum, as I have only just started and was not sure what to do.

Property History

I currently have 2 properties. The first is a flat which was purchased jointly with my mother, and was bought from the council at a discounted rate. I have owned this property now for 7 years. The outstanding Mortgage balance is Ј36,400 with Mortgage Payments of Ј248 per month - Approx Ј15k equity). The property is fully mine with my mum, she just helped me purchase it as she was the council tenant, and a the time it was the only way that I could buy it. She would want some money if I ever sold it, but I do not have any intentions of ever selling it.

The second property has been purchased in conjunction with my Mrs, and was purchased in April 2014.

Ultimately I have always thought about purchasing a few properties as my retirement nest egg, but have only just got to the financial stage where I am debt free (loans/credit cards etc) and have some disposable income.

Financial History

I have in the last few months FINALLY become debt free. When I was younger I made the foolish mistake of getting into mountains of debt. I finally went through the CCCS approx 5 years ago, and they stopped my interest and I cleared my debt. Unfortunately my credit history is nothing.

I currently earn Ј30k per year. I have a personal disposable income now of Ј500 per month after all bills, food, fuel, holiday savings, xmas savings etc etc etc.

Questions

1/. Can I combine my previous Pensions together, as they must have some sort of money in them, or leave them as they are?

2/. Should I continue to put money into the NEST pension scheme (but obviously increase my % payments)

3/. Would I be better off instead putting the money that I would use for my pension into overpaying my mortgage on the 1st property to pay it off sooner. Once paid off then look into other properties?

4/. Any other options that I could consider?

Long post, but I would really appreciate some advice/input!

Best answers:

• Deferred member of M&S Defined Benefit pension scheme?
  https://www.mandspensionscheme.com/ Click on Deferred Members.
  You have your statement of preserved benefits?
  
  Are you able to leave your Asda benefits within the scheme or are you required to transfer out?
  https://www.nestpensions.org.uk/schem...or-savers.html
  Re new state pension https://www.gov.uk/new-state-pension/overview
  Have you thought of saving in a stocks and shares ISA?
  Are you and your mother joint tenants or tenants-in-common of the ex-council property?
  Would you benefit from the advice of an IFA?
  https://www.unbiased.co.uk/
• Thanks for the reply. A few answers below:
  Quote:
• Why would you want to transfer out of the M&S pension scheme?
  
  You did join the scheme before 31 Mar 2002?
  
  If so, you have a deferred defined benefits pension https://www.moneyadviceservice.org.u...enefit-schemes
  If so, do you have your statement of deferred benefits?
  Any receiving scheme would almost certainly require you to have taken advice from an IFA qualified in pension transfers.
  The state pension is the state pension - assuming you are employed you contribute through your NI contributions! You don't have a choice!
  How do you and your mother own the property? See https://www.actlegal.co.uk/faq/buying-house-faqs/35/
  Make sure that you see an independent financial adviser with the appropriate qualifications to advise on pensions.
• If you have a DB pension with M&S, you want to leave it where it is to grow. Not to transfer it. Get a statement of benefits, make sure all your old pensions give you a current statement, and make sure they have your address.
  And please re read and answer the questions above as the answers will help you?
• Thanks for the advice:
  Quote:
• If you are joint tenants rather than tenants in common, in the event of the death of one of you, the property passes immediately into the possession of the other, regardless of any will.
  If this is not what you want, you may prefer to sever the joint tenancy in favour of a TIC arrangement.
• Cheers,
  Im aware of that and have no concerns.
  With regard to the pension vs mortgage over payments:
  My current mortgage has 18 years remaining with payments of Ј240 (after getting new deal today).
  Ј100 Example Over 18 year Period (Current mortgage term)
  Overpaying Vs Pension
  If I overpay Ј100 per month, this would result in the mortgage being paid off 7 years early, saving Ј7686 in interest payments. This would mean that in 11 years time I would have a property worth approx Ј60k. (Conservative estimate as similar neighbour property sold for Ј50k in 2011). This would be a gain of Ј28k in 11 years (Ј212 per month over the 11 years).
  The mortgage option would then give me Ј680 to re-invest after the 11 year period (Ј100 month over-payment, Ј240 mortgage payment, Ј340 rental income, so in theory after the 11 year period I would have a property worth Ј60k + Ј680 monthly.
  Over the 11 year to 18 year period this would be Ј57,120, plus the value of the property Ј60k (Keeping it at the same price for simplicity terms).
  The total for this 18 year period would then be a net of Ј117,120 (Ј542 per month over 18 years).
  If this was then applied to a retirement of 68 years old (in line with the state for simplicity) this would be a net figure of Ј255,840 (24 years at Ј680 month + Ј60k property).
  The option here would be that the Ј680 monthly could then be invested in purchasing another property at year 11, which would result in possible additional income from the 2nd property.
  --------------------------------------------------------------------------
  Pension Vs Overpaying
  Ј100 per month + Ј24 per month tax relief + Ј25 per month NEST company additional = Ј149 per month.
  18 years Pension Payments = Ј32,184. Average investment return is 4.4%, which would equate to Ј33,600. Add the completed property value of Ј60k would net at Ј93,600 (Ј433 per month over 18 years).
  If this was then applied to a retirement of 68 years old (in line with the state for simplicity) this would be a net figure of Ј239,094 (17 years at Ј680 month, + Ј136 month tax relief + Ј25 NEST * 4.4% return + Ј60k property).
  --------------------------------------------------------------------------
  Same basic calculation at Ј200 (Over 18 years using above principle):
  Overpaying Vs Pension = Ј141,600 - Mortgage cleared in 8 years
  Pension Vs Overpaying = Ј114,648
  Any input with regards to this line of thinking greatly appreciated!
• Just giving a gentle bump.....
  Has anyone any feedback on my thoughts?
• Average pension return is 4.4% per year - you've applied it over 18 years instead.
• Ahhhhhh, thank you, so each year will increase by 4.4%! Of course!
  I will re-calculate!
  Thank you
• Well, over the last few weeks I have been having a good think about my retirement situation. Probably 16 years to late to be honest!!
  Retirement is all about how you can guarantee your income when you stop working. If I want to continue with my current standard of living it has been caculated that I need to save Ј5000 a year, for the next 36 years. The reality of the matter is that is not an option.
  So, my retirement plan is involving long term property purchases, and using their subsequent rental income once their mortgages have been competed.
  (Figures are all low estimates using todays money, and would likely adjust with inflation over the years).
  * My state pension would be Ј590 per month.
  * I currently own one property, which would give me approx Ј350-Ј400 a month income.
  I intend on purchasing 2 more properties now, on Buy-To-Let mortgages which would raise once mortgages completed, Ј350/Ј400 each.
  This would give a potential base income of Ј1,640 - Ј1,790 before any tax per month.
  The properties in question will be low value, so minimal risk. I have been analysing the market area in which I am to operate in, along with the rental requirements of that area. My objective is long term, Ido not want to try and be a property millionaire etc, I have a good job at the moment. This option will however enable me to have the opportunity to retire at 55 instead of the current state age of 68.
• You don't get tax relief on property purchases.
  The assets are illiquid and an all eggs in one basket investment approach.
  You get clobbered for CGT on disposal of assets.
  Being an elderly landlord to multiple tenants may be challenging.
  Good luck!