Pensions – Why are they so bad?

It’s that time of year when  I receive pension statements. I do wonder what the point of a pension is as every year their value may increase (a little) but their payout forecast just drops and drops each year.

This year my paid up personal pension is quoting a ‘massive’ £283 PER YEAR pension when I reach 60 – Wow that is really going to give me enough to live off! ** I did look at re-starting this pension but they want me to get a solicitor to sign off forms to prove my identity!? WTF ?! They know where I live, they have history on me and can check the DD details and ID check me electronically – I still pay contributions to them for something else – so why do I need to provide all this info, just so I can restart monthly payments as a fixed rate ( due to their rules(?) I can only pay in the amount that I was when I stopped it. Which is a pittance anyway).

I stopped it because it was a pension I took out when I first started working and my employer at the time did not have a pension scheme. I then moved job and wanted to join my new employer’s really good company scheme (it was a final salary!) – at that time you couldn’t have two pensions on the go so I had to stop this one. My final-salary pension is now deferred as I have left that employer and I know what that will pay out from 65, they currently guarantee me an annual value. Can I be sure it will still be there when I reach 65 – possibly not if BHS, Hoover, etc… are anything to go by?

The next pension statement was for my personal pension (a stakeholder) which I still contribute to, a small but regular payment. If I retire at 55 (I set the age to this when I opened it to give me flexibility to drawn from that age onwards if I wanted to), I will receive a whole £850 PER YEAR. Not even enough to pay my annual council tax never mind monthly living costs.

The next pension statement received is from my current employer pension scheme. Now, this scheme is a money-purchase – I don’t know anyone who has an active final-salary one now. It’s value is open to fluctuation and heavy interpretation anyway. If I continue to work for my present employer until I reach 65 (which I very much doubt – given the fact that I am looking to leave), I can potentially claim a pension of £3,000 PER YEAR.

I don’t get to claim my state pension until 67 due to the government changes, which could change again between now and then. I also cannot get a figure out of DWP either as due to opt-out years, my state pension value will have a deduction due to SERPs opt-out years, which they will not calculate until I actually reach state pension age. So all I know is that it will be less than £8k per year as I will have opt-out deductions.

That’s why I am so glad I am investing separately to gain some control over my future with savings via ISAs and a SIPP, I can see the value when I want to and do something about it. Well, at least try to do something about it! 🙂

 

May – Monthly Update

Wow – the year seems to be flying by and I have a bank holiday weekend ahead of me.

I have just been doing my monthly summary and can see that this month has been a bit heavy on expenses, mainly paying for my summer holiday which is only a few weeks away now and some seasonal spending.

At last, my SIPP is showing a profit! the funds have been slowly rising over the past month and they have now started to offset the original investment buy/costs. I have also received the tax reclaim this month  – I didnt realise it would take so long to get the tax reclaim into the account. My pensions are quick at claiming and investing the tax reclaim – but not this SIPP company. It makes me wonder if there is a ‘slight delay’ to enable them to accrue some interest during transit?

Anyhow, with the sun out and the warm weather, it has lightened my mood which is gratefully received and required. I am counting down to my holiday and time away from my workplace. ‘The Man’ is tiresome and so full of office politics at the moment it might as well be them participating in the general election. Things are now accumulating on the project I am working on and the findings are not good. It may mean that the project is canned, if so, they have no need for me long-term so my time there could come to an end quicker than I thought. Which is fine, that’s the reason for the FI fund – to not be worried about the need to work. Its about having choices and the ability to live without being tied to ‘The Man’. Some independence and self-sufficiency.

My FI fund is looking good at the end of this month and is almost back to the level it was at when I took my ‘FI break’. Pension funds are looking good, making good gains and the SIPP is now looking healthier.

I have increased my ISA monthly savings amount to take advantage of the new allowances. Being able to put upto £20k into an ISA will really help me as I can move money that is idling in savings accounts into the ISA an earn some better income.

I also want to sell some of my non-tax sheltered shares and move the money into pension, SIPP and ISA accounts and the new allowances give me the freedom to do this.

Happy May bank holiday everyone, I am off to enjoy the sun.

May Progress

After my last post, I have had another check on progress and updated my accounts. I am still saving 60% of my income but it isn’t making much of a dent on my net worth, this still remains flat.

When I first started off on this path, the growth was rapid and a lot of that was down to making changes to behaviour and spending that meant that I made quite big impacts on my net worth. These have now tailed off.

I hit a wall 2 years ago when I was made redundant for the second time. I took the first (and only job) offered so I could retain an income stream. Everyone else was getting a job and it would have looked bad if I hadn’t had something when we all ended our redundancy notice. It was a bad mistake, the place didn’t fit and I suffered it for 6 months to see if it would change but it didn’t so I just left. I had no job but felt better than sitting in a horrid work environment. I decided to have an ‘FI holiday’ and took 6 months off (3 months off as FI + 3 months actively job-seeking) before I was back in employment.

My net worth did drop a bit during my ‘FI holiday’ as I used my funds to live.  (Well, my dividends were used as income! I did not use any capital). When I eventually found a job and starting earning again, my fund had lost some value but now was the time to grow it again.

Over the past year I have seen that my net worth has fluctuated. After the drop, I expected it to pick up but the external factors of Brexit and economic instability mean that my fund has not grown at the same rate that it once did. My dividend yields have dropped this year. Dividends within my ISA and SIPP are automatically re-invested but I am not making the same gains as I once was.

I am investing into my ISA, SIPP & pensions to use tax free allowances on a monthly basis and then any surplus into cash savings. I am considering pumping all the surplus cash into my SIPP and pensions but it means I cannot access this until I am 55.

My SIPP is currently recording a loss. I had opened the account by transferring two very small company pension funds (less than £2.5k each) into this account to consolidate them, then did a bulk buy to get the money back into the market, just as their prices dropped. I can see that the account is still in the red but this loss is reducing each week so it should move into profit by the end of the year. I am now topping up this SIPP account. While I have an income I will push money into saving hard.

The path seems to be faltering but I will try to continue to aim for the line. It seems so close and yet so far away too.

I am looking at side hustles and other income stream opportunities so I can move away from working for ‘The Man’ and working for myself with the support of an FI fund.

I am looking at any options so if anyone has any suggestions let me know…

 

 

HoneyPot Progress

I have spent some time this weekend reviewing where I am. How is my HoneyPot doing? When will I reach FI? I could possibly say I am FIRE now. The fund is looking pretty good and I am now seeing a positive increase rather than a negative return when I compare LY / TY monthly figures.

I am pushing spare money into my newly opened SIPP and I am currently showing a loss but I think that is due to the fees and the drop in my selected fund prices over the past few weeks. I will “keep calm and carry on”. This is a long term savings path and I need to keep saving hard and making the most of the tax free accounts available to me. While I am still working I want to take advantage of any tax breaks and plough spare cash in to useful diverse savings areas so I can feel happy with my HoneyPot over the long term.

It needs to last me at least until I can draw my state and final salary pension when I am 67 – if they still exist then? Can never tell what will happen with pensions either company or state ones.

To get a full state pension, I still need to contribute a few more years of NI into the state pot.

I have been browsing the job sites for any interesting jobs but nothing about. I will continue to browse and start rattling a few of my network contacts. I am thinking of changing direction just need to find the right thing. I am reading up on how others have changed direction and what the pros/cons have been so I can try and work out the best path to take so I don’t make the same mistakes along the way.

I don’t want a job in London and so its a bit sparse in my immediate vicinity. I will continue to browse. I have heard that someone I used to work with has been head-hunted and has been offered a job where they can work from home most of the time. I read the US FIRE blogs and plenty of them have managed to find a similar home-based role. I could do with something like that, with the odd trip out to face-to-face meetings.

Something similar to an old job I had and enjoyed where I was in a sense ‘field’ working and able to work from different work locations as well as home. It allowed me to ‘mix it up’ and vary the people I met and worked with and feel like I was ‘making the difference’ that provides that ‘self-worth’ that I crave.

I will continue to read around the blogs and research options and see what fits. I need to end the weekend on a positive note! Onward and Upward on the FIRE trail.

April Progress

Can’t believe its nearly the end of April already. I have received my tax return notice and will have to start collating all the info for submission. Now that savings interest is paid gross I have to see what tax I may need to pay and also what will be due on taxable dividends.

And what do you mean, we now have an general election on the 8th June. Ouch! Its bad enough with the local council ones. I am not a political animal and don’t really like the media coverage and hype that is being stirred up about Brexit. I have been trying to avoid this by evaluating things more closer to home.

I have been reviewing my work life at the moment as the job is getting toxic. I have been reading ournextlife.com and it makes interesting reading. I love the positivity and the analysis of the journey and the thoughts it provokes.  I particularly like the article on self worth & validation. I am someone who likes to feel that I am making a difference at work and that I am contributing to make positive steps for others. Getting a thanks for making a difference is more important to me than anything and gives me the self worth and fulfilment that has made going to work enjoyable and worthy.  That has been the draw rather than climbing the career ladder. I guess I have fallen into the “live to work” trap and in the past enjoyed my jobs and feeling rewarded by the positive comments from others for work delivered and achieved….making a difference….be that as a team or individual… I have received promotions along the way but have not wanted to strive for the higher levels of management and the heady heights of the career ladder.

In my current job that making a difference feeling is missing. Work is not providing any internal or external validation for me. It is not something that is present in the tasks I am performing at the moment. My contributions seem to be constantly questioned. I am being challenged at every turn and my every move interrogated to the point I now feel that I question my own ability to actually do the job. Micromanagement is kicking in big time due the the office politics, people trying to protect their own backs and putting me in the ‘scapegoat’ situation. Its a sorry state of affairs when a job turns sour. The politics of office life raises its sickly head and the dark clouds of a toxic environment start to billow around you. It has hit home harder his week as a work colleague has handed in their notice. They are not happy with their role and have found something new to move to, which will hopefully be better for them. I hope it works out well for them and also makes me realise I need to do something about my situation. I need to plan my escape.

Leaving work would resolve the toxic element but where would I find the self worth and the validation I seek? I have an innate passion for doing a good job and put my heart and soul into things. Where would I find that in a new job and eventually in FIRE?

I am not in FIRE territory yet, still on the journey with all its twists and turns. I suppose I could quit work and live off my savings for a while then look for something new.  A change of direction is needed. I did that the other year when the previous job I accepted turned out to be ‘not as advertised’. I jumped into a job too quickly after my redundancy and paid the price. What I do seem to feel is that the role I do just doesn’t fit me any more. Being a punchbag for others to verbally abuse and stress out is hard on my health. Headaches and pains abound and I wonder what it is really doing to my underlying health. As I walk into work I can feel the heavy chains wrap themselves around my body and a vice like grip squeeze the life out of my brain. I am the middle man with no ability to control or affect the situation. I don’t have that ‘teflon’ coating that seems to be required in this role, I am worn down and generally demoralised by the whole working world.

It’s making me turn the wrong way and make bad decisions. I am walking into stupid situations and making silly mistakes because my brain has disengaged. Stupid me!

I know I am ranting but need to let off the steam. An outlet for my anger is required and I need to calm down and get focused on moving on, moving forward. Frustration that I cannot expect being FIRE to completely resolve, how will it provide the validation I seek going forward. I need to find a hustle that gives me some focus and some self-worth. That need to achieve and get a feedback loop. That motivation and feeling of being valued has to come from somewhere, now in my working life and once I reach FIRE?

Where do I find it? When will I find it?

April Fool

The 1st April all ready. April Fool’s day in the UK and I wonder what will appear in the media today….

I have just spend a few hours doing my monthly review to see where I am financially. Its been a quiet month really, I have been topping up my ISA and SIPP with any spare money to reach any tax year limits where possible and I have been re-balancing my funds. So sold funds and bought others to try and diversify and re-balance my accounts as I hold too many UK funds and need to move some into Global funds. In the normal way for me, the funds I have moved into have dropped in value but I hope they will pick up and move back into the black in the future.

I don’t really like buying funds at this time of year as I feel that the funds get overheated as everyone is trying to use up their allowances so there is a spike.  I will continue to review the re-balance activity over the following few months to smooth out the buying peaks.

Based on this month last year my net worth is up. Based on last month, I am down. The volatility in the markets continues and my investments seem to roller coaster rather than ‘bob’ along lightly. The sooner Brexit gets more settled the better.

I managed to fit in a long weekend holiday. A motorbike trip with my partner to Whitby to catch the sunshine. A nice ride round the York moors, a visit to Goathland and fish and chips in Whitby itself. The dry weather and blue skies were great. Although others had the same idea, so Whitby was heaving with people, cars queuing to get into the harbour area. Some very relaxing cafe stops in small villages on the York moors and pub meals in the evenings helped to re-charge the batteries. Being able to sit outside with a pint and take in the warm sunshine and views was great for my sanity. I need a few more weekends like this!

I needed the break from work as my head is about to explode. Why? Because my head feels like a football, being kicked between multiple managers (including my boss) as the office politics kicks in big time. I have receive multiple ‘verbal battering’ in meetings from various managers over the past month because I am being used as a deflection tactic by others and the scapegoat for other people’s inadequacies and failings. I have been well and truly hung out to dry by my boss too, so much for their comments about ‘having my back and supporting me’. They well and truly stabbed me in the back then tried to dress the wound with empty words afterwards. From what I can glean from others in the company, this scenario happened 2 years ago and resulted in my predecessor leaving! (as they were receiving the same treatment and decided that enough was enough).

The sooner I can quit this current career the better. It is no good for my health and I am fed up of being treated like dirt that can be shouted at and generally poorly treated. My head hurts.

I have been expected to put in extra hours this month and I have just continued to be barracked during this time too. I know I don’t work the kind of hours that some others do, I am not working a 12 hour day (work + commute) but to be fair I have done that and I feel I’ve had enough of it. “Been there, done that, got the t-shirt“, I just want a better work-life balance now. I have worked the long hours through my 20s and 30s and put in the effort and received no reward for it – other than to actually lose my job to redundancy. I want to slow down and get off the high-speed train and take a slower journey now that enables me to stop and do other things along the way.

I am being made to feel that I am inadequate and incapable of doing my job. The pressure and expectation is being increased and I am expected to perform. Well, I think I have had enough. My confidence has been squashed to nothing, I am now internally questioning my ability to do the job at all. My burnout limits just don’t seem to be at the levels they once were.

That is why I am on this journey to FI so I can have choices. To gain it I need to stick at this current job a bit longer and continue to save hard. I am so near and yet so far away…….

The Good / Bad News

The Good News:

I have been slugging away on getting garden chores completed as I get ready for the removal of the council garden collection service at the end of the month. I know – not really an FI thing as such – but it is a frugal living thing! Why pay £40 pa when you don’t need to? It’s free therapy too.

I am nearly there now and ticking off the items on the to-do list quite swiftly. Its been good for my sanity too as the workplace is a real bind at the moment. Basically office politics is flying around big time with anger, frustration and back-stabbing going on. This just spurs me on to achieve FI and be able to walk away from all this stupid nonsense once and for all. I was on the receiving end of anger and frustrations last week just because I was given the short straw of delivering bad news, I was presented to the firing squad and bombarded with barbed words and fury. I am alive and still with a job at the moment.

Ah,well back to the garden and watching the lovely robins that are currently residing in the trees. I have planted up the free seeds I have received from the Woodland trust and have planted up all the herbs and chillies to supply flavourings for my food creations this year. I have stored a load of chillies from last year’s plant so if this year’s crop is as big as last year I will be onto a winner.

The Bad News

The budget – I have avoided the news this week and have now just caught up by reading Monevator’s post on the budget. What I wasn’t aware of is the change in Dividend Allowance. I heard all the noise about self-employed NI but not this sneaking in. I am affected by this as I do generate £6k of dividend income outside a tax wrapper. Its basically, my old employer’s shares which I have kept. Up to now this hasn’t been much of a problem. I was accepting of the £5k limit for this tax year – but going down to £2k is not so good. I cannot sell down the shares fast enough without incurring CGT. I should have sold the shares and diversified earlier but  have been nostalgically holding on to them as they have been providing a good return, 4%+ over the past 3 years as well as good double-digit growth and funding my  6 month job-free gap.

I just need to offset this with changes in other areas and sell some and move this into my SIPP. I was reluctant to do this as I cannot then access their value again unto I reach 55. That’s the government for you, they mess up the savings rates then as people move into shares, they increase the taxes on that too.

It’s like diesel vehicles – OK, ignoring the air pollution bit for a minute – years ago, diesel fuel was considerably cheaper than petrol to buy and the MPG gap was considerable so for those travelling high mileage each year, a diesel car was a no-brainer choice. Diesel cars held their value due to this too. Petrol cars were for the city types/short distance commutes and diesels for those who travelled longer distances. Move on a few years and diesels were promoted heavily to everyone and the volumes on the roads grew until every city is full of them – and being used or short distance trips. As promotion of diesel continued, the price of diesel spiralled upwards until it is now priced higher than petrol and the MPG gap has narrowed substantially. Thanks to all that recent news coverage on air pollution, anyone with a diesel car is now suffering a loss in resale value and being seen as a bad citizen. They have been stung by the hype. If you now look at buying a hybrid or electric car -watch out as that is the next spin and hype zone ready for reaping in a few years time when it has reached a good ‘market value’.

Enough of my ranting and off to do some more chores while the rain has stopped.