Money Journies: James from Barnet, an advice sceptic, turns investing evangelist
In our Money Journies series, Investor Weekly talks to readers about how they have started to invest for their futures.
James, from North London is 50 and wants to retire at 68. He runs his own construction business and can save £10,000 per year.
He met with an independent financial advisor and here he shares his story:
“I went through a divorce in my 40s and some business problems that cost me everything really so I am starting again now basically,” he says candidly.
In regards planning for retirement he goes on, “I was sceptical about getting advice, as it seemed to me that I needed to save all I could and hope for the best. But the process of getting a financial plan has done several things for me that I really value. I have peace of mind that there is a number I can get to, which will make retirement OK. I am going to get there quicker through the investment process and it’s all forced me to actually get on with it rather than procrastinating.”
Before James took advice he simply planned to save into a ISA from his high street bank.
However after seeking advice he decided set up a SIPP and invest in a globally diversified portfolio of funds. He also re-evaluated his spending and is pushing to save £12,000 a year.
“I spent £1,000 on advice initially and £500 a year on all the costs of my new pension and I think it’s going to pay me back a hundred times that, literally!”
The tax advantages of paying his construction company dividends into a pension are the first advantage over his ISA plan. “By paying my £12,000 dividends into a SIPP I will get £4,800 tax back each year.”
The second advantage he found is that by choosing to invest in a professionally designed portfolio he expects to average 5% better returns each year through cost savings and better investment performance. “The advisor showed my the last 5 years of the bank’s ISA performance versus my bespoke plan and the results are night and day” said James.
Over an 18 year period, these small differences compound each year, and eventually add up to around £400,000 extra in his pension over his original plan, which dramatically changes his retirement prospects.
James sums it all up, “I feel retirement is something I can look forward to now.”
