I want to save towards my retirement and for current life stability but where should I start?

20 July 2021

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Question by Catherine

I want to save towards my retirement and for current life stability but don't know where to start. I'm 38, I currently have no debt (other than student loans) though I have just clawed my way out of about 6k of credit card debt which I really don't want to fall back into. My earnings are fairly low - below the personal tax threshold due to poor health and cancer treatment 3 years ago. I'm a self-employed artist so I work in a fairly low-paid field with lots of insecure/short-term work. Me and my partner own our flat in London and my partner pays the mortgage as I contributed a large deposit. I have barely paid into a pension - maybe just for 2 years while I was working part time/ad hoc hours.

I am about to receive a small lump sum of 10k and would like to invest this wisely. Part of me is worried about locking it away as I have no savings to fall back on. But I do really want to start making pension contributions or some saving for retirement. I'm conscious I have gaps in my NI contributions, again due to periods of illness.

I'm not sure whether paying into a pension is the best step right now as I won't get the basic tax payer contribution or whether I should go for something like a Lifetime ISA or whether I should invest some of the money so it is accessible if I need it and as soon I start paying basic rate tax then start paying into a pension. Any help would be much appreciated!

Answered by Tamsin Caine

Hi Catherine, thanks for your question.

It is a good idea to hold 6 to 12 months of your expenditure needs in cash. So I would suggest that you use some of the lump some for this. This is your emergency fund - I know lots of people don't like this term for it but I think it stops you using the cash for every day things! Then think about how much you might want to invest.

If you put money in a pension, you cannot touch it until you are at least 57, but that can be a good thing! Even without employer contributions, you will receive basic rate tax relief, which is an extra £20 for every £80 you invest. Start small and be consistent. Make sure you can commit to the figure you choose to invest monthly, in you are thinking of putting money into a pension regularly.

I hope this helps.

Answered by

Tamsin Caine

Director of financial planning

I’m a single mum of two wonderful teenagers. I divorced in 2017 and grew up from the age of 12 with divorced parents. Following these experiences and realising how my financial planning experience could help, I founded Smart Divorce in 2018.