At the age of 34 Keira Roth worried that she had left it a little late to start saving. In the last five years she has started contributing to both a pension and stocks and shares ISA, but she wishes she had put more aside when she started working.
“It would have been better to have started saving in my early 20s. But I can’t put the clock back now,” she said.
Like many younger people, Roth found it difficult to save, as she had very little spare cash and was not knowledgeable about pensions and finance.
Roth explains: “One of my first jobs was working for the publishers EMAP. At the time they had a really good pension, where the company contributed a significant percentage of your salary into the scheme. But for some daft reason I never got around to signing up.
“Pensions didn’t seem to be anything I needed to worry about then. Now, of course, I think what an idiot to have not taken those contributions that were available.”
Auto-enrolment Pennies Stack Up
Roth, who lives in Buckinghamshire with her partner, now juggles a number of part-time jobs – none of which offer quite so generous pension benefits. She is the warden of a Quaker building and also has a career in digital fundraising and campaigning. Roth has recently also set up her own technology company, alongside her other employment.
Thanks to the pension reforms in recent years she is now automatically enrolled into a pension with the digital company she works for.
She says: “Every month contributions are automatically deducted through my pay-as-you-earn salary. They are invested in a NEST pension scheme. It’s not a huge amount at present, but hopefully if I keep investing this will grow into a reasonable nest-egg over time.”
The NEST Scheme was set up by the Government, as a default pension scheme for workplaces who did not have the time or inclination to set up their own.
All companies in the UK have to provide pension for staff now, thanks to auto-enrolment rules. Many have opted for the NEST scheme because there are no minimum contributions, so it’s suitable for those who have workers on lower wages, or part-time earnings.
Rather than select individual funds, workers like Roth, have their money automatically invested in a retirement date fund. This assumes that people will take their money at the age of 65, or their State Pension age, whichever is higher. Money is moved from higher risk investments into lower risk assets as people approach this date. Most of the assets are in lower cost passive funds.
ISA Investing for Property Purchase
Elsewhere, Roth has started saving into an ISA, which she hopes at some point will enable her to get a foot on the housing ladder.
She says: “One of advantages of the warden’s job is that it comes with its own flat. So this has certainly helped savings-wise.”
Roth would like to buy a flat to rent out while she is living in her current accommodation. This would give her a foothold in the property market, and she hopes to benefit from future house price gains. She adds: “It’s difficult being a first-time buyer; mortgages for first-time buyers looking for a buy-to-let seem few and far between.”
Passive Funds and Premium Bonds
Roth left the construction of her ISA portfolio to the professionals, as she felt “a little daunted by choosing individual funds”.
She chose to open an account with Nutmeg, selecting one of their managed portfolios.
Roth opted for one of the higher risk portfolios, but investing hasn’t been a smooth ride. She explains: “For the first couple of years, the value of my investments seemed to fall. I was tempted to stop investing, or switch my money elsewhere. But I had to tell myself that this was a long-term investment and that ups and downs were inevitable. It’s just off-putting if you start off with the downs.”
She kept the monthly direct debit rolling and tried not to look at the balance too often, and her patience has been rewarded, with performance picking up over the past 12 months.
Roth says: “I wasn’t particularly happy with the result of the EU referendum, but it’s clearly not affected my investments too much. Since them the portfolio has been doing really well and over all I’ve made about a 10% return on my money.”
Elsewhere Roth also has “substantial” number of Premium Bonds, reflecting: “I probably have too much really, as the returns are pretty non-existent.” However, she points out that starting her own business and juggling paid employment means that she does need access to cash savings periodically.
“I know my money is safe, and I can get at it if I need to. It seems to me that the returns are not much different to keeping them in a bank account, or cash ISA, but here, there’s always the possibility of winning one of the bigger prizes.” As her business moves onto a more even footing Roth may channel some of these Premium Bond savings into her ISA.
