Great advice
Fed-up with financial pages always being full of jargon? Meet Holly Mackay, the expert who says it simply
Holly Mackay has worked in the investment industry for 25 years, and is now on a mission to help people make better money choices. As CEO of Boring Money, she spends her time rating the best savings, investment and pension products, and offering straightforward advice.
PENSION PLAN
A One of the most common mistakes in a divorce is to overlook the pension and to focus on the house. But it’s not uncommon for a pension to be worth more than the family home. The average sold price of a house in Nottingham in 2023 was about £260,000*. However, many people in their 50s have pensions that are substantially larger than this, particularly those in the public sector.
Any judge will not be interested in who worked hard or did what – the rule of thumb is that all assets built up during a marriage are divided equally. You should ask to see a copy of your husband’s last pension statement and make sure you consider this in the total pool of assets.
BEST INVESTMENT
A Sitting in a current account is seldom the best place for large lump sums of money, so let’s think through some options. One essential we should all aim for is to have at least three months’ salary easily available for those unforeseen emergencies. Interest rates are high now, which is great for savings, so shop around for a good easy access savings account.
Once that’s done, for most of us it’s a trade-off between paying down any debt, or investing into ISAs or a pension. Debt is like fat – there is good debt and bad debt. If you have expensive credit card debt, loans or a mortgage that is 6% or more, these are at the saturated fat end of the scale and should be paid off asap. On the other hand, if you have a mortgage, but this is still fixed at a low-ish rate such as 1 or 2% (from the good old days), then this is good fat (think avocado) and not bad.
Finally, consider your pension. As a midlife, part-time working mum, you may have had career breaks that could mean you’re not in line for the full State Pension. If you search for State Pension forecast online (gov.uk/check-statepension), the Government will do a check and let you know what you’re in line for.
Also, check out your work pension. What are you entitled to? If you pay in an extra amount to the workplace pension, will they match it? This is something many larger employers offer, and it can be a powerful way to boost your savings. If not, it’s easier than ever to set up a personal pension online – maybe your bank has something or a large player such as Aviva may be worth a look? If you’re a basic-rate taxpayer and you pay £8,000 into a pension, you get a tax refund on this balance and so the £8,000 would magically turn into £10,000. That’s free money!
