400 a month for 10 years to invest

Flu_strength_Darren · 16 November 2017 at 10:37PM

I have a good amount of disposable income every month and am basically pi***** it up the wall or giving most of it away to bet 365, this last year I think I've finally grown up financially and at 45 have started looking at retirement I've got a final salary pension, will retire at 55 and have worked out at today's values I'll have 16000 a year to play with, either to transfer or take, a property paid for which I rent out. I have a small pension from SERPS at about 33k I'm looking at doing something better with, my question is what should I do with 400 a month, my dad telling me stocks and shares ISA, my sister a SIPp, me Im looking at a mortgage to rent another property Long term investment not a problem, would like to make the most of this spare cash?

Sarastro · 16 November 2017 at 11:58PM

Welcome to adulthood.

You're lucky to have your defined benefit scheme, otherwise, you'd have very little to retire early on. SIPP would probably be more tax efficient, but ISA more flexible if you want to do something else later in life. Don't assume property beats everything...and income from rental now all taxed (rather than profit from rental being taxed).

atush · 17 November 2017 at 12:09AM

remmber, taking your ension at 55 will see it reduced drastically over scheme age retirement. You lready have a Serps pot of 33K so you need to get more into a DC pension. Thes moneis can be taken (currently) froim age 55 and you cold use these pots to live on from age 55 til you take your DB pension.

So a sipp is a good idea. But I would also consider a S&S isa. You dont have to do just one thing with your money, you can split the money into different areas (3 main ones are cash emergency pot, pensions and S&S isas).

If you already have a cash pot, look at both S&S isa and a Sipp (or PP).

Set your self a budget, incl a leisure spend (which can cover gambling, the pub, night out etc) and stick to it.

kidmugsy · 17 November 2017 at 12:38AM

Flu_strength_Darren wrote: »

I've got a final salary pension, will retire at 55

With most DB pensions you lose a lot of income by taking them early. The "actuarial reduction" could easily be 5% or 6% for each year early.
So a good plan is to build up a money purchase pension and use it to begin with, so deferring drawing the DB pension.

Suppose you save £4800 a year into such a pension for a decade. Suppose you pay basic rate tax. Your £4800 becomes £6000 when the tax relief reaches the provider. Suppose its growth over ten years does nothing better than keep up with inflation. You end up with £60000 index-linked. Now you can draw £15000 tax-free. The remaining £45000 you can draw down at £11k per year for 4 years: that will be tax-free because of your personal allowance. You can play the same game with your existing DC pension after that.

But if the money went into an ISA you'll only have £48000 in your investment, not £60000. So once you've put aside an emergency cash fund the pension contributions look a better bet than the ISA.

Tom99 · 17 November 2017 at 2:40AM

Do you pay marginal tax at 20% or 40%? That makes a big difference when comparing SIPP/ISA/LISA.

crv1963 · 17 November 2017 at 6:17AM

Flu_strength_Darren wrote: »

I have a good amount of disposable income every month and am basically pi***** it up the wall or giving most of it away to bet 365, I've finally grown up financially and at 45 have started looking at retirement I've got a final salary pension, my question is what should I do with 400 a month, my dad telling me stocks and shares ISA, my sister a SIPp, me Im looking at a mortgage to rent another property Long term investment not a problem, would like to make the most of this spare cash?

They are all right, what matters is what is right for you. For us pension (SIPP) is right because of the tax relief but for others locking the money away until 55 soon to be 57 or 58 may be too far in the distance so a S&S ISA may be the best bet. Property to let out may be a sound investment but the tax situation has changed and property values may fall, politicians may interfere further as pressure mounts for them to do something about the housing pressures.

Being diverse is the best idea, you may want to split your savings/ investments as suggested. You have a property to let out so I would look at a mix of emergency fund, S&S ISA so accessible if pushed between a rock and a hard place and a SIPP to take advantage of tax relief for long term growth and the future option of earlier retirement without the need to take a reduction of the DB pension or to have a smaller reduction of it.

The amounts could vary between the pots depending on your overall target for each.

Flu_strength_Darren · 18 November 2017 at 4:02PM

Many thanks for the replies, yes I get a reduction at 55 but not a great deal, I have taken this into account.
My SERPs pension, I have no idea what type only that's it's with standard Life managed fund will this be reduced as well if I took it all at 55, would I be better moving it to a SIPP?

I also own 25k ISH of company shares that I got at a good discount, and am at around 40% profit, historically they rise a few percent a year, but what's already in I have the profit alkready, could I use this better elsewhere, Ur a SIPP, obviously I am carrying on buying then everymonth, 2 year holding period but the 25k is the amount I've had in 2 year alkready.

bigadaj · 18 November 2017 at 5:45PM

Flu_strength_Darren wrote: »

Many thanks for the replies, yes I get a reduction at 55 but not a great deal, I have taken this into account.
My SERPs pension, I have no idea what type only that's it's with standard Life managed fund will this be reduced as well if I took it all at 55, would I be better moving it to a SIPP?

I also own 25k ISH of company shares that I got at a good discount, and am at around 40% profit, historically they rise a few percent a year, but what's already in I have the profit alkready, could I use this better elsewhere, Ur a SIPP, obviously I am carrying on buying then everymonth, 2 year holding period but the 25k is the amount I've had in 2 year alkready.

Normally recommended to sell single company shares as soon as you reasonably can and diversify into funds, it lowers the risk dramatically.

The funds you buy can be within a sipp, isa or unwrapped, you'd get tax relief in the way in with a sipp, be untaxed in the way out with an isa.

400 a month for 10 years to invest

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