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  • FIRST POST
    • AlphaWaves
    • By AlphaWaves 22nd Feb 17, 9:11 PM
    • 2Posts
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    AlphaWaves
    Where to invest 500 per month?
    • #1
    • 22nd Feb 17, 9:11 PM
    Where to invest 500 per month? 22nd Feb 17 at 9:11 PM
    Hi, I am turning to the forum for some advice on where next to invest up to 500 per month?

    I am currently holding:
    BOS Vantage 5k @ 3%
    Nationwide FlexDirect 2.5k @ 5%
    Nationwide FlexPlus 2.5k @ 3%
    TSB Classic 1.5k @ 3%
    Nationwide Regular Saver 500/month @ 5%
    P2P lending 1k @ 3.8%
    Cash ISA 20k @ 0.75%

    I am a higher rate tax payer and the interest on the above non-Isa accounts will exceed my personal interest allowance so any further interest will be taxed at 40%.

    So where is the best place to invest next? Im 30 years old and I have up to 500/month to invest.

    I am already contributing over 25% of my salary to personal pension contributions to maximise the benefit from the 40% tax relief, any further monthly contributions would only attract 20% relief. I have also overpaid my mortgage for the year and this time next year I will be withdrawing some of the cash ISA to pay off the balance leaving me mortgage free.

    I dont have any specific investment goal in mind, but I assume in the next five years I will most likely start a family and/or move to a bigger property, so I anticipate my next choice should be one which is relatively low risk and fairly liquid in case I need access to the money in the next five years. My initial thought is that a SAS ISA with funds heavily weighted in favour of bonds may be ideal so as to shelter any gains from tax and provide a low risk return which should outperform cash savings. Maybe the Vanguard Life Strategy 20? Or are their better investment options to explore first?
Page 1
    • masonic
    • By masonic 22nd Feb 17, 9:48 PM
    • 9,126 Posts
    • 6,273 Thanks
    masonic
    • #2
    • 22nd Feb 17, 9:48 PM
    • #2
    • 22nd Feb 17, 9:48 PM
    I would probably lean towards some more P2P lending (within an IF ISA) before considering bonds. It would be sensible to keep your overall P2P exposure a relatively low percentage of your total balance, say 10%, maybe 15% at a push. I also don't see any mention of the 5% regular savers from First Direct, HSBC, and M&S bank, which would net you 3% after tax.

    The trouble with bonds is that yields are very low and capital values seem more likely to go down rather than up in the next few years.
    • msallen
    • By msallen 23rd Feb 17, 6:12 AM
    • 527 Posts
    • 445 Thanks
    msallen
    • #3
    • 23rd Feb 17, 6:12 AM
    • #3
    • 23rd Feb 17, 6:12 AM
    You seem to imply that all your income above the higher rate limit is going into your pension (as any more would only get 20% relief).

    This being the case then you should be entitled to the full 1000 of tax free interest per year (as long as that 1000 doesn't push you back over the tax threshold again).

    Thats what I do - I pay enough into my pension, that my taxable income comes down to about 40K - that leaves me enough space to earn just under 1K in interest plus some wiggle room for any unexpected income at the end of the tax year. I'll be changing that next tax year to aim for a taxable income of around 42-43K (plus interest).
    • JohnRo
    • By JohnRo 23rd Feb 17, 12:31 PM
    • 2,431 Posts
    • 2,189 Thanks
    JohnRo
    • #4
    • 23rd Feb 17, 12:31 PM
    • #4
    • 23rd Feb 17, 12:31 PM
    As a higher rate tax payer have you considered utilising your maximum premium bond allowance?

    With average luck you'd expect to get a 1.25% annual rate of return (dropping to 1.15% in May) tax free.

    also,

    Why don't you have

    Tesco 3K @ 3% (x2)
    BOS Vantage 5K @ 3% (x2) three in total

    that's another 16K @ 1.8% net

    It's not an Earth shattering return but it's relatively risk free and the capital is guaranteed against everything but inflation.
    Last edited by JohnRo; 23-02-2017 at 12:39 PM.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • xylophone
    • By xylophone 23rd Feb 17, 1:06 PM
    • 23,079 Posts
    • 13,375 Thanks
    xylophone
    • #5
    • 23rd Feb 17, 1:06 PM
    • #5
    • 23rd Feb 17, 1:06 PM
    Tesco 3K @ 3% (x2)
    http://www.tescobank.com/current-accounts/

    In order to best serve our existing customers, we have decided to pause accepting new applications for the time being. In the coming weeks, we will let customers know when they can apply again for the Tesco Bank Current Account.
    • AlphaWaves
    • By AlphaWaves 23rd Feb 17, 1:23 PM
    • 2 Posts
    • 0 Thanks
    AlphaWaves
    • #6
    • 23rd Feb 17, 1:23 PM
    • #6
    • 23rd Feb 17, 1:23 PM
    Thanks for the replies, some interesting points and options to consider from which it looks like bonds are not the way forward but more 'high interest' cash savings.

    msallen, good point on the interest allowances, I am on the edge of the tax threshold at the moment being just inside the 40%. I shall have to review the feasibility and benefits of adding a little more into my pension contributions to bring my taxable income down into basic rate to obtain the 1k interest allowance.
    • JohnRo
    • By JohnRo 23rd Feb 17, 2:13 PM
    • 2,431 Posts
    • 2,189 Thanks
    JohnRo
    • #7
    • 23rd Feb 17, 2:13 PM
    • #7
    • 23rd Feb 17, 2:13 PM
    http://www.tescobank.com/current-accounts/

    In order to best serve our existing customers, we have decided to pause accepting new applications for the time being. In the coming weeks, we will let customers know when they can apply again for the Tesco Bank Current Account.
    Originally posted by xylophone
    I hadn't realised it was as ongoing as that, I'd assumed it was just a brief stop gap until they sorted out the recent security breach.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • vacheron
    • By vacheron 23rd Feb 17, 2:47 PM
    • 710 Posts
    • 605 Thanks
    vacheron
    • #8
    • 23rd Feb 17, 2:47 PM
    • #8
    • 23rd Feb 17, 2:47 PM
    Hi AlphaWaves.

    I assume you are an employee rather than self employed?

    If you are it is worth checking if your company runs any kind of Sharesave scheme. This will allow you to contribute up to 500 per month, it is virtually risk free and has a promise of a very good return at the end.

    I am putting 500 each month in to the one ran by our parent company and am 1 year in to their 5 year scheme. The current share price is already double the original option price so if it keeps doing that for the next four rears I should make 930k from a 30k stake!

    Wishful thinking, but even if it stays where it is I'll be more than happy!



    .......msallen, good point on the interest allowances, I am on the edge of the tax threshold at the moment being just inside the 40%. I shall have to review the feasibility and benefits of adding a little more into my pension contributions to bring my taxable income down into basic rate to obtain the 1k interest allowance.
    Originally posted by AlphaWaves
    It is definitely worth taking care here when you are skirting around the 40% threshold. There are a lot of pitfalls in the way HMRC will consider you a higher rate taxpayer even though you don't pay ANY higher rate tax.

    Take a look at this thread which proves that even HMRC get it wrong!
    Last edited by vacheron; 23-02-2017 at 2:57 PM.
    The rich buy assets.
    The poor only have expenses.
    The middle class buy liabilities they think are assets.
    Robert T. Kiyosaki
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