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  • FIRST POST
    • PrudentSpender
    • By PrudentSpender 10th Jul 17, 7:34 PM
    • 6Posts
    • 1Thanks
    PrudentSpender
    Advice for future planning
    • #1
    • 10th Jul 17, 7:34 PM
    Advice for future planning 10th Jul 17 at 7:34 PM
    Hi,

    This is my first post here so apologies if its a newbie'ish.

    Anyhow i'm 35 years old and have recently been left an inheritance of just over £150k, and I want plan for the future, but i'm trying to work out the best options considering the state of global markets, my age, brexit, low savings interest rates and many other variables i'm sure you're aware of.

    I have aspirations in the future of turning my hand to property 'buy to improve and sell', or 'buy to let'. But until the Brexit fallout settles i'm not planning on doing that in the short term until we find out where UK housing prices land. So for now I want to try to get my money working for me as best I can.

    Splitting my money over two 1-2 year fixed rate interest accounts like Paragon and Oak North at 1.85% and 1.86% seems like a potential plan in the short term over the next year or so. But can anyone offer any alternative plans?
    Also is it worth taking some of it and spreading it over some of the higher interest Current accounts as well such as Santander's 1.5% on 20K. Or is that better for savings when you have smaller amounts to work with?

    Basically i'm looking for some advice for more experienced savers/investors than myself

    Many thanks for your time
    Last edited by PrudentSpender; 10-07-2017 at 7:38 PM.
Page 1
    • eskbanker
    • By eskbanker 10th Jul 17, 7:46 PM
    • 5,801 Posts
    • 5,686 Thanks
    eskbanker
    • #2
    • 10th Jul 17, 7:46 PM
    • #2
    • 10th Jul 17, 7:46 PM
    Do you own your home at the moment? Overpaying a mortgage can be worth considering, depending on rates obviously, or if you're renting then clearly you'd be in a position to buy.

    Pension(s)? Almost always worth stashing as much as possible into these, given the tax advantages.

    Personally I wouldn't pay too much attention to the external environment, in terms of Brexit, financial markets, house prices, etc - decide what you want to do and go for it, there will always be some reasons not to! Bear in mind that saving in cash at below 2% means your money is already losing value in real terms.

    Having said that, in your shoes I think I'd be more tempted to invest in funds and so on for the long term rather than buy-to-let, given increasingly onerous tax treatment and the amount of hard work in being a landlord, as well as being inherently illiquid, what attracts you to this?
    • PrudentSpender
    • By PrudentSpender 10th Jul 17, 8:09 PM
    • 6 Posts
    • 1 Thanks
    PrudentSpender
    • #3
    • 10th Jul 17, 8:09 PM
    • #3
    • 10th Jul 17, 8:09 PM
    Hi Eskbanker,

    thanks for the speedy reply mate.
    I'm not against investing in funds, i suppose I just dont understand much about it and i'm not what you'd call a gambler, I inherently try and play it safe when I dont fully understand something, so any advice or guidance on funds would be welcome.

    Could you explain why the 'saving in cash at below 2% means your money is already losing value in real terms', I dont quite follow how that works.

    I'm interested in property as my grandfather had a construction firm and had me involved from a young age, this isnt what I do now, but in each house we owned i've done almost all the renovation work myself to turn as much profit as we can when we move on. + my mother-in-law has made sensible housing decisions and has managed to turn a tidy profit on it, so I guess that helped the thought along as well, + the old bricks and mortar being secure myth.

    Currently my situation is as follows:
    Married
    £32K year job, hopefully to increase shortly. Does not include annual bonus
    4% monthly pension contribution through work, soon to go up to 5%
    Paying mortgage on current home. So overpaying might be a good option here.
    No credit card debt that is not on 0% interest rate (fixed term), keeping that to maintain credit score levels.

    thats about it.
    • tibbles209
    • By tibbles209 10th Jul 17, 9:26 PM
    • 63 Posts
    • 138 Thanks
    tibbles209
    • #4
    • 10th Jul 17, 9:26 PM
    • #4
    • 10th Jul 17, 9:26 PM
    Your money loses value as the rate of interest on those accounts is below inflation. Say inflation is at 3% - if you deposit £100 in one of those 1 year fixed accounts then in 12 months you will have £101.85. Although that number is bigger than the one you started with, because of inflation your £101.85 will only buy you what £98.79 would have at the time you first deposited into the account so in real terms you have lost money. Of course if you simply don't know how to use this money and need more time to work out your plan then it is fine to put it into these accounts to stall for a couple of years.

    If you have construction/ decorating skills you may be able to make a go of making money by renovating and reselling. This is however a very big undertaking - particularly when you are working full time - and does come with a reasonable amount of risk that you could lose money, or only break even (you will not be able to accurately predict the timing of house price drops). Some people do make good money this way though and if it is something you are interested in and would enjoy rather than purely a financial decision then it could be worth considering.

    Does your 4% pension contribution to your pension include your employer contribution? Unless your employer is providing an extremely generous contribution in addition to this you are almost certainly saving nowhere near enough into your pension. To be able to retire at normal retirement age without taking a substantial hit to your lifestyle you really want your combined employee + employer contributions to be closer to the 20% mark.

    Overpaying your mortgage is a solid option - interest rates are very low at the moment so your 'rate of return' would be lower than you could get elsewhere, however it is a guaranteed rate of return and if (when) interest rates rise the payoff will be bigger.

    The other main option is investing in the stock market (global index funds in a S&S ISA - would take a few years to trickle your £150k into ISAs). Have a read of Monevator investing articles to see if this suits you.

    Best of luck!
    • PrudentSpender
    • By PrudentSpender 11th Jul 17, 1:50 PM
    • 6 Posts
    • 1 Thanks
    PrudentSpender
    • #5
    • 11th Jul 17, 1:50 PM
    • #5
    • 11th Jul 17, 1:50 PM
    Does your 4% pension contribution to your pension include your employer contribution? Unless your employer is providing an extremely generous contribution in addition to this you are almost certainly saving nowhere near enough into your pension. To be able to retire at normal retirement age without taking a substantial hit to your lifestyle you really want your combined employee + employer contributions to be closer to the 20% mark.
    Originally posted by tibbles209
    They currently match the 4% and it will be rising to 5% for me and them in Sept, making 10% monthly contribution

    The other main option is investing in the stock market (global index funds in a S&S ISA - would take a few years to trickle your £150k into ISAs). Have a read of Monevator investing articles to see if this suits you.
    Originally posted by tibbles209
    I'm interested in this, i'll certainly check it out. Can you explain a little what you mean about 'trickle £150K into ISAs'? is it because there is a limit on how much can be added

    thanks,
    • timeuk
    • By timeuk 11th Jul 17, 2:02 PM
    • 5 Posts
    • 2 Thanks
    timeuk
    • #6
    • 11th Jul 17, 2:02 PM
    • #6
    • 11th Jul 17, 2:02 PM
    Basic rules:-
    1. Pay off your mortgage ASAP
    2. Save up in super.
    These are likely your biggest investments in your life.
    If you follow these rules, you won't do too badly.
    Then you can think of other investments eg, shares and properties.
    Financial advisors ( bad ones) will tempt you to borrow to invest in some bad investment for the sake of gearing in order to pay less tax and have more money for your mortgage. You just have to be careful of what to invest.
    • badger09
    • By badger09 11th Jul 17, 2:05 PM
    • 5,399 Posts
    • 4,640 Thanks
    badger09
    • #7
    • 11th Jul 17, 2:05 PM
    • #7
    • 11th Jul 17, 2:05 PM
    They currently match the 4% and it will be rising to 5% for me and them in Sept, making 10% monthly contribution


    I'm interested in this, i'll certainly check it out. Can you explain a little what you mean about 'trickle £150K into ISAs'? is it because there is a limit on how much can be added

    thanks,
    Originally posted by PrudentSpender
    Yes, maximum you can pay in each tax year is £20k. £40k if your wife also has one.
    • PrudentSpender
    • By PrudentSpender 11th Jul 17, 5:05 PM
    • 6 Posts
    • 1 Thanks
    PrudentSpender
    • #8
    • 11th Jul 17, 5:05 PM
    • #8
    • 11th Jul 17, 5:05 PM
    Basic rules:-
    1. Pay off your mortgage ASAP
    2. Save up in super.
    These are likely your biggest investments in your life.
    If you follow these rules, you won't do too badly.
    Then you can think of other investments eg, shares and properties.
    Financial advisors ( bad ones) will tempt you to borrow to invest in some bad investment for the sake of gearing in order to pay less tax and have more money for your mortgage. You just have to be careful of what to invest.
    Originally posted by timeuk
    1. GREAT, will do, i'll look into this.
    2. Super? whats this, please can you explain. Sorry i'm a complete finance newb, but now I have funds i'm trying to get educated. AT SPEED!
    3. I'm interested in financial advisers, but just dont know where to start with this. Who can you trust, know what i mean!!
    • PrudentSpender
    • By PrudentSpender 11th Jul 17, 5:07 PM
    • 6 Posts
    • 1 Thanks
    PrudentSpender
    • #9
    • 11th Jul 17, 5:07 PM
    • #9
    • 11th Jul 17, 5:07 PM
    Yes, maximum you can pay in each tax year is £20k. £40k if your wife also has one.
    Originally posted by badger09
    So I can invest in the stock marketing using ISAs? But i'm limited to 20K per year. However that money is then invested over multiple stocks through the ISA provider? is that how this works. Again, sorry for the newbie questions.
    • Eco Miser
    • By Eco Miser 11th Jul 17, 5:29 PM
    • 3,176 Posts
    • 2,940 Thanks
    Eco Miser
    So I can invest in the stock marketing using ISAs? But i'm limited to 20K per year. However that money is then invested over multiple stocks through the ISA provider? is that how this works. Again, sorry for the newbie questions.
    Originally posted by PrudentSpender
    Yes. You can also invest through a pension(SIPP Self Invested Personal Pension or PP Personal Pension), or unwrapped - usually with the same provider.
    You can then move £20k into the ISA each financial year by selling unwrapped and rebuying within the ISA(known as Bed & ISA).

    You would buy one or more funds, each fund invests in shares of many companies and/or in other funds and/or in property (as in they buy a whole shopping centre or office block or warehouse and rent it out).
    Eco Miser
    Saving money for well over half a century
    • badger09
    • By badger09 11th Jul 17, 6:15 PM
    • 5,399 Posts
    • 4,640 Thanks
    badger09
    So I can invest in the stock marketing using ISAs? But i'm limited to 20K per year. However that money is then invested over multiple stocks through the ISA provider? is that how this works. Again, sorry for the newbie questions.
    Originally posted by PrudentSpender
    Have a browse around this website.

    http://monevator.com/category/investing/

    Biased towards Passive Investing, but that's no bad thing when you're starting out.
    • AnotherJoe
    • By AnotherJoe 15th Jul 17, 10:19 AM
    • 7,591 Posts
    • 8,191 Thanks
    AnotherJoe
    Basic rules:-
    1. Pay off your mortgage ASAP
    2. Save up in super.
    These are likely your biggest investments in your life.
    If you follow these rules, you won't do too badly.
    Then you can think of other investments eg, shares and properties.
    Financial advisors ( bad ones) will tempt you to borrow to invest in some bad investment for the sake of gearing in order to pay less tax and have more money for your mortgage. You just have to be careful of what to invest.
    Originally posted by timeuk
    1. Too simplistic and often a poor choice when contrasted with (2).
    2. "Super" is I presume Australian for a pension? Often in the UK it's better to do 2 before 1. Especially if you are a high rate taxpayer due to the highly favourable tax treatment.

    In the MFW forum there are many people bending over backwards to pay their mortgage at almost any costs whilst their pensions suffer (unbeknown to them) and longer term whilst they may relish being mortgage free earlier , financially they've lost many tens of thousands.

    What's so special about the SIPP being sold by Pilling? Why point that one out ? Ata quick glance their charges look very high to me.
    • bigadaj
    • By bigadaj 15th Jul 17, 2:07 PM
    • 10,694 Posts
    • 6,984 Thanks
    bigadaj
    1. Too simplistic and often a poor choice when contrasted with (2).
    2. "Super" is I presume Australian for a pension? Often in the UK it's better to do 2 before 1. Especially if you are a high rate taxpayer due to the highly favourable tax treatment.

    In the MFW forum there are many people bending over backwards to pay their mortgage at almost any costs whilst their pensions suffer (unbeknown to them) and longer term whilst they may relish being mortgage free earlier , financially they've lost many tens of thousands.

    What's so special about the SIPP being sold by Pilling? Why point that one out ? Ata quick glance their charges look very high to me.
    Originally posted by AnotherJoe
    Spam presumably.
    • kidmugsy
    • By kidmugsy 15th Jul 17, 2:46 PM
    • 9,848 Posts
    • 6,639 Thanks
    kidmugsy
    2. Super? whats this, please can you explain.
    Originally posted by PrudentSpender
    "Super" is what our Ozzie cousins call pensions i.e. superannuation.

    Compare with our USS = Universities Superannuation Scheme.
    • kidmugsy
    • By kidmugsy 15th Jul 17, 3:01 PM
    • 9,848 Posts
    • 6,639 Thanks
    kidmugsy
    What to do.

    (i) Put aside a decent emergency fund in cash e.g. equal to six months worth of outgoings. Use a Santander 123 account, or Premium Bonds, or high interest current accounts, etc. Ensure that your bank/BS accounts never total more than £85k in one name on the one banking licence.

    (ii) Consider owner-occupied housing. Is your mortgage expensive? Would you like to reduce the interest rate by overpaying so that you are on a lower LTV? Would you like to clear the mortgage (and if so, why)? Would you like to move to a house that suits you better?

    (iii) Consider a Lifetime ISA ("LISA"). It takes £4k p.a., leaving £16k p.a. of your annual ISA allowance for other use.

    (iv) Once you've maximised your employer's pension contribution, don't rush to contribute more to pensions unless (a) you can do so by salary sacrifice, or (b) you find yourself to be a 40% tax payer.

    (v) Personally I would also invest some modest sum (e.g. £5k each for a couple) into Gold Sovereigns as long as you have some secure way of storing them.

    The trick is to combine (1) diversification with (2) low charges, and (3) tax avoidance.
    • TBC15
    • By TBC15 15th Jul 17, 6:49 PM
    • 226 Posts
    • 79 Thanks
    TBC15
    Must ask Gold Sovereigns, why?
    • PrudentSpender
    • By PrudentSpender 21st Jul 17, 8:47 AM
    • 6 Posts
    • 1 Thanks
    PrudentSpender
    What to do.

    (i) Put aside a decent emergency fund in cash e.g. equal to six months worth of outgoings. Use a Santander 123 account, or Premium Bonds, or high interest current accounts, etc. Ensure that your bank/BS accounts never total more than £85k in one name on the one banking licence.

    (ii) Consider owner-occupied housing. Is your mortgage expensive? Would you like to reduce the interest rate by overpaying so that you are on a lower LTV? Would you like to clear the mortgage (and if so, why)? Would you like to move to a house that suits you better?

    (iii) Consider a Lifetime ISA ("LISA"). It takes £4k p.a., leaving £16k p.a. of your annual ISA allowance for other use.

    (iv) Once you've maximised your employer's pension contribution, don't rush to contribute more to pensions unless (a) you can do so by salary sacrifice, or (b) you find yourself to be a 40% tax payer.

    (v) Personally I would also invest some modest sum (e.g. £5k each for a couple) into Gold Sovereigns as long as you have some secure way of storing them.

    The trick is to combine (1) diversification with (2) low charges, and (3) tax avoidance.
    Originally posted by kidmugsy
    thanks mate, that all makes sense.
    But yes, why the Gold?
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