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  • FIRST POST
    • TheShape
    • By TheShape 21st Sep 17, 11:17 PM
    • 1,140Posts
    • 905Thanks
    TheShape
    Investment next steps.
    • #1
    • 21st Sep 17, 11:17 PM
    Investment next steps. 21st Sep 17 at 11:17 PM
    Around this time last year I started to think more carefully about savings/investments/pension provision.
    I discovered the ‘5% savings loophole’ opening multiple current accounts and regular savers. When funds became short due to the significant regular saver deposits I discovered stoozing and managed to build a decent sized stooz pot. I moved my S&S ISA from the L&G/Nationwide IPS platform to Cavendish Online, made a lump sum deposit and increased my monthly deposit. I also finally got around to consolidating three small personal pensions into a Hargreaves Lansdown SIPP and began making modest contributions. I have also started investing in p2p which has probably been my primary focus for the last 6 months.

    It’s time for a review especially as I think that I am perhaps over-invested in p2p.

    Current approximate position below:

    Age 39.
    Employed full-time, salary approx. £27.5k. Currently contributing to the Civil Service Alpha pension scheme (2.5 years contributions). 6 years contributions to the previous nuvos scheme.
    No children.
    Homeowner, property value approx. £325k to £350k, mortgage outstanding approx. £72k (rate 1.74%). My girlfriend has her own property value £350k to £375k, mortgage approx. £50k. She would like us to sell both our properties in the near (2-4 years) future and buy a larger/nicer property without a mortgage.
    £23.5k in high interest current accounts and regular savers.
    £23k in p2p, the majority with Ablrate, Moneything and Collateral.
    £22.5k 0% credit card debt (at least a year before any of this needs clearing above minimum payments)

    HL SIPP – £5k (VLS100) – monthly investment £62.
    Cavendish Online S&S ISA - £14k (VLS100, Blackrock Consensus 100, HSBC Global Strategy Dynamic) – monthly investment £150 (split evenly between the three funds).
    ------------------------------------------------------------------------------------------------------------------------------------
    Probably have £300 to £500 per month (which I’ve currently been adding to p2p) to continue to invest.
    I’m considering whether it would be best to increase contributions to the SIPP, gaining the tax relief or opening a LISA prior to the end of the tax year with a £4k lump-sum gaining the 25% bonus and then continuing with monthly deposits.
    Aim is to increase the value of my investments as much as possible over the next 15/20+ years.

    Any thoughts as to what I might do over the next couple of years especially with regard to SIPP vs LISA?
Page 1
    • Alexland
    • By Alexland 21st Sep 17, 11:34 PM
    • 731 Posts
    • 459 Thanks
    Alexland
    • #2
    • 21st Sep 17, 11:34 PM
    • #2
    • 21st Sep 17, 11:34 PM
    In no particular order:

    1) At the very least put £100 in a LISA to keep your options open for the next 10 years.

    2) Marry have kid(s)? I found that I had just about got the hang of life and my son introduced me to a whole new world of challenges.

    3) After getting married we consolidated our property wealth into one big house and it's really given our quality of life a boost. No harm having a bit of a mortgage if it gets you somewhere better - check school catchments (and criteria if the school is oversubscribed) before moving to avoid the cost of moving again.

    4) I am sure someone will suggest VCTs

    5) Would the HL SIPP be better transferred into your employer scheme or a cheaper Cavendish SIPP? (might take a few years to recover transfer costs?) Regular contributions are usually better via salary sacrifice AVCs into employer scheme than SIPPs.
    Last edited by Alexland; 22-09-2017 at 10:35 PM.
    • TheShape
    • By TheShape 22nd Sep 17, 12:04 AM
    • 1,140 Posts
    • 905 Thanks
    TheShape
    • #3
    • 22nd Sep 17, 12:04 AM
    • #3
    • 22nd Sep 17, 12:04 AM
    In no particular order:

    1) At the very least put £100 in a LISA to keep your options open for the next 10 years.

    2) Marry have kid(s)? I found that I had just about got the hang of life and my son introduced me to a whole new world of challenges.

    3) After getting married we consolidated our property wealth into one big house and it's really given our quality of life a boost. No harm having a bit of a mortgage if it gets you somewhere better - check school catchments (and criteria if the school is oversubscribed) before moving to avoid the cost of moving again.

    4) I am sure someone will suggest VCTs

    5) Would the HL SIPP be better transferred into your employer scheme or a cheaper Cavendish SIPP? (might take a few years to recover transfer costs?) Regular contributions are usually better via salary sacrifice AVCs into employer scheme than SIPPs.
    Originally posted by Alexland
    To clarify:

    1) I will, at the very least, open a LISA to keep my options open.

    2)My girlfriend is 11 years my senior and has a 23 year old daughter. We may marry but won't be having children.

    3)My girlfriend desires a mortgage free future. We have significantly different views on debt.

    4)They might.

    5)A future SIPP transfer is something I will look at. I don't believe that salary sacrifice is available to me.
    • Alexland
    • By Alexland 22nd Sep 17, 7:02 AM
    • 731 Posts
    • 459 Thanks
    Alexland
    • #4
    • 22nd Sep 17, 7:02 AM
    • #4
    • 22nd Sep 17, 7:02 AM
    In which case if the concern is purely pension versus LISA then as a basic rate taxpayer without salary sacrifice the pension still has sone advantages in terms of earlier access and inheritance tax avoidance. However the LISA will not be taxed again and is unlikely to incur fees to draw down.

    In your position I would do both.

    Alex.
    • jimjames
    • By jimjames 22nd Sep 17, 12:59 PM
    • 12,234 Posts
    • 10,760 Thanks
    jimjames
    • #5
    • 22nd Sep 17, 12:59 PM
    • #5
    • 22nd Sep 17, 12:59 PM
    4) I am sure someone will suggest VCTs
    Originally posted by Alexland
    Not sure if there was a reason you mentioned VCTs but I can't see anything that would suggest they were suitable for the OP who isn't anywhere near maxing out their ISA or pension allowances.
    Remember the saying: if it looks too good to be true it almost certainly is.
    • Alexland
    • By Alexland 22nd Sep 17, 10:35 PM
    • 731 Posts
    • 459 Thanks
    Alexland
    • #6
    • 22nd Sep 17, 10:35 PM
    • #6
    • 22nd Sep 17, 10:35 PM
    Actually thinking about it a good reason to do both the pension and LISA is to use the LISA to feed the pension between the ages 60 to 75 to get the best of both worlds.
    • ewaste
    • By ewaste 22nd Sep 17, 10:51 PM
    • 44 Posts
    • 32 Thanks
    ewaste
    • #7
    • 22nd Sep 17, 10:51 PM
    • #7
    • 22nd Sep 17, 10:51 PM
    Since your in the Civil Service and in the Alpha scheme I would seriously consider added pension, CSAVCS or EPA.

    You don't mention when you think you might want to retire which would influence the best options for you going forward e.g. tying money up in pensions or the options available in the Alpha scheme.

    To those wondering Alpha doesn't have a salary sacrifice option from what I'm aware, not even for the CSAVCS which makes maximum contributions to S&S LISA very attractive indeed.

    You could theoretically set things up to retire on income transitioning from S&S ISA's then a SIPP then S&S LISA then EPA before the main Alpha pension kicks in a state pension age.
    Last edited by ewaste; 22-09-2017 at 11:11 PM.
    • Bravepants
    • By Bravepants 23rd Sep 17, 12:39 PM
    • 274 Posts
    • 320 Thanks
    Bravepants
    • #8
    • 23rd Sep 17, 12:39 PM
    • #8
    • 23rd Sep 17, 12:39 PM
    If there are only going to be two of you in the future do you really need a big house? You can have a nice comfortable smaller house with zero mortgage, and plenty of ISA investment with which to retire early and leave the stress of work behind.
    • TheShape
    • By TheShape 23rd Sep 17, 2:15 PM
    • 1,140 Posts
    • 905 Thanks
    TheShape
    • #9
    • 23rd Sep 17, 2:15 PM
    • #9
    • 23rd Sep 17, 2:15 PM
    Since your in the Civil Service and in the Alpha scheme I would seriously consider added pension, CSAVCS or EPA.

    You don't mention when you think you might want to retire which would influence the best options for you going forward e.g. tying money up in pensions or the options available in the Alpha scheme.

    To those wondering Alpha doesn't have a salary sacrifice option from what I'm aware, not even for the CSAVCS which makes maximum contributions to S&S LISA very attractive indeed.

    You could theoretically set things up to retire on income transitioning from S&S ISA's then a SIPP then S&S LISA then EPA before the main Alpha pension kicks in a state pension age.
    Originally posted by ewaste
    With my girlfriend being 11 years my senior I would like to retire before state pension age as it would be nice to spend as many non working years together as possible. Alternatively, a reduction in working hours/days as I approach SPA would be something I would like to do.

    Without the option of salary sacrifice AVCS don't look to be of particular benefit if I can pay into my own personal pension.

    EPA looks to be an option. Alpha pension accrues at 2.32% of pensionable earnings with the cost of the three year EPA is 2.8% of pensionable earnings (according to the EPA calculator). At current salary that would cost approx £772 to gain £640 of pension three years earlier. The alpha scheme guide says EPA qualifies for tax relief so would this actually cost £617? and is this a good deal?
    • TheShape
    • By TheShape 23rd Sep 17, 2:33 PM
    • 1,140 Posts
    • 905 Thanks
    TheShape
    If there are only going to be two of you in the future do you really need a big house? You can have a nice comfortable smaller house with zero mortgage, and plenty of ISA investment with which to retire early and leave the stress of work behind.
    Originally posted by Bravepants
    Even if we realise top-end asking prices for our homes, pay off a charge of £20k on my girlfriend's property (to a former partner) and pay off the mortgages, the £550k or so remaining won't buy anything particularly 'big' in a nice part of our London Borough (Havering). It would buy a decent sized home though.

    Ultimately a smaller house (although wouldn't want smaller than we have already) might be beneficial but would depend whether my girlfriends daughter will be living with us. We have seen houses that would accommodate the three of us very comfortably with the daughter having a somewhat separate living area. This is something I would very much prefer.

    Even if my girlfriends daughter has moved out before we move, my girlfriend believes (and I agree) that having a large enough space to 'get away from each other' is likely to lead to a happier long-term relationship.
    • takesyourchances
    • By takesyourchances 25th Sep 17, 5:39 PM
    • 450 Posts
    • 264 Thanks
    takesyourchances
    Been offline a few days, interesting read as I am similar age to you at 38 and been putting a fair bit into P2P as well recently. While I am still putting into P2P I have been also putting into my S&S ISA recently as well.

    Have you thought about adding some Investment Trusts in and creating a dividend stream and re-invest dividends until ready to take. Not saying this is the way to go, but I have a portfolio growing of IT's as well and like the idea of the long standing dividend history with many of them so many an idea.

    Maybe adding some sectors to your S&S ISA too or smaller companies etc or geographical regions.

    While adding to P2P, I was adding most of my free money as well in recent months to it, but recent weeks have been splitting between S&S ISA investments and P2P as loans arise.

    Will read with interest
    • TheShape
    • By TheShape 8th Oct 17, 4:31 PM
    • 1,140 Posts
    • 905 Thanks
    TheShape
    After giving the options some thought I'm inclined to make the maximum use of the LISA given that the LISA allowance is a case of 'use it or lose it'. Using the allowance for the first three/four years should (dependent upon returns) result in a fairly good balance between p2p, S&S ISA and S&S LISA. Any future changes like being mortgage free or inheritance would allow me to make additional payments eg to the SIPP.

    I think I'll also start paying for the EPA on my Civil Service Pension.

    Actually thinking about it a good reason to do both the pension and LISA is to use the LISA to feed the pension between the ages 60 to 75 to get the best of both worlds.
    Originally posted by Alexland
    This sounds like a good use of LISA funds when withdrawn.
    • Alexland
    • By Alexland 8th Oct 17, 10:12 PM
    • 731 Posts
    • 459 Thanks
    Alexland
    Thanks for the update - glad we could be of help in your decision making process.
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