Saving £££ monthly for the long-term

ant1979pry

Hi all, could really use some advice please. Am 31 years old and have only just started to save some money for retirement. Presently this has taken two forms:

1. A stakeholder pension which both myself and my employer contribute to each month to the total sum of £180.

2. An ISA which I put £150 into each month - I started this about 7/8 months ago.

Now obviously I will continue to pay into the pension month by month. What I am also looking to do is build some funds for my eventual retirement by saving £150 monthly (this figure will increase a fair amount in a couple of years when other comitments dissapear). This is money that I can afford to 'lock away' for the future and would not be dipping into at any time. Obviously I have only saved a fairly small amount so far (£1200-ish) but want to continue to add £150 to this monthly in the hope that one day there will be a decent amount there.

Where is the best place for me to put this £1200 and add £150 to it each month? I have other money set aside for emergencies and so really won't be touching this money for 20 odd years - probably closer to 30!! I am thus happy to tie it somewhere for some time if that means a better % interest rate. At the same time I wouldn't be looking for anything 'higher-risk' as I need to know the money will be growing safely for my retirement / cost of grandchildren!!

Any advice/guidance would be kindly received. Thanks!!

Rob_192

Ant

If you're looking to invest for this length of time, a S&S Isa is the obvious place.

I would recommend using a funds supermarket such as Hargraves Lansdown and spreading your risk by investing in different funds. You can invest lump sums (min £1,000) or buy monthly (min £50/month/fund). Therefore you could invest your £1,200 as a lump sum and then buy 3 funds at £50/month.

I know many people say it's impossible to time the market (which it is!) and this is why drip feeding your money is a good idea, but for your £1,200, wait till the markets take a slight dip - they're at an 8 week high at the moment, but will drop a bit soon, they always do.

I would consider buying a general UK tracker fund with the lump sum and add £50/month to the same, and then 2 funds from different areas, possibly emerging markets or BRIC.

Don't be tempted by S&S Isas offered by the high street banks, their charges are much higher than the discounted funds supermarket providers.

I'm assuming, incidentally, that you have an emergency fund and general savings and this money is definitely for the long term.

R

Rob_192

Just another thought, is the ammount your employer contributes a percentage of your contribution? If so and assuming it's a reasonable %, you may be better off increasing your contribution and taking advatage of any free money being offered by your employer.

Another thought, the best investment I ever made was over paying my motgage and clearing it at a relatively young age (40), I now have no mortage/rent and can throw everything I have at my pension/ISAs.

R

Primrose

You mentioned you're putting money into an ISA. Hopefully, with 20 years to go to retirement, you've opted for an equity ISA rather than a cash one, as cash will only depreciate over this time whereas in the long term, stock markets generally perform much better.
I'd also think about using a little of your spare money to overpay on your mortgage, if you have one. Nobody has a job for life any more and to be rid of this large financial burden earlier, rather than later, can be a very reassuring situation to be in if you find yourself in a rocky employment situation later in your working life.|

I agree with Rob's suggestion to give the banks a wide berth when selecting equity ISAs. You will get a far wider choice of funds going through a broker like Hargreaves Lansdown and over 20 years you will also start to build up a growing loyalty bonus on your investments.

cashbackproblems

Primrose wrote: »

You mentioned you're putting money into an ISA. Hopefully, with 20 years to go to retirement, you've opted for an equity ISA rather than a cash one, as cash will only depreciate over this time whereas in the long term, stock markets generally perform much better.
I'd also think about using a little of your spare money to overpay on your mortgage, if you have one. Nobody has a job for life any more and to be rid of this large financial burden earlier, rather than later, can be a very reassuring situation to be in if you find yourself in a rocky employment situation later in your working life.|

I agree with Rob's suggestion to give the banks a wide berth when selecting equity ISAs. You will get a far wider choice of funds going through a broker like Hargreaves Lansdown and over 20 years you will also start to build up a growing loyalty bonus on your investments.

Are S+S ISAs the same as funds such as these, which are better?
http://www.iii.co.uk/funds/#topperf

I currently have shares and agree over 20 yrs u'll make so much more in these than savings accounts.

Rob_192

cashbackproblems wrote: »

Are S+S ISAs the same as funds such as these, which are better?
http://www.iii.co.uk/funds/#topperf

I currently have shares and agree over 20 yrs u'll make so much more in these than savings accounts.

A S+S Isa is simply an account in which you can then choose to invest in a variety of things, including funds, ETFs, corporate bonds or shares.

Anything invested within the ISA account is then tax-free and remains so.

The website you highlight is that of one of the companies through which you could hold your ISA. The funds are run by the usual financial institutions and you can buy into the same funds via a number of different ISA providers.

If you allready hold shares outside an ISA, it may well be worth looking at bringing these inside an ISA where they will then be exempt from CGT. You can however only contribute £10,200/yr or £5,100/yr if you're going to use your cash ISA allowance (also £5,100)

R

ant1979pry

Thanks for the replies.

I have no mortgage at present although that may change in the next year or two. My employer is paying the max into my pension and so raising my contribution would not bring about any increase in what they pay in.

The ISA I'm paying into at present is a cash one.

Took a look at the Hargraves Lansdown options and I really have no idea which funds would be better choices than others!! How will I know when it is a good time to buy and which specific funds to pick? Am already beginning to get the feeling I am a little out of my depth!!

Cheers!

terakris

ant1979pry wrote: »

Took a look at the Hargraves Lansdown options and I really have no idea which funds would be better choices than others!! How will I know when it is a good time to buy and which specific funds to pick? Am already beginning to get the feeling I am a little out of my depth!!

I know what you mean - im in a similar situation to you with regard to the S&S ISA options to invest some extra money for retirement and look at all the funds you can invest in and have no idea :embarasse

Primrose

I agree it's totally overwhelming for a beginning to know which funds to select. I'm not a financial adviser so can't offer you advice but most beginners seem to opt for popular equity income funds which have a good track record over many years, and buy accumulation units so that income/dividends are reinvested. Many people have started off with funds like Invesco Perpetual High Income whose manager, Neil Woodford, has an exemplary investment record (although even people like him can't get it right all the time), Artemis Income, and Newton Higher Income. Every financial adviser will have their own favourites if they are suggesting funds. Do some Google research and find out which are the most popular funds which many people hold, spread your risk over more than one fund, and when you feel more confident branch out into other geographical areas and market sectors.
As for knowing when is a good time to buy, the market is going up and down all the time, but if you are investing for the really long term, i.e. retirement, the law of averages is that it will be higher when you need to draw income from the money tham it was when you started investing, and over years, if you are investing on a drip feed basis, pound cost averaging should work in your favour.