long term savings

elantan

Hi all

i wonder if anyone can help me ... i am looking for a long term savings plan of some sort .... i want to initially put in £50 a month but to increase that to £100 a month over 5 years ... i want to save it for roughly 25 years and i am looking to not be able to have easy access to it but if an emergency arose be able to access the money

the reason for this is to be an addition to my pension .... i have a personal pension but i really want to have a savings vehicle as well .... i have i.s.a's at the moment and use them as a daily savings account type of thing (new car/holiday etc etc)

can anyone recommend any accounts/plans etc that might give me what i am looking for ?

thanks

opinions4u

Stocks and shares ISA is the ideal wrapper for this, assuming you've only used your cash ISA allowance.

I'd suggest you look for a provider who offers a range of funds and low management charges.

Hargreaves Lansdown are popular with some posters on here. Your job is to decide which of their 2,400 choices to pick from!

Loughton_Monkey

Firstly, you should not be thinking of simply 'saving' over 25 years. Don't get me wrong. Save initially, since your pension contributions are equities, for the ong term, and should provide a good return. But savings do not keep up with inflation. So instead, think about regular saving but every few years, take some of it out and shove it a Stocks & Shares ISA - until you are nearing retirement.

Secondly, change your attitude about cash ISA's. The point of these are to 'lock' money in for a few years and 'roll up' the interest tax free. If you use your ISA for 'short term provisioning' then you are wasting it.

elantan

cheers for the reply ....

i have had an account with h&l before but found it lost me money (obviously i dont have a clue what to do ) so was looking for a more safer route this time ... will give it a further thought though

thanks

elantan

Loughton_Monkey wrote: »

Secondly, change your attitude about cash ISA's. The point of these are to 'lock' money in for a few years and 'roll up' the interest tax free. If you use your ISA for 'short term provisioning' then you are wasting it.

so maybe have a different type of account for car/holiday savings etc? and use my I.S.A as a long term account then transfer it to shares after a few years ?

cheers will give it all some thought ... i know savings accounts arnt worth the money just now as they have low rates of interest but i dont want to get to my retirement and just rely on my pension ... they aint doing too good just now either lol

Loughton_Monkey

I personally find it very important to distinguish between "Retirement Saving" and [what I call] "Provisioning". I notice a lot of people who 'think' they are saving. In a sense they are, but for a new car, for the daughter's wedding, for a kitchen re-vamp etc. All very well, but when you get to retirement and ask the big question "What have I got to live on? I've saved all my life!" there are no good answers.

As always, a good pension arrangement is the backbone of retirement planning. These are virtually always invested in equities (or sometimes a small mix of other things). This tends to give a reasonably good inflation protection. If you want to save extra for retirement, then doing it via 'savings' over such a long term would probably produce only about 25% of the value of equities.

Pensions do have limitations on when/how you get the money. So Stocks & Shares ISA's are an excellent additional method. My own strategy, when saving, was to save maximum in cash ISA and maximum in S&S ISA (in the good years at least). Also, extra would go into non-ISA for use in things like cars, holidays, home improvements etc. If there were 'room' in my Cash ISA, I would have used that and drawn it out (just to receive marginal benefit).

But at a certain point, I felt I had enough 'cash' and so tended to throw 100% of spare into S&S ISA or Pension.

Keeping seperate accounts for different purposes is perfectly legitimate. Personally, I never did this, since I use personal 'accounts' to keep track of what I was saving for. That allowed me to deal with the totality of my savings 'in bulk' and put it all where I thought best - with only accessibility as an issue.

Tammer

Hi,

You need to think carefully what you want to do.

It's no use people on here suggesting a stocks and shares ISA if your attitude to risk is very cautious - which may be the case if you were worried by losing money with HL the last time. If you take out a S&S ISA it would be possible to lose money.

However, saving for the long term can be a good way to reduce your risk as, over time, there is a greater likelihood that you will make money, even if the stock market falls at some points over the 25 year period.

psychic_teabag

elantan wrote: »

so maybe have a different type of account for car/holiday savings etc? and use my I.S.A as a long term account then transfer it to shares after a few years ?

That sounds the wrong way round - normally you'd invest it in shares for a few years, and then move it to cash at an appropriate point in the future. So if you're planning on putting it in shares at all, it may as well be sooner rather than later. Shares (or funds) are volatile, and the value can fluctuate wildly. The risk is that when you need the money, they might be at a relative low and you lose out. But if you can leave them for a good while and don't need the money on any particular date, you can choose the most opportune time to convert them to something less volatile. The longer you can leave them, the better the chances that you will find a good time to reap the profit.

Unfortunately, the current rules allow a cash ISA to be converted to a S&S ISA, but not the other way round, so you can't convert from S&S ISA to cash ISA. But who knows what the rules will be in 25 years time.

I think LM meant that you should use your cash ISA for long-term cash (eg emergency fund), rather than for short-term savings.

elantan

thanks everyone for your helpful imput .... i deff have alot to think about ... i think firstly i will be changing the idea in my head about where to save for a car, holiday etc ... so i will look into different types of accounts for that .... i think i will have my long term savings for retirement in the i.s.a ( thanks for the note about people saving for years and years to only reach retirement and have no savings cause they spent it on cars etc .... THAT wouldve been me)

deff food for thought ... thank you all

bendix

Tammer wrote: »

Hi,

You need to think carefully what you want to do.

It's no use people on here suggesting a stocks and shares ISA if your attitude to risk is very cautious - which may be the case if you were worried by losing money with HL the last time. If you take out a S&S ISA it would be possible to lose money.

However, saving for the long term can be a good way to reduce your risk as, over time, there is a greater likelihood that you will make money, even if the stock market falls at some points over the 25 year period.

Saving in cash accounts over a 25 year period is MUCH more risky that saving in stocks and shares. You are guaranteed to lose money with that approach.

pinkteapot

Bendix is right. I've failed to find 25 year data online, but found some 50 year data on The Times website.

In 1959, the average house cost £2,507 (about £43,000 in today’s money), compared with £162,085 in 2009 — a rise of 273% after inflation or an average annual real return of 2.7%, according to Halifax. By contrast, shares have returned 1,180% after inflation over the past 50 years, giving an average annual real return of 5.2%, according to Barclays Capital.

So, even if you could manage to equal the inflation rate with your cash savings rate over the long term (which isn't always possible, e.g. now), it's still the worst way to save. If in 1959 you'd put £2,500 into each of cash, housing, and shares, your cash would now be worth £43,000 (and would only buy as much stuff as it did then), your house worth £162,000 and your shares worth £295,000.

The trick with an S&S ISA (or any investing compared to cash saving) is not to keep looking at the value in the short term. Put the money away and forget about it. I posted on here recently about my bank's broad fund that invests globally in shares, fixed income, real estate, everything. It's the laziest way to invest - if I picked and chose individual country/asset class funds I would do a lot better. But I have neither the time nor inclination so this sort of approach, where everything is done on your behalf, suits me, and it should still beat cash in the long term. We've put a lump into that through an ISA with a 20-25 year view. We don't have kids yet but we've hidden that money away to hopefully provide a cash to help the kids with uni costs if they want to go. If they don't or they turn out to be little sh&ts then hubby and I will be going on a great holiday instead.

Having said that, it does depend on what you can afford to save in total. Don't put everything you're saving into investments; you can lose the money. Having a mixture of cash and investments is the best long-term approach.