Savings review

Bean123

Hello all,

Long time lurker but now ready to post.

I'm trying to get some objectivity on how I manage my money - how to prioritise my savings in particular, and hope that some of you might feel able to offer some thoughts. I'm 41 years old.

• Income £42730 gross, so just into higher rate tax band. Pension is sorted out.
• Gift aid of about £1800 per year, in case that information is relevant to my tax situation.
• I have 3 Lloyds Vantage accounts, total about £14-15K. One is my current account and the other two are used as savings / to cycle £1K through them. Each gets the 3% interest rate.
• I also have a Halifax Reward account for the £5 per month.
• And a Halifax cash ISA version 4 with interest rate of 3.2% (I think), total about £32K. I'm pretty happy with this ISA but haven't yet put any money into it this tax year.
• Ancient L&G S&S tracker ISA with approx £2500-3K in it.

Mortgage at 4.84%, fixed for another 2+ years.

I propose to set up a First Direct account and savings account in order to achieve the 8% savings rate for £300 per month, and will obviously need to cycle £1500 through the current account monthly.

I therefore have about £500 spare after the FD saving every month. Is it best to:
a) overpay mortgage by up to that amount?
b) put it into the ISA?
c) combination?
d) something else?

Not quite ready to boost the S&S ISA at the moment but also wonder whether I need to keep all of the funds in Vantage at present - would be happy to transfer up to £5-7K elsewhere if appropriate.

Any thoughts would be welcome, sorry it's such a long post.

atush

First of all, you are paying tax on your Vantage accts. So move 5340 of that into an isa paying over 3% as you haven't used up this years ISA.

You say your pension is 'sorted' but how sorted? How much in % slary is paid in each monht? what is it worth now?

What rate is your mtg? There are 2 ways of looking at this. Most say save elsewhere if your rate is less than 3%, BUT again it is easiest to overpay when rates are low and you have some spare. So I overpay some anyway each month as well as saving outside.

So, for your 500 I would consider a combo of mtg overpay and equities- by increasing your pension provision or outside or both.

Bean123

Thanks atush.

Have just amended my salary total in my first post as I earn £42730 rather than £42270 - doubt it makes any difference to the overall position though.

Happy to put the max limit into the cash ISA.

I'm a civil servant in the Classic pension scheme so, even with the proposed changes, that will remain a decent final salary / career average scheme. I've got about 17 years' contributions in there.

The mtg is 4.84% so will look to put surplus funds / overpayments up to £500 into there, I think. More than that will incur an ERC.

I just got a bit bamboozled about priorities and your thoughts have really helped.

atush

Well you are def sorted for pension lol. But you will pay HRT on every cent of savings you earn outside an ISA so keep filling them- and consider an NSI ILSC if some are released next year.

And you could really have more equity exposure

Ifts

Bean123 wrote: »

I propose to set up a First Direct account and savings account in order to achieve the 8% savings rate for £300 per month, and will obviously need to cycle £1500 through the current account monthly.

You get away with having to cycle £1500 through the FD current account monthly if you have one of their savings accounts or any of their other qualifying products*

If you want to have their 8% RS then you have to have their current account, which you have to fund with x amount each month or you have to pay a monthly fee to have it, but if you also have one of their savings accounts (even with £1 in it) then you can get around the monthly funding requirement of the FD current account.

*Discussed in this thread:
http://forums.moneysavingexpert.com/....php?t=2830388 (p2 post 39)

Bean123

Thanks, Ifts - will look into that as cycling £1500 is a bit of a faff if I can get away with an alternative.

Atush, I do take your point about increasing the S&S part of my savings. I don't think I'll be putting away enough yet to make it worth a broker's while vs fees.

I'm a pretty low-risk investor and would be happy with a tracker fund. My current (ancient) S&S ISA is in L&G UK tracker funds I think. Is it just worth continuing to invest in something like that? Now that HL has increased its charges I'm guessing it probably isn't worth transferring to another provider?

Bean123

Good evening all,

Suddenly realised it's time to have another ponder about where I'm at, savings-wise and future direction. I'd be grateful for any thoughts, sorry for the long post.

Age 42, salary £42730, civil service pension, no dependents.

Cash ISAs: total c.£53500
£46230 in Halifax, which has just gone onto 0.5% after being 3%.
£7500 in NS&I, which has been on 2.25% for a long time.

Current accounts:
£12500 or so in 3 Lloyds Vantage at range of 2 / 3 / 4 %

Savings accounts:
£3600 in FD Reg Saver at 8% (12th payment just gone in, so likely to mature in 4 weeks or so, I think)

S&S ISA:
£4500 in L&G UK Index tracker (with L&G).

Mortgage:
4.84% with NWide, fixed until Mar 2014, amount outstanding at present is £108750. (I didn't remortgage early in the end, after listening to comments on here). I do intend to remortgage at the expiry of the fixed term, also bringing the remainder of the term down by a few years so it expires before I'm 60.

Short-medium term likely capital expenditure, estimated up to £10K:
- I will probably need to replace the car in the next year or two
- Stuff needing to be done on the house / garden

No particular longer-term aspirations.

So, I have a lot of money in cash and probably don't need to accumulate any more?

The specific things I'm mulling over are:

1. The Halifax Cash ISA iss now on a poor rate and need transferring. I've got FD in mind, as they pay 3% on balances over £40K and I'm already an account holder. Does this sound OK?

I might as well transfer the NS&I one at the same time, to keep them together and for the better rate.

2. Equity.
I haven't forgotten atush's comment above that I could do with some more equity exposure, but I haven't done anything more on that since I was last thinking about this.

What about the Vanguard Lifestrategy funds which are on the Savings board at the moment (within a S&S ISA)? Don't want the hassle of selecting my own range of shares, just a regular monthly savings amount. Once I stop paying into the FD Reg Saver, I could divert those funds there.

If I went for one of these funds, is there any general rule about % in equities / bonds or cash? I am a relatively cautious investor and am not sure, given my age, whether the 60 or 80 fund might better fit my profile. Does anyone have any observations on this?

Also, the L&G ISA is just sitting there. Should I think about transferring the funds to whichever new ISA I take out, or just leave it where it is? I don't think there are exit fees but could check this out.

3. Mortgage
I've overpaid the mortgage by about £400 per month over the last few months, and could carry on doing this. Does this sound a good idea - or would I be better to focus just on S&S ISA?

In summary, my main dilemma is how to focus my ongoing expenditure - on equities, or mortgage, or both - and selection of appropriate S&S ISA.

Any thoughts would be much appreciated.

Any

1/ Yes, I would go for the FD one.

2/ Given that you have rather lot of money in cash, I would definitely invest a bit more in equity. I have more equity then cash - long term thinking a/you can save more tax free and b/long term it ALWAYS overdoes cash. (As long as you put it in sensible funds/shares!!)

As for funds... Vanguard are usually good. I also like Invesco Perpetual High Income accumulation, with Neil Woodford in charge. There is a lot more that are medium risk and have good track record. I would definitely go with a broker, like H&L or similar to give yourself better exposure of funds... Going directly with provider is often expensive. Do your research.

The split is definitely depending on your risk attitude and your view of markets.

L&G ISA - it depends on how happy you are with the fund and it's charges. It does no harm keeping it there if you are happy with performance and cost, however if you could move to better fund/lower cost provider then it's might be worth moving. Also check on exit fees - funds usually don't have exit fee, but often they have transfer to new provider fees...
You need to find out.

3/mortgage - at the end of this term, what will be the equity %? Will it be enough to give you a good deal to move onto next? That might affect whether to repay or not.

Bean123

Thanks so much for replying.

I'll contact FD in the morning and look into the Invesco funds too.

As for the mortgage, I have <60% LTV so hopefully there will be some decent deals still around. SVR is currently 3.99%.

jimjames

Bean123 wrote: »

2. Equity.
I haven't forgotten atush's comment above that I could do with some more equity exposure, but I haven't done anything more on that since I was last thinking about this.


If I went for one of these funds, is there any general rule about % in equities / bonds or cash? I am a relatively cautious investor and am not sure, given my age, whether the 60 or 80 fund might better fit my profile. Does anyone have any observations on this?

Also, the L&G ISA is just sitting there. Should I think about transferring the funds to whichever new ISA I take out, or just leave it where it is? I don't think there are exit fees but could check this out.

I'm a similar age and similar position although my FS scheme closes next year so I will need to make pension provision.

The difference is that I have almost all my money in investments and very little cash bar an emergency fund. Even the cash I hold is in mortgage offset rather than being in an ISA. All my ISA savings are S&S not cash.

It is a shame about not looking into S&S ISA 2 years ago as you would have had around 25% growth in that time if invested in the tracker.

You can transfer the ISA to another provider and that may well be worth doing so you can use a wider range of funds. Cavendish and HL are both good fund supermarkets but HL is more expensive for small tracker funds as they charge a platform fee per month. It is definitely worth having more broadly based portfolio so that you are not so dependent on the UK market. You can get trackers covering other markets around the world so charges still remain low.

Overall it is really down to when you need the money and your view of risk but personally I would not have anywhere near that amount in cash at the moment and putting the max into a S&S ISA each month would reduce the risk of investing a lump sum just before the market drops.

atush

Welcome back!!

It is a shame about not looking into S&S ISA 2 years ago as you would have had around 25% growth in that time if invested in the tracker.

Oh dear too bad you didn't look into this, you could have made a bit. but not to worry. The beauty of regular investing is that you will perform during both good and bad markets (as when prices are falling you buy more units for your money which then rebound later).

Normally, for a cautious investor, you might think 60/40. but given the amt of cash you hold, and your FS pension, I might go 80/20?

Also, the pension. I can't remember way back when, but does your scheme have AVCs? if so, are they the kind that allow you to take all your TFLS from the AVC rather than from the main scheme (which reduces your pension)? If so, it would be something to look at too?