Feedback on my savings ideas

theshortstack

Afternoon all - I'm relatively new to MSE and to saving/finance as a whole. However, I've been lucky enough to recently switch jobs into a new role which is paying me a much higher salary that my previous position.

As a result, I'm now likely to have a fair bit of disposable income at the end of each month and I wanted to get people's advice on the best way to deal with it.

In terms of income, my current situation is as follows:

• Salary: £80k year (potential for up to an additional £20k in bonuses)
• Secondary Income: approx £25k a year

In terms of savings:

• 6% of my salary is going into a company mortgage (this is the largest amount that will be matched by my employers)
• I am putting approximately £1,500 - £2,00 a month into a S&S ISA, having only started it last year. It's currently worth £19k and I have approximately £8k left of this years allowance.
• I have approximately £12,000 in cash (from my secondary income) stored in a business bank account where it's getting a pitfully low interest rate

After ISA savings, paying into my pension as well as general costs like my share of the mortgage, bills and beer money etc, I am likely to have approximately £1,000-£1,500 sitting around in my bank account at the end of each month.

So I have the following questions:

• Firstly, can anyone spot any glaring holes/errors in anything I've said above? As I mentioned, I'm rather new to saving and I'd like to make sure that I'm not being silly anywhere.
• Following on from that, my plan is to keep paying as much as I can into my S&S ISA on a monthly basis. Does that sound like a good idea?
• My wife and I are thinking of starting a family shortly which means that we need to save some money for when she goes on maternity leave. Where would be the best place to save for something like this?
• I'm sure I could be doing something more sensible with the money that I have sitting in the business bank account. But given that I'm likely to hit my ISA limit this year, can anyone point me in the direction of alternative products that would help me generate a better return on that money than it's currently getting? And how much would you recommend that I keep in that account for emergency purposes?
• Finally, my thoughts at the moment are that I top up my pention with any additional funds that I have left over in my bank account at the end of each month (or potentially any bonus payments I receive from work). Does that sound sensible?

This post has gone on for a bit longer than I thought, so apologies for that but I wanted to try and get my entire situation down in one place.

If anyone has any thoughts on anything I've said above, I'd be really grateful to hear them, as I'm really keen to learn more about what I should be doing with my savings going forward.

So thanks very much for your time in advance!

Edi81

Company mortgage? Do you mean a company pension?

Archi_Bald

It is not clear how the secondary income / the interest from the business account you mention gets taxed, but it sounds as if you might be perilously close, or right into, the income bracket (£100K+) that reduces your personal allowance (by £1 for every £2 of income above the £100,000, until you reach £120K, when your personal allowance is zero anyway).

It might be desirable, and possible to reduce or negate the personal allowance decrease by making additional pension contributions, either inside or outside your company pension scheme. If you can't work your way through the tax / pension jungle, it might be worth seeking professional advice from an accountant and/or an IFA.

jimjames

Hitting ISA limit?

At £2000 per month you'll easily exceed it!

Archi_Bald

theshortstack wrote: »

My wife and I are thinking of starting a family shortly which means that we need to save some money for when she goes on maternity leave. Where would be the best place to save for something like this?

It sounds as if you expect to need access to that money at relatively short notice. Thus one or more best interest paying accounts might be appropriate. You need to try and minimise the tax on interest, so if your wife stops working, and/or if she is a basic rate tax payer (you don't mention her tax bracket), having the accounts in her name might be best from a tax efficiency point of view. Depending on when, and how long for, she stops working, she might also be able to claim back tax on interest or have her interest paid gross (google R40 and R85).

In any case, the best interest paying accounts are current accounts at present. There is a list of these here, plus there is BOS Vantage with 3% AER on 3 x £5,000 max.

If you are both in the 40% tax bracket, even a cash ISA might be an option.

ColdIron

I'd seriously consider putting more into the pension, as a higher rtae taxpayer this is a bit of a no brainer. Does your company offer salary sacrifice?

theshortstack

Sorry, only just got around to getting up to speed on this. Thanks for all your replies - and yes, I absolutely meant company pension rather than company mortgage

ColdIron wrote: »

I'd seriously consider putting more into the pension, as a higher rtae taxpayer this is a bit of a no brainer. Does your company offer salary sacrifice?

Yes, it does - at the moment I'm putting everything I can into there.

trailingspouse

+1 for using an Independent Financial Advisor.

Other options might be to use excess monies to overpay your mortgage or to pay off any other loans (eg car) early if you can. The advantage is that over the longer term you save a boat-load of interest. The disadvantage is that if you should need that money in the future you can't have it!!

Fully utilise at least one of the interest-bearing current accounts - we decided Santander 123 was best for us as it pays 3% on balances up to £20,000 and with all the cashback deals and the linked credit card it's a really good deal. You can get higher interest on other accounts (eg Club Lloyds) but on smaller balances.