Help with setting up my future

II_D2_II

So I have been on this forum for a long time, and I have been Reading this section since last year without posting, now I think it is time to post.

So I am at the age of 25 currently, I earn around 1600 after Tax. I do make an additional £25-35 per month, but this is currently being reinvested to try and make more from it (I have grown this from £2 per month over the course of 1 year).
I have £1500 sitting in a TSB classic plus account with no other savings anywhere. I currently do not have a pension, I know that I should have a pension, I may sign up to one in the next 5 months.
From the Beginning of March I will be saving £1000 a month for 2 months, after this I will be dropping down to saving £5-600 per month.

Now here is where I have some questions.
From what I have read on here, I here everyone saying that you need to save for a rainy day fund (between 3-6 months) of outgoings. I currently do not have this.
My theory is to save for my rainy day fund, and invest for the future at the same time. I know many people may disagree with this but I think doing this at the same time allows me to step foot on the investment ladder whilst setting up my future and building my rainy day fund at the same time.
Does this sound like something that is achievable? I have no real expenditure, it´s all optional, if I were to lose my job tomorrow I could have another one lined up within 2 weeks.

I also have been reading about Vanguard VLS funds on these threads, but I think I have got myself a little confused. Do I need a S&S ISA in order to open a VLS Vanguard account? Or is it just that is best to open up S&S ISA to invest into Vanguard through the S&S ISA?

I plan to get my TSB account to £2000 and bounce £500 in and out month to get the interest from this.
I then was planning on investing £300 a month into Vanguard VLS 80, as I want to take a risk, I plan to not withdraw this money till I am at least 40-45.
The spare £2-300 I will continue to grow and place in my secondary TSB account until it gets to £2000


I am not sure if this all makes sense, if it doesn´t please do not hesitate to ask me any questions, I hope I can answer them all.

Thank you in advance for all your help.:)

xylophone

Does your employer offer a pension? If so, why have you not joined up?

You might build a rainy day fund of around £10000, using your TSB accounts, a Nationwide Flexdirect account, and perhaps a LLoyds Club account - you will need a couple of DDs for the Lloyds - cycle £1500 around once a month to get the interest.

After a year you could switch out of the Nationwide for a switching bonus /open a Santander 123 etc.

If you are saving for a house deposit the Santander would be useful.

Start a stocks and shares ISA, using the platform best suited to your needs.

http://monevator.com/compare-uk-cheapest-online-brokers/

http://monevator.com/dont-wait-to-open-your-stocks-and-shares-isa/

http://monevator.com/vanguards-cheap-trackers-lower-charges/

II_D2_II

xylophone wrote: »

Does your employer offer a pension? If so, why have you not joined up?

You might build a rainy day fund of around £10000, using your TSB accounts, a Nationwide Flexdirect account, and perhaps a LLoyds Club account - you will need a couple of DDs for the Lloyds - cycle £1500 around once a month to get the interest.

After a year you could switch out of the Nationwide for a switching bonus /open a Santander 123 etc.

If you are saving for a house deposit the Santander would be useful.

Start a stocks and shares ISA, using the platform best suited to your needs.

http://monevator.com/compare-uk-cheapest-online-brokers/

http://monevator.com/dont-wait-to-open-your-stocks-and-shares-isa/

http://monevator.com/vanguards-cheap-trackers-lower-charges/

My company does offer a pension, and there is no real reason why I haven't signed up to it, I just thought it would be better to use the money to invest, or is this wrong?

I will build my rainy day fund to somewhere around that amount hopefully I should be able to do this within the next 18 months.

Thank you for the links, i think the Cavendish Online account will be the best for me, so I will use that.

bowlhead99

II_D2_II wrote: »

My company does offer a pension, and there is no real reason why I haven't signed up to it, I just thought it would be better to use the money to invest, or is this wrong?

You can hold the exact same investments in a pension wrapper or an ISA wrapper or unwrapped.

In practice, the investment choices available in your company pension scheme will probably not have every single investment option under the sun. However, there will be something suitable. So, it's not really a choice of "invest versus pension". It's "invest in a pension" or "invest not in a pension". Most people should do both.

One reason to use a pension is that you will get tax relief on your contributions which is likely more than the tax you'll pay in retirement. So, free money from the government. Even if tax rates and your personal circumstances change later, your company will contribute money into your scheme and if you don't sign up, you're missing out on free money from your employer. They are willing to give you the money if you'd just ask for it!

So, although putting money in a pension means you lock it up until you're 55, you are throwing away free money from your boss and HMRC if you don't do it. It's not worth spending hours shopping around to get an extra few pounds from the best deal on a current account when you are completely missing the opportunity of free money being dumped into a pension pot. If your company has a minimum you have to contribute to get the maximum free money from them, make sure you're doing that. And then the rest of your money can be split between cash savings and S&S investments and even more pension contributions.

If you're still trying to build up a rainy day fund then you shouldn't go all-out on locking more and more money into your pension - as it will compromise your pile of emergency cash and medium term savings for other life goals. Later in life you will have pay rises and hopefully be in higher tax brackets so can save even more tax by doing extra pension then, and meanwhile use cash and S&S ISA to build up more practical pots of accessible money for houses and cars and families etc. But for the moment you should at least do something about investing in a pension, even if it is just grabbing the free money from your employer.

Linton

II_D2_II wrote: »

My company does offer a pension, and there is no real reason why I haven't signed up to it, I just thought it would be better to use the money to invest, or is this wrong?

I will build my rainy day fund to somewhere around that amount hopefully I should be able to do this within the next 18 months.

Thank you for the links, i think the Cavendish Online account will be the best for me, so I will use that.

Err a pension would be invested, and would include money contributed by the company. Why dont you want to invest with other people's money?

II_D2_II

bowlhead99 wrote: »

You can hold the exact same investments in a pension wrapper or an ISA wrapper or unwrapped.

In practice, the investment choices available in your company pension scheme will probably not have every single investment option under the sun. However, there will be something suitable. So, it's not really a choice of "invest versus pension". It's "invest in a pension" or "invest not in a pension". Most people should do both.

One reason to use a pension is that you will get tax relief on your contributions which is likely more than the tax you'll pay in retirement. So, free money from the government. Even if tax rates and your personal circumstances change later, your company will contribute money into your scheme and if you don't sign up, you're missing out on free money from your employer. They are willing to give you the money if you'd just ask for it!

So, although putting money in a pension means you lock it up until you're 55, you are throwing away free money from your boss and HMRC if you don't do it. It's not worth spending hours shopping around to get an extra few pounds from the best deal on a current account when you are completely missing the opportunity of free money being dumped into a pension pot. If your company has a minimum you have to contribute to get the maximum free money from them, make sure you're doing that. And then the rest of your money can be split between cash savings and S&S investments and even more pension contributions.

If you're still trying to build up a rainy day fund then you shouldn't go all-out on locking more and more money into your pension - as it will compromise your pile of emergency cash and medium term savings for other life goals. Later in life you will have pay rises and hopefully be in higher tax brackets so can save even more tax by doing extra pension then, and meanwhile use cash and S&S ISA to build up more practical pots of accessible money for houses and cars and families etc. But for the moment you should at least do something about investing in a pension, even if it is just grabbing the free money from your employer.

Linton wrote: »

Err a pension would be invested, and would include money contributed by the company. Why dont you want to invest with other people's money?

So it seems like there is some importance to having a pension then. I will begin investing in my pension ASAP. I will not invest the max until I have reached a comfortable rainy day fund.

xylophone

What kind of pension scheme does your employer offer?

How much is the employer contribution? Does it increase if you increase your contribution?

II_D2_II

xylophone wrote: »

What kind of pension scheme does your employer offer?

How much is the employer contribution? Does it increase if you increase your contribution?

I have just looked into my company pension, and I was not aware that you could invest with your pension fund .

the details are as follows:
Employee 3% - Employer - 6%
Employee 4% - Employer - 6%
Employee 6% - Employer - 9%
Employee 9% - Employer - 11.5%

the pension will give me the option to self invest into some equity funds:
UK Equity Index - BlackRock
Global Equity (50:50) Index - BlackRock
Global Diversified Fund - Trilogy
UK Focus Fund - BlackRock
Sharia compliant - HSBC Amanah Fund

Bonds:
Over 5 year index - linked gil index - BlackRock
Over 15 year corporate bond fund - BlackRock


So I guess investing in a pension should be priority for me alongside my rainy day fund right now.

bowlhead99

II_D2_II wrote: »

So I guess investing in a pension should be priority for me alongside my rainy day fund right now.

Hell yeah! They are literally willing to give you an 11.5% pay rise and put it in a pension for you, as long as you put 9% of your own salary into a pension. Only a fool would not sacrifice what they could to get a free double digit payrise in exchange for watching the pennies.

So say if you are earning £24000 or £2000 a month gross. If you give up £180 of your monthly salary they will put in more than £200 of free money AND that £180 only costs you less than £150 net because you would have paid tax on it if you'd taken the cash instead of hiding it in the pension.

For someone with £500-£600 a month of spare cash there is nothing closer to a no-brainer.