37yr, Mortgage Free with £170k savings - Advice Appreciated

MrWebDesign

I wanted to get some advice on my personal circumstances below, where my current goal is to try and maximize my savings, which currently are not doing an awful lot for me:

Summary:
37yr Old with Wife and 2 kids (7 & 8)
Home-owner (paid off mortgage last year)
Monthly Income: £5,050/month
Monthly outgoings: £1,200/month
Savings: £169,000 (£125k + £44k ISA)
Bank Acct: First Direct

I've got a very basic pension in work and have always viewed my salary as a way of saving each month for the future. It has allowed me to pay off the mortgage and now the surplus each month just goes into a basic First Direct savings account earning...well, not a lot.

Whilst I am commercially savvy which is my job in sales, I am inexperienced in personal finances and savings/investments etc and have always had a 'safe' home for my money, which is typically my bank.

I would really value any advice on what I should perhaps be exploring or actually do given my circumstances above!

Thanks for any advice!

ColdIron

Employers will usually match your pension contributions up to a set limit. Are you at least contributing that much to your pension?

MrWebDesign

Hi - I just checked my payslip and I currently pay £100/mth into my pension.

Rollinghills

If I were you I would really look into boosting your pension. Check your company pension scheme in detail.

For every 1000 you earn (above the tax bracket), you pay 40% income tax. So you only get 600. But pension contributions are tax free, so 1,000 goes straight into your pension pot. It is hard to get a 40% return on even the most risky investments.

My husband pays 30% of his income into his pension (30,000 a year), and his employer adds 7%. We will have to reduce this when we start paying our mortgage but it is the most tax efficient form of saving.

At 100 per month you are paying very little into your pension given your income / finances.

masonic

It would probably be worth seeking out an IFA. Holding that much in cash is probably not a great idea and I sense you would not be comfortable making your own investment decisions.

ColdIron

MrWebDesign wrote: »

Hi - I just checked my payslip and I currently pay £100/mth into my pension.

That sounds very low, too low. An employer will often match your contributions up to a certain percentage of your salary, say 4% -> 8%, you need to check what that is and make sure you pay in at least that much otherwise you are throwing away free money. Pension contributions are tax free as well which is also free money especially if you are a higher rate taxpayer. It would be foolish to disregard these incentives

noggin1980

I'd put all the ISA money in stocks and shares ISA to the max you can for both you and your wife, then set up a monthly payment into both isas after april 6th to put £1250 in each each month, depositing the full 30k in april is probably more lucrative but you might like the decreased varience that comes from depositing monthly especially after you would have just deposited a big lump sum in shares.

read Tim hales book and the monevator site for help with that.

I'd be putting plenty in my pension, or opening a private SIPP if you think your works plan is no good. I'd probably wack a good 30k in now to give it a good boost.

3 new current accounts at santander, you, wife and joint, 20k in each paying 3% before tax.

I'd get all that sorted and then see whats left and think again what to do with that.

ColdIron

noggin1980 wrote: »

set up a monthly payment into both isas after april 6th to put £1250 in each each month

£1,270 after April 6th

noggin1980

MrWebDesign wrote: »

Hi - I just checked my payslip and I currently pay £100/mth into my pension.

Put in loads more, remember if you put £8k in that becomes 10k instantly because of the 20% tax that you haven't paid, then when you do your tax return you get another 20% back.

Many pensions are even better than that because the employer will be matching some and some reduce the amount of national insurance you pay too.

Pensions, stocks and shares ISA, good 3%+ current accounts then reassess imo. Or see an IFA but I think its much better to get some knowledge of your own before doing that, so you know if the advice is good.

noggin1980

ColdIron wrote: »

£1,270 after April 6th

very true ty

xylophone

Improve your pension provision - presumably you are losing your family allowance?

http://www.theguardian.com/money/2013/sep/28/child-benefit-pension-contributions-higher-earners

http://www.hl.co.uk/pensions/interactive-calculators/tax-relief-calculator

Get your cash savings into high interest current accounts for you and your wife?

Start stocks and shares ISAs for you and your wife?

Does your wife have a pension?

Re new state pension https://www.gov.uk/new-state-pension/overview