after the 5% loopthread

geoff42

What happens then, when one has exhausted all the current accounts that offer 3% and above, and has maxed all the ongoing regular savers accounts? I'm not that close yet; only around 23K doing the rounds. But after, is it 50K?, all those avenues have been closed out, are we left with the meagre ISA's? I'm a long time single man who intends to be single for a long time; no dependents; working full time with overtime thrown at him left, right and centre. Give or take two and half years, I will surpass 50K in savings. Just kind of wondering: max the pension to full hilt or venture into stocks and shares, although I've never been comfortable with fluctuating charts - give me a steady roundabout over a roller coaster.

colsten

Do you own your home? If not, why not?

What are your pension arrangements?

What is your tax rate?

fun4everyone

There are quite a few harder to get regular savers, local building societys and such. Some are listed on the official MSE page.


After that there are stocks and shares ISAs, P2P (isas?) or instant access savings accounts. You don't have to take a large risk with a S&S isa, you could use it to invest in safe gilts and bonds. Lower return but safer.


Perhaps someone else has better ideas than me but these are the things you could look into.

geoff42

hi, colsten, I did own a home with ex wife; went south along with divorce; she got the cherry, I got the cocktail stick. Cut my losses. Only a work pension scheme which I've just increased to 6% this year, the max which is allowed for employer to match. Tax rate is standard at moment in time. I've only been saving for three years and, in the last year, began the 5% loophole system. A bit of a newbie in these fields, but still like to think ahead.

geoff42

thanks, fun4, I figured it would be something along those lines. As I said previously, I still have around 2 and half years before I get to that point. I imagine when the sums become too unwieldy, one would need professional financial guidance. You know, for some reason, i'm really going to dread that.

bowlhead99

Even though you're not higher rate tax and extra pension isn't a complete no-brainer, you certainly need some money for retirement.

6% from you and 6% from employer in your pension is not a huge amount of money - especially if this isn't based on the 'normal' income that you're used to living on, i.e. overtime money etc. If you only put 12% of your pre-overtime gross salary away, for (say) 40 years of work age 20-60, what percentage of your average gross salary will that allow you to live on for the 40 years of retirement when you don't have a job age 60-100? It will be more than 12%, due to investment growth, but maybe not as much you want to live on. And it sounds like you and your employer have only only been contributing at that 12% rate for a relatively short space of time. So, makes sense to increase that a bit.

If you don't know what life will throw at you between now and your late 50s, and (for example) you don't own a property and will need one to live in before retirement stops you earning enough money to buy one, you shouldn't lock up *all* your retirement money inside a pension of course. A stocks and shares ISA can give the same benefits of tax-free growth and can hold the same sort of investments as a pension. This is great for long term instead of short term spending needs even if you don't use it for outright retirement. You could always use some of it to fund more pension contributions in some later year of your life if you become a higher rate taxpayer in the future and want to be able to make larger pension contributions at that point to avoid the higher rate income tax on your salary.

Basically, although investments go through ups and downs, they typically grow at a rate higher than inflation over the long term, while cash doesn't (especially when you've used up the best promotional rate current accounts). So if you want to actually grow your money in real terms, to help buy houses or cars or fund future relationships or whatever, you need to use investments. If you use savings (which don't grow in real terms) instead of investments (which do), you are going to have to put away larger percentage of your salary over the course of your life to fund your spending needs. In other words, by being nervous about investing, you are working harder, for longer, or giving up more current enjoyable spending, to buy the same stuff as everyone else who does embrace investing.

You mention only earning enough for basic rate tax. So let's say you're on £30-£40k gross which is about £24k-£30k net. You are talking about growing your money from £23k to £50k in a bit more than a couple of years, so presumably putting away £1k a month into saving, so what you're living on is not the full £24-£30k but more like £12k-£18k.

So if your life currently costs you £12-18k (£1-1.5k a month), or maybe even less. And you are talking about getting £50k of ready cash in a savings or current account. That would be about 33 to 50 months usual spending money (or even more) in your 'rainy day' fund instead of an investment pot.

Given the rainy day fund will just sit there and not really grow over time because cash savings barely beat inflation, (apart from on a few thousand of it in the top accounts), that's one heck of a lot of money to decide you need in the rainy day fund rather than investing to grow for your retirement or future spending needs.

Maybe the £23k is all money you're planning to spend on buying another property in the next few years, so it's only the money beyond £23k that will act as your true 'emergency fund', perhaps you need six month's living costs. But after that, you should definitely be looking at investments. This could include (e.g.) p2p lending, but for most people would typically involve buying a shares-based investment fund or two inside a S&S ISA.

Dan83

Why stop at 3% savings accounts? There will be accounts paying upto 2.99% that don't get mentioned.

The only account I know of is Yorkshire bank, pays 2%. I can't remember all the ins and out of the account, but I'd guess there are more interest paying accounts out there.

Archi_Bald

Dan83 wrote: »

Why stop at 3% savings accounts? There will be accounts paying upto 2.99% that don't get mentioned.

can you mention them?

Dan83 wrote: »

The only account I know of is Yorkshire bank, pays 2%. I can't remember all the ins and out of the account, but I'd guess there are more interest paying accounts out there.

YB pays 2% on up to £3,000. All the good accounts for cash are mentioned here. I agree with bowlhead99 that geoff42 should look into much more than cash savings.

geoff42

thanks, bowlhead, for your detailed reply. You're almost spot on as regards my finances, of which my savings is all spare money for the future. So, you've certainly made me think seriously about investments. cheers.

enjoyyourshoes

Sipp's are worth looking at as the Govt contributes.

As mentioned earlier Stocks and shares ISA, for the long term. But this is investing not savings.

These could be used for the results of the annual maturity of your regular savings accounts !?

Also watch out for tax on your savings as the first £1000 only is tax free if standard rate taxpayer (£500 if higher rate). So S&S isa pops up again ?