Pensions and LISA

[Deleted User]

I'm after a bit of advice or guidance about savings and investments. I have seen IFA in the past but I've not been terribly impressed. They all seem to want to sell my life insurance even though I am single with no dependents and one was trying to sell me a service that looked very much like YNAB for £75 a month.

I used to contract and when I did I set up a private pension, through an IFA, with Aegon in a moderate risk portfolio. I also have a pension through work with Scottish Widows and that has a moderately adventurous portfolio. I did seek some advice about moving my pension with Aegon to Scottish Widows but the advisor said it wouldn't be worth the fees.

I currently pay 5% of my salary and my employer pays 8% into my workplace pension. I had been thinking about increasing this and now that the Scottish government wants me to pay more income tax I think I shall just pay more into my pension. I haven't paid anything into the Aegon pension for a few years now.

As a higher rate tax payer I know the LISA isn't particularly attractive until you've used up all pension allowance at the higher rate (or maybe I am wrong). I am wondering if I should open one anyway because if I went back to contracting in the future it probably would become more attractive.

I don't have any other investments. I have some cash savings and most of the rest of my money I spent buying my home a couple of years ago and doing it up, new central heating, new kitchen, replastering the walls after removing woodchip wallpaper, etc.

I do have a cope of Tim Hale's "Smarter Investing" I just haven't got round to investing anything other than in my pensions.

Should I move me private pension? Should I perhaps look at another more adventurous portfolio within Aegon? Should I do as a colleague suggested and just blow my money on drugs and hookers?

chockydavid1983

Do you have a sufficient emergency fund? I.e. 3-6 months expenses?
How far are you from retirement?
How much are the local drug dealers/ hookers charging?

[Deleted User]

chockydavid1983 wrote: »

Do you have a sufficient emergency fund? I.e. 3-6 months expenses?

No, more like one month at the moment. I have a lot of credit at 0% at the moment and my goal is to get that paid off in the next 18 months before I start getting charged interest.

chockydavid1983 wrote: »

How far are you from retirement?

Not a clue. At the moment I won't be eligible for my state pension for another 31 years but I expect that to change as the government moves the goal posts again. Not that I think I will be eligible for a state pension when the time comes because I strongly suspect that it will be means tested by the time I reach that age. 31 years is really just an arbitrary figure as I haven't thought much about when I would like to retire.

chockydavid1983 wrote: »

How much are the local drug dealers/ hookers charging?

Not sure, more research required.

[Deleted User]

Should the 3-6 months emergency fund be 3-6 times your gross or net income?

chockydavid1983

Different people have different views on this.
I tend to go with essential expenses rather than income so mortgage, bills, food etc.
So i could survive x months without any income.
Of course, this also covers unexpected expenses such as boiler break down.
Some people also hold a reduced emergency fund if they have easy access to credit.

Does increasing pension contributions mean you get more matched by your employer? Definitely do that if so. Adding more to pension as a HRTP is generally a good idea if you won't need the money any time soon, otherwise I would go S&S ISA for the flexibility (over LISA as you already have a home).

dunstonh

Lover_of_Lycra wrote: »

Should the 3-6 months emergency fund be 3-6 times your gross or net income?

it can be 12 months. Any figure is just a guide. No hard and fast rule.

If you were made redundant tomorrow, with no income and forget jobseekers allowance, how much would you need to survive with all bills paid and life continuing? Take that figure and go for 6-12 months as a guide.

[Deleted User]

chockydavid1983 wrote: »

Different people have different views on this.
I tend to go with essential expenses rather than income so mortgage, bills, food etc.
So i could survive x months without any income.
Of course, this also covers unexpected expenses such as boiler break down.
Some people also hold a reduced emergency fund if they have easy access to credit.

I've been using YNAB for a few years now so I should be able to sit down during the Christmas holidays and work out how much I'll need for essential expenses and unexpected expenses.

chockydavid1983 wrote: »

Does increasing pension contributions mean you get more matched by your employer? Definitely do that if so. Adding more to pension as a HRTP is generally a good idea if you won't need the money any time soon, otherwise I would go S&S ISA for the flexibility (over LISA as you already have a home).

8% is the maximum my employer will contribute so I wouldn't get anymore by increasing my contributions. The main driver for me wanting to do it is that as of the next tax year I will fall into the new 41% tax bracket in Scotland so will be approximately £1,000 a year worse off than I am now, not that I'm badly off by any means but if there is a way to (legally) organise my finances to maximise tax efficiency then I'll take it.

The S&S ISA is probably a good idea for me so that I have some medium term investments rather than just cash and pensions.

I forgot (I know that's terrible) that I do actually have some other investments. I work for an employee owned company and I bought shares in the company because a) I also received matching and partnership shares so 3 for the price of 1, and b) it stopped me spunking my money on fripperies.

JustAnotherSaver

Lover_of_Lycra wrote: »

Should the 3-6 months emergency fund be 3-6 times your gross or net income?

As the man said - there is no rule.

I only came to be aware of this way of thinking (building an emergency backup) from reading these forums & 3 months seemed to be the common figure with some people suggesting 6.

I was going to ask the question also - just bills or whole income until i decided that since income is greater i'll just go for that based on 'better to be safe than sorry'.

We took a £10k hit when we bought the house so we're having to build towards having an emergency fund. With all other outgoings my plan at the moment is £85 per month for 5 years which will give us a 3 month income pot (approx). It's a gamble doing it this way but we all make decisions and have to stand by them.

Once that target it met i will reduce the monthly payments a lot and slowly trickle it to 4 months. I'll not build anything greater than 6 months.

[Deleted User]

dunstonh wrote: »

it can be 12 months. Any figure is just a guide. No hard and fast rule.

If you were made redundant tomorrow, with no income and forget jobseekers allowance, how much would you need to survive with all bills paid and life continuing? Take that figure and go for 6-12 months as a guide.

That makes sense. I guess it's a bit arbitrary like my retirement age (at the moment).

Malthusian

Lover_of_Lycra wrote: »

I forgot (I know that's terrible) that I do actually have some other investments. I work for an employee owned company and I bought shares in the company because a) I also received matching and partnership shares so 3 for the price of 1, and b) it stopped me spunking my money on fripperies.

Are you able to sell the shares without losing the 2 extra or any tax benefits?

Generally employee shares should be sold as soon as possible and reinvested into a diversified portfolio. Individual shares are always ultra high risk anyway, and especially when you're working for the company, as if the company goes bust you lose both your job and your savings.

With 30 years to retirement you can in theory afford to be adventurous with your pension - without risking permanent or total loss - as you have 30 years to ride out stockmarket crashes. However, it is easy for me to say that and just as easy for you to panic in a market crash and decide that you're going to sell your adventurous funds and buy cautious ones, while saying "why did I listen to that guy on the Internet".

Trying to sell you life insurance when you have no dependants is a bit odd for an IFA in this day and age (an FA i.e. a salesperson would be a different matter). Are you sure it wasn't income protection they were trying to sell you? How would you pay the bills in the event you were unable to work for a long time (long enough to exhaust the emergency fund) due to something like a serious car accident or depression?

[Deleted User]

Malthusian wrote: »

Are you able to sell the shares without losing the 2 extra or any tax benefits?

IIRC I need to keep the shares for 5 years before I can sell them to keep the extra 2 and not pay tax. If I sell between 3-5 years I can keep the extra 2 but will be taxed. I bought my first ones in the 2013/14 tax year so I've got a couple of years to go yet.

Malthusian wrote: »

Generally employee shares should be sold as soon as possible and reinvested into a diversified portfolio. Individual shares are always ultra high risk anyway, and especially when you're working for the company, as if the company goes bust you lose both your job and your savings.

Understood. I think I'm capped at £1,800 a tax year for shares and whilst I'm getting 3 for 1 I think I'll keep buying them and then cashing them in to invest elsewhere once the 5 years are up.

Malthusian wrote: »

With 30 years to retirement you can in theory afford to be adventurous with your pension - without risking permanent or total loss - as you have 30 years to ride out stockmarket crashes. However, it is easy for me to say that and just as easy for you to panic in a market crash and decide that you're going to sell your adventurous funds and buy cautious ones, while saying "why did I listen to that guy on the Internet".

:rotfl:

I don't disagree that my pension portfolios could be more adventurous especially the one with Aegon. Fortune favours the brave!

Malthusian wrote: »

Trying to sell you life insurance when you have no dependants is a bit odd for an IFA in this day and age (an FA i.e. a salesperson would be a different matter). Are you sure it wasn't income protection they were trying to sell you? How would you pay the bills in the event you were unable to work for a long time (long enough to exhaust the emergency fund) due to something like a serious car accident or depression?

It was definitely life insurance that two of them wanted to sell me so "all" was a bit of an exaggeration, two thirds would be more accurate.

I am lucky in that I get a good level of sick pay from my employer and private health insurance so if I did have an accident or similar I reckon I would have about a year of breathing space when I get rid of my debt (all 0% at present) so that's my next financial goal. However, after reading the Debt Free Wannabe board it seems incredibly easy to contact your creditors and say that you can't pay any more than £1 a month but I would rather avoid having to do that.

If I went back to contracting it would be a different story. I could probably last 2 months, 3 tops if I was unable to work.