Finance Review

MallyGirl

S&S are really for the long term - 10 years plus. It doesn't seem like that is right for you at the moment

Outsider_83

I would say plug £1000 into stocks and shares.

YellowStarling

Hi OP, not sure if your stating of 10% overpayments on mortgage is allowed is indicating you are already doing that or not, but - if not - then that might be a consideration for additional money you'll have each month once you begin recycling your current RS maturities, given the interest rate on your current term is almost as high, if not higher, than the average yields from current accounts and RSs.


As for the £5k incoming (if it's separate to the RS maturities - again I may have misunderstood), personally I'd use that plus a slice of your maturing RSs to pay off the folks. Clean slate for you and, at least, a nice gesture for them or, at the more extreme end, a weight off of their shoulders as, assuming you've not agreed an interest rate, that £5500 is simply being eroded by inflation the longer they don't have it (no response required - not prying!).


Next, depending on when your student loan was taken out (i.e. 16 years ago at 18, or more recently if a mature student) then I'd also look at paying that off if it is a more recent loan (as the interest rate has or is going up I believe and will be close if not higher than average current and RS yields) and before you start the new tax year if you currently pay it out of your income, as these repayments rely on HMRC data one a year (meaning you could end up paying all of the loan off part-way through the year but they will continue to deduct it from your wages until April next year and then reimburse you the overpayment, with which you could have been outing to use this year). If you have a lower interest rate SL, circa 1.5%, then I'd be tempted to just let that run down naturally, as your £900 could be earning more through other means.


Once the above is considered, you could use the rest (bulk) of your maturing RSs to maintain a cash emergency fund in a series of the current accounts (instant access) or RS (restricted access?) or a notice account (not instant access, but not restricted) that have already been suggested to you.


Following all of this, I appreciate you explaining it's not your priority at present, and you already have an adequate pot building, I would be looking to use the 'new' £500 per month you advise you'd have (i.e. what today would be your RS contributions but in the future you'll have matured RS funds to recycle as described above) to explore upping your pension contributions via AVCs (additional voluntary contributions) as suggested by another poster earlier, and/or beginning a LISA (to be used for pension as you're already a homeowner) - the business case for each depends largely on your tax situation and is beyond the scope of my post, but there are plenty of threads over on the Pensions board and handy calculators on the net.


Eventually, once you have enough in accessible funds, debts cleared, mortgage renegotiated at a better rate, pension contributions at a decent level, you could turn your horizon to S&S ISA, which is a tax-free (but with varying degrees of risk) way to speculate over the longer term for historically greater returns than cash savings.

chockydavid1983

Before paying off extra student loan, read this:
https://www.moneysavingexpert.com/students/student-loans-repay
AFAIK, it's normally not worth it.

Cotta

YellowStarling wrote: »

Hi OP, not sure if your stating of 10% overpayments on mortgage is allowed is indicating you are already doing that or not, but - if not - then that might be a consideration for additional money you'll have each month once you begin recycling your current RS maturities, given the interest rate on your current term is almost as high, if not higher, than the average yields from current accounts and RSs.

As for the £5k incoming (if it's separate to the RS maturities - again I may have misunderstood), personally I'd use that plus a slice of your maturing RSs to pay off the folks. Clean slate for you and, at least, a nice gesture for them or, at the more extreme end, a weight off of their shoulders as, assuming you've not agreed an interest rate, that £5500 is simply being eroded by inflation the longer they don't have it (no response required - not prying!).

Next, depending on when your student loan was taken out (i.e. 16 years ago at 18, or more recently if a mature student) then I'd also look at paying that off if it is a more recent loan (as the interest rate has or is going up I believe and will be close if not higher than average current and RS yields) and before you start the new tax year if you currently pay it out of your income, as these repayments rely on HMRC data one a year (meaning you could end up paying all of the loan off part-way through the year but they will continue to deduct it from your wages until April next year and then reimburse you the overpayment, with which you could have been outing to use this year). If you have a lower interest rate SL, circa 1.5%, then I'd be tempted to just let that run down naturally, as your £900 could be earning more through other means.

Once the above is considered, you could use the rest (bulk) of your maturing RSs to maintain a cash emergency fund in a series of the current accounts (instant access) or RS (restricted access?) or a notice account (not instant access, but not restricted) that have already been suggested to you.

Following all of this, I appreciate you explaining it's not your priority at present, and you already have an adequate pot building, I would be looking to use the 'new' £500 per month you advise you'd have (i.e. what today would be your RS contributions but in the future you'll have matured RS funds to recycle as described above) to explore upping your pension contributions via AVCs (additional voluntary contributions) as suggested by another poster earlier, and/or beginning a LISA (to be used for pension as you're already a homeowner) - the business case for each depends largely on your tax situation and is beyond the scope of my post, but there are plenty of threads over on the Pensions board and handy calculators on the net.

Eventually, once you have enough in accessible funds, debts cleared, mortgage renegotiated at a better rate, pension contributions at a decent level, you could turn your horizon to S&S ISA, which is a tax-free (but with varying degrees of risk) way to speculate over the longer term for historically greater returns than cash savings.

Thanks for this reply.

In relation to mortgage overpayments, I have not been making any, I felt it was more prudent to build up a cash stockpile as there was a point during which I was living payday to payday.

I called in relation to my Student Loan, there is only seven instalments left as the loan company added on recent payments and based on this I don't think it's worth paying off early?

I do agree that some of the £5000 coming my way will be going towards my parent's loan.

I assume the over gist of this thread is that I am not in a good position to look at ISA S&Ss at present?

chockydavid1983

It's up to you of course but in your position I'd reassess once the remortgage is done- if you still have extra cash after getting a good deal on that, then consider S&S ISA/ Pension.

YellowStarling

Cotta wrote: »

Thanks for this reply.

In relation to mortgage overpayments, I have not been making any, I felt it was more prudent to build up a cash stockpile as there was a point during which I was living payday to payday.

Agreed, an emergency fund you can get easy access to is a sensible approach. Advisable amounts range from 3-12 months' worth of outgoings. However, once you've got that in place, a oft-recommended next step is to begin reducing your costliest debt (i.e. overpayments on your current mortgage term in your case, both because the interest rate is comparatively high but also because paying more capital off might get you into the next LTV bracket down which will bring a lower interest rate at renewal by itself. This is assuming no significant credit card debt or personal loan debt?) and/or to prepare even more readily for your future by looking at your pension. Rule #1 is to try to get the maximum contribution from your employer. which you've already done, so you're onto whether you think AVCs would give you a bit more security or enjoyment later in life. A good (though lengthy) thread on the Pensions board about how to work out what you (might) need to enjoy your retirement is one called The Number - check it out.

Cotta wrote: »

I called in relation to my Student Loan, there is only seven instalments left as the loan company added on recent payments and based on this I don't think it's worth paying off early?

As Chocky posted above, it's very rare that paying off a SL is advisable, and I did aim to capture this in my original post too. Sometimes, when it gets to the smaller amount, it may be more comfortable to pay it off before a new 12-month round of HMRC deductions begins, but it all rights itself regardless.


If it's a post-2012 loan then this additional article may be of interest, as it covers in more detail what little I could remember off the top of my head when posting yesterday.


https://www.moneysavingexpert.com/students/repay-post-2012-student-loan

Cotta wrote: »

I assume the over gist of this thread is that I am not in a good position to look at ISA S&Ss at present?

In fairness, your approach looks (from what I can tell from a stranger on the net!) to have been pretty much the right steps in the right order: explore debt reduction (mortgage, parents, SL), explore cheaper debt (mortgage renewal), emergency cash fund (maturing RSs to be recycled - just make sure some if not all of it is accessible).


Following the above, your 'surplus' £500 per month could either go towards topping up your recycled RS funds if you decide your emergency cash fund isn't enough, utilising some or all of the 10% mortgage overpayment opportunity, topping up your pension AVCs or LISA, or beginning an S&S ISA (as you can contribute to one of those as well as a cash ISA each year, or into one alone, up to the value of £20,000 new contributions) - it could even be a combination as Chocky hinted at. You know the mantra by now: It all depends on your circumstances, risk appetite and horizon (i.e. length of time you can leave your assets untouched).


Or you could put some of it towards a nice holiday or treat - but then this is the Savings board!:money: