What would you do?

lolamancity

Hi all,


I'm interested in what other people would do in my situation. I'm 34, 2 kids, a partner (unmarried) and a home owner (mortgage). I paid into a LGPF for 12 years, was made redundant, and it's frozen as it is for now. It's highly unlikely it would ever be paid into again.

Currently, i am not working as i am recieving carers allowance for my youngest son who is disabled. The carers allowance for me and DLA for him would never be a guaranteed long term because DWP chop and change their mindabout the level of financial assistance they award you - in fact, i'm awaiting the result of his renewal now. Realistically, i am always going to be his carer with or without financial assistance, but to what extent, we just don't know as he's only 4 and it's impossible to predict his long term needs. It is highly unlikely i would ever be in a well paid job (and paying into a pension) ever again.

My partner earns above the average, and his wage is just about enough for us to survive on. The carers allowance and DLA allows us to live a comfortable life above that. He pays a decent amount into his company pension, i am his nominated beneficiary BUT we're not married, so that may cause issues.


I have a fluctuating £18k - £20k from previous redundancy and a house sale in a Santander 123 current account. This money has always been our safety net but i am aware it's not really reaching any potential sat in that account.


I pay into 2x Junior ISA's for my children each month, but i'm not 100% happy with that as a long term investment for them.



I am due to recieve between £10k - 15K as a very rough estimate in inheritance at some point this year - which leads me onto my question....


With very little prospect of a pension, a decent amount of investable money at my disposal, large chunks of spare time and a lot of shrewdness, what would you do with my money?

Martin's MSE email this morning drew me to his article on 'robo-investment' - it seemed like a good idea for someone in my position, but i also felt like it was a little 'lazy' considering i have time on my hands to potentially gain more from investing. Maybe i'm wrong.


I have done very basic amounts of research into investing so far, but i feel i'm getting bogged down by the vastness of it all. I would prefer to focus on a few specific realistic options and then invest all my time and effort into researching those. I am open to moderate risk, and my long term aim is safeguarding my childrens future (particularly my disabled son) and the financial survival of old age for my partner and I!


Thanks in advance for your opinions!

Alexland

Hi

Crikey, you have provided a lot of information to digest!

I would suggest you understand more about the Junior ISAs if the kids are young then stocks and shares would provide the best opportunity for growth above inflation. I wouldn't waste time researching individual shares but try to find a suitable low cost fund from a good company like Vanguard. I wouldn't put too much in their name at this point as you might want to keep some control on the money and it might affect eligibility for benefits in future.

I wouldn't worry about Robo Investing being a lazy option but it is worth spending some quality time thinking about how your money would be invested and if the investment approach is suitable for you.

There are a number of tax advantages to being married but I wouldn't do it unless you are doing it for the right reasons.

Keeping a rainy day fund in cash is good practice but I would try and get a better return maximising 5% accounts between you and your partner.

Alex

ValiantSon

I'd second all of Alex's comments.

Have you and your partner made wills? It's a truly horrible eventuality to have to think of, but the sad truth is that sometimes terrible things happen and as an unmarried couple this can get very complicated, so if you haven't made wills then do so now. Seriously, do it without delay because if you put it off it might be too late. I don't mean to depress or worry you, but this is so important. Trust me on this one.

Robo investing is fine if that is what you feel most comfortable with. There are cheaper ways of doing it, but there is nothing worng with paying a little more for peace of mind at the present. You can always switch to self-managing investments at a later date as and when you become more confident. However, if you do want to explore those options a little further right now, then I suggest having a look at multi-asset funds like Vanguard LifeStrategy, HSBC Global Strategy and Blackrock Consensus. Each of these comes in different mixes of equities and bonds, with the greater proportion of equities increasing the risk, but also the potential returns. If you do decide to pursue any form of investment then I would always advocate doing it in a tax efficient way,

https://www.trustnet.com/fund/search/vanguard%20lifestrategy (Top five in the list).

https://www.trustnet.com/fund/search/hsbc%20global%20strategy (Top four in the list).

https://www.trustnet.com/fund/search/blackrock%20consensus (Top five in the list).

Equally the Vanguard funds are probably particularly worth thinking about for your children's JISAs. If you did decide to go down that route (as cash ISAs are offering pitifully poor returns and over a substantial period of time S&Ss are likely to significantly outperform cash savings) then I'd suggest paying particular attention to Vanguard's own JISA, which has a very low platform fee of 0.15%. Here are a couple of links:

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-junior-isa

https://www.vanguardinvestor.co.uk/what-we-offer/life-strategy-products

I hope this is of some help in starting to sort a plan, but do come back and post more questions. There are lots of people's brains to pick!

xylophone

It is highly unlikely i would ever be in a well paid job (and paying into a pension) ever again.

Assuming that you work again it is likely that you would be contributing to a pension.

https://www.gov.uk/workplace-pensions/joining-a-workplace-pension

In the mean time, you could consider paying £2880 per annum into a simple stakeholder and transfer this into a workplace pension in due course.

Or you might consider an ISA.

https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

http://monevator.com/using-vanguard-lifestrategy-funds-life/

kidmugsy

Is it possible to estimate the size of your eventual state pension and your eventual LGPS pension?

lolamancity

Wow, thanks for your brilliant replies guys.

Alex - i am a TERRIBLE waffler and that OP was probably the most concise i've ever been! This is why i headed to this forum first, i do have access to an IFA i've used for mortgages in the past, but i tend to get anxious about offending people if i don't do as they suggest and end up clouding my own judgement! Therefore i really appreciate your informal opinions about my options.

In terms of the kids ISA's - would these be easy to close and transfer to something more profitable? My eldest son's was forced into a JISA from the short-lived farce that was Child Trust Funds - when they went defunkt, the only option was a JISA, so that's where i took it, and set one up for my smallest boy at the same time - approx 3 years ago. The restriction from CTF to JISA at that time wouldn't affect my ability to move the money again now would it? I'm definitely not keen to put much in either of their names now - i'm not 100% comfortable with them being able to do whatever they want with that money when they reach the age they can do so and am not planning to even tell them i've been saving money for them unless absolutely neccessary! I roughly calculated that they'd both have £10k by 18 as things currently stand, but i want to bump my youngest son's higher than that because of his disability payments.

Forgot to mention in the OP - my partner is putting away as much as possible in a 5% saver, ditto his pension payments, and we're overpaying on the mortgage. The pension thing is becoming more of an issue the more i actually stop to think about it - he's only paid an 'ok' amount into it for 2 years (he's 30) and we've loosely discussed his pension needing to be enough for both us us, but the more i read, the more i realise it doesn't work like that!

Valiant - we have very basic mirror wills through his trade union. They only differ slightly where it comes to care (not money) of my eldest son (different dad).

Thanks for the Vanguard JISA links - that's absolutely the kind of thing i had in mind.

In terms of your 'robo' investing advice, i think you've made my mind up for me - i was thinking the major advantage was that it would be a safer introduction into investing with a good opportunity to learn along the way. I'll definitely look into your suggestions, i keep reading about Vanguard, so need to look more into that one - i also did a bit of reading last night and Nutmeg and Moneyfarm were mentioned a lot. I decided i liked the sound of Moneyfarm more, but they don't offer anything relating to pensions ( is it a SIPP?) so i was wondering if it's possible to maybe run 2 products at the same time (Stocks and shares ISA and a SIPP maybe?) And what are the differences between Moneyfarm/Nutmeg and Vanguard/Blackrock/HSBC?

I'm thinking i would like to set something up now... using a small (£300-£500) deposit and then regular monthly payments. And then if and when this larger inheritance comes through later this year, start something with a much larger amount. I'm also pretty open to both being high risk because i'm still relatively young. Would a SIPP come under the first plan, and then a S&S ISA for the second? Am i talking absolute BS?!

Xylophone - Yes you're right, i would be paying into a pension (no choice now!) but it would almost certainly be part time/low paid work (or ideally Self employment of some sort), and it's never going to be substantial enough to make a difference tbh. Thanks for mentioning the Vanguard/Monevator options though - i definitely need to research more.

Kidmugsy - my deferred statement states a one-off lump sum of £4643 and a yearly amount of £3484. Doubt it'll even cover the gas and electric!

Thanks SO much for your time everyone, i really do appreciate it

Alexland

Now the Junior ISAs are open with contributions only the child can access the money at 18 (unless HMRC agree they are terminally ill, etc) so there is no option to close the account. However you can move the JISA between providers and change between cash and stocks & shares investments.

Building up a personal pension big enough for one person is a big challenge but trying to generate enough income to support two is really tough. I assume your partner is contributing enough to get maximum employer contributions and avoid 40% tax or child benefit claw back? After that it's worth considering using S&S Lifetime ISA(s) for additional investing if you have money available.

Also I assume you have checked your state pension forecast and the child benefit is in your name so that you get the NI credits required to build up state pension entitlement? Sometimes it can be worth buying missed NI years but if money is tight this might not be an option.

Alex.

ValiantSon

lolamancity wrote: »

In terms of the kids ISA's - would these be easy to close and transfer to something more profitable? My eldest son's was forced into a JISA from the short-lived farce that was Child Trust Funds - when they went defunkt, the only option was a JISA, so that's where i took it, and set one up for my smallest boy at the same time - approx 3 years ago. The restriction from CTF to JISA at that time wouldn't affect my ability to move the money again now would it? I'm definitely not keen to put much in either of their names now - i'm not 100% comfortable with them being able to do whatever they want with that money when they reach the age they can do so and am not planning to even tell them i've been saving money for them unless absolutely neccessary! I roughly calculated that they'd both have £10k by 18 as things currently stand, but i want to bump my youngest son's higher than that because of his disability payments.

Any money currently in the JISAs belongs to your children and cannot be taken or hidden from them. If you think about it, if a parent was able to make use of this money then they would in effect be getting an additional ISA allowance, compared to someone without children, which would be unfair. You don't need to tell them anything about it until they are 18, but once they get there they can to do with it as they please. You just have to hope that you have managed to bring up sensible children who understand the value of money and won't just squander it.

That £10,000 each could be substantially more if invested in a good multi-asset tracker in a S&S JISA.

You can move the cash JISAs to any other JISA provider, including S&S JISAs. You do this using a transfer in. There will be information about this on the JISA providers website. Vanguard, for example, have a button clearly labelled, "Transfer An Account" on the JISA information page.

lolamancity wrote: »

Forgot to mention in the OP - my partner is putting away as much as possible in a 5% saver, ditto his pension payments, and we're overpaying on the mortgage. The pension thing is becoming more of an issue the more i actually stop to think about it - he's only paid an 'ok' amount into it for 2 years (he's 30) and we've loosely discussed his pension needing to be enough for both us us, but the more i read, the more i realise it doesn't work like that!

It is possible that his pension will be enough to support both of you, but it may not provide enough for much in the way of extras and luxuries. It's great that he is trying to maximise his pension contributions now. Employer contributions will also be helping, so it's worth checking that he is putting in enough to get the maximum employer contribution (obviously assuming that you can both afford for him to pay that much). The more he can invest in his pension, the greater the chance that his pension will provide a retirement income that you can both survive on.

You should ensure that he has nominated you as the beneficiary of his pension scheme in the event of his death.

lolamancity wrote: »

Valiant - we have very basic mirror wills through his trade union. They only differ slightly where it comes to care (not money) of my eldest son (different dad).

I'm glad to hear that you have made wills. Another thought, however, is life assurance. If it isn't already in place then it would be well worth buying so that, should anything happen, there is money to pay off the mortgage, at least. Along with this critical illness insurance may also be a good idea.

lolamancity wrote: »

Thanks for the Vanguard JISA links - that's absolutely the kind of thing i had in mind.

In terms of your 'robo' investing advice, i think you've made my mind up for me - i was thinking the major advantage was that it would be a safer introduction into investing with a good opportunity to learn along the way. I'll definitely look into your suggestions, i keep reading about Vanguard, so need to look more into that one - i also did a bit of reading last night and Nutmeg and Moneyfarm were mentioned a lot.

If you think robo investing is a good way forward to begin with then go for that option and continue to research multi-asset funds. You can always move your ISA to a new provider or, at the start of each new tax year, open a new ISA with someone else and keep your exiting investments with the robo (that way potentially avoiding losing out if the investments are currently at a low point).

lolamancity wrote: »

I decided i liked the sound of Moneyfarm more, but they don't offer anything relating to pensions ( is it a SIPP?) so i was wondering if it's possible to maybe run 2 products at the same time (Stocks and shares ISA and a SIPP maybe?) And what are the differences between Moneyfarm/Nutmeg and Vanguard/Blackrock/HSBC?

You'd need to open a SIPP with a different provider, as you are right that none of the robo firms currently offer one. However, as you aren't currently working, you can only pay a small amount into your pension. You are only allowed to put in up to the value of your income for the year to gain the tax relief (up to a maximum of £40,000), so if you earned £20,000 you could put £20,000 into your pension, but if you do not have an income on which you are paying income tax, then the maximum that you can put in is £2,880 (which will give you an extra £720 contribution as tax relief).

Using an S&S LISA would give you a 25% bonus on each year's contributions, up to the age of 50. You can't take the money out until you are 60, but if you put the maximum £4000 in each year then you would actually get £5,000 invested. I'm not prying, but to simply to illustrate, I will assume that you are the same age as your partner. You would be able to invest £80,000 in the LISA to age 50 and with the bonus that investment of your money would actually amount to £100,000, so the LISA is well worth considering. You don't have to contribute every year, although I would advise doing so if you can afford it, and you can choose to stop contributing after 50 when the government bonuses stop, but keep all the investments in place to draw on at 60.

The £4000 p.a. LISA limit comes out of your total ISA allowance for the year, so it would leave you with an allowance of up to a further £16,000 to invest in a S&S ISA each year.

N.B. As we are talking about saving for retirement I wouldn't even consider cash LISAs or ISAs as the interest rates are rubbish and, over the next 20-30 years you are likely to realise much better returns in S&S.

The number of providers offering an S&S LISA is pretty low. Nutmeg do offer an S&S LISA, but they are the only robo who do. Going down the multi-asset fund route there are still only a few options, and I would only consider two of them: for a Vanguard or HSBC fund, then I'd look at AJ Bell Youinvest, and for a Blackrock fund I'd look at Hargreaves Lansdown.

The fees with Nutmeg, Moneyfarm and Wealthify are as below, as are investing in a Vanguard LifeStrategy 80, HSBC Global Strategy Dynamic, and Blackrock Consensus 85 on the cheapest platform for each (platform shown in brackets):

Nutmeg = 0.72% (for the fixed allocation portfolio)
Moneyfarm = 1.00%
Wealthify = 0.89%
Vanguard LifeStrategy 80 (Vanguard Investor) = 0.48%
HSBC Global Strategy Dynamic (Cavendish Online) = 0.47%
Blackrock Consensus 85 (Hargreaves Lansdown) = 0.46% (N.B. I cannot find the transaction costs for this fund).

As you can see, the robo investments are more expensive, but there are other factors to consider when making an investment decision.

What was it that you preferred about Moneyfarm compared to Nutmeg?

It may also interest you to know that there are some cashback offers currently available with some of the robo firms. You've already seen through this week's e-mail that Wealthify will give you £40 on an investment of £400 that you hold for at least six months. Moneyfarm (via Topcashback) will give you £126 on an initial investment of £1500, with a monthly direct debit investment of £150 for a minimum three month investment; or £210 on a £900 monthly direct debit for a minimum three month investment. Nutmeg are not currently offering a deal. I would only make use of one of these offers, however, if you did decide to go for the robo option to begin with.

Note that your S&S LISA and S&S ISA do not need to be with the same provider.

Links for each of the platforms mentioned below:

Vanguard Investor https://www.vanguardinvestor.co.uk/

Cavendish Online https://www.cavendishonline.co.uk/

Hargreaves Lansdown http://www.hl.co.uk/

AJ Bell Youinvest https://www.youinvest.co.uk/

lolamancity wrote: »

Xylophone - Yes you're right, i would be paying into a pension (no choice now!) but it would almost certainly be part time/low paid work (or ideally Self employment of some sort), and it's never going to be substantial enough to make a difference tbh. Thanks for mentioning the Vanguard/Monevator options though - i definitely need to research more.

Any money put away in an investment will make a difference thanks to compounding of interest. Just because you might not be able to manage large sums, don't assume it isn't worth doing.

lolamancity

Thanks Alex. Think I'll definitely go for the 2x JISA with Vanguard then. I'm swaying towards the 80/20 option, or is this too risky? 1 child is 9 with £5.1k in a cash ISA, the other is 4 with £2k so quite a while before they turn 18, at which point I'll have very heavy influence on making them turn it into something else similar.


Also think the S&S LISA seems to be a good idea too. Partner is contributing enough to max the employer contributions and we are very aware of the 40% tax and. Child benefit implications and have already decided that we'll just bump his pension contributions if that starts becoming an issue. He earns between £41-43k but he's at a point where his next step soon would be advanced roles with more money so it is in our thoughts.


I've also always kept my eye on my state pension forecast, no gaps in that as yet.


Thanks so so much Valiantson, you are absolutely amazing!


I'm decided on the kids JISA's with Vanguard Lifestrategy although as I mentioned above, slightly torn about which option.... Would you say the 80/20 for JISA would be a good bet?

I'd never hide the money from them or even take it (i can't even bring myself to borrow a quid out of their piggy banks in emergencies!) Son 1 is super sensible and also mega intelligent so has got mega potential if he makes the right choices, and son 2 is unlikely to ever manage his own finances without at least a bit of assistance (and his money will likely be going towards him living independantly), but i would want to sit down and have a really good chat with them about it and make it clear what the money was/is intended for, so would prefer a pinky finger grip on it even when it is signed over to them fully!

Life assurance we've toyed with, but partner gets an occupational one (only death or injury in work I think) and my parents aren't shot of cash & would help out in immediate emergencies, not ideal but we keep putting it off (I know, I know!) He's also nominated me to get his pension so we're covered in that respect at least & is paying the most to get the max employer contributions.


I'm definitely going to open a S&S LISA for a pension then. I can't afford to pay large amounts into it because it's too risky to lock it away but I'm definitely going to get it rolling anyway. I'm thinking maybe the Nutmeg LISA, mainly because I'm still a total novice, and for now, a robo investor seems a safe bet. I can always change it to something I can have more of an input with in years to come?


And finally.... In terms of my large amount of rainy day/emergency funds and due inheritance... I'm going to open a S&S ISA with a robo investor for at least a few years so i can learn along the way. I think I decided on Moneyfarm over Nutmeg and Wealthify because I read a few lengthy expert comparisons and also a fair few pages of user reviews and people seemed to be mentioning more success with Moneyfarm.


One thing I'm still a bit confused about though.... Is Vanguard Lifestrategy a robo investment? From what you've posted, they obv have much lower fees, but do they operate in the same way as Moneyfarm? I've tried a load more reading into it but I still can't work it out!


Which would you go with purely for the 'robo' investment?


Ive got a top cashback account so I'm even more swayed towards Moneyfarm now!


I can't tell you how helpful you've been so far, I appreciate it immensely! My finances have been a cloud over my head for years now!

Alexland

On the 80/20 JISA it's worth playing with the Vanguard asset mixer to understand you volatility tollerence to the ups and downs across a calendar year. Remember the ups and downs over a rolling year could be more severe.

https://www.vanguardinvestor.co.uk/investing-explained/tools/asset-mixer

I would be tempted to invest the JISA in Target Retirement (Target Date) funds which reduce stock market and foreign exchange volatility as the target withdrawal date approaches.

https://www.vanguardinvestor.co.uk/what-we-offer/target-retirement-products

So assuming they might need the money at 18 then its really a medium term investment so maybe VTR2030 (currently 68/32) for the 4 year old and VTR2025 (currently 63/37) for the 9 year old? Others might say this is too conservative.

I wouldn't get tied up with the 'robo' terminology. Both Vanguard and Nutmeg are automatically adjusting their allocations according to an algorithm.

I think Nutmeg fixed allocation portfolios are a good choice for a LISA (our are with them) however Hargreaves Lansdown investing in Blackrock Consensus 85 (similar to Vanguard LifeStrategy but lower cost on HL) is also a good long term option and marginally cheaper so we will probably move. HL are a lot more financially secure than Nutmeg who remain loss making. I just lack the motivation to do the application and transfer form.

We did Moneyfarm for the TopCashBack bonus but they don't do pensions or LISAs, the fees were high and it was nothing special so we closed the accounts.

Alex

BLB53

One thing I'm still a bit confused about though.... Is Vanguard Lifestrategy a robo investment? From what you've posted, they obv have much lower fees, but do they operate in the same way as Moneyfarm? I've tried a load more reading into it but I still can't work it out!

VLS is a fund offered by Vanguard and is held by investors via a platform such as Vanguard Direct, Hargreaves Lansdown or AJ Bell Youinvest for example.

Here an article on DIY Investor relating to Robo Advisors which may help?
http://diyinvestoruk.blogspot.co.uk/2017/08/a-look-at-uk-robo-advisors.html

If you know what funds to select eg Vanguard Lifestrategy and you can set up with a low cost provider such as Vanguard Direct you would save around 0.5% in charges.