Where should I save money next??

ColdIron

If you do a self assessment just declare it there or phone up HMRC and they'll adjust your tax code next year. BTW in post #4 you said you were a basic rate taxpayer but by post #19 you became a higher rate taxpayer, what happened? HL can be expensive but for small SIPPs they are good and easy to use for a novice

Shabbycat

ColdIron wrote: »

If you do a self assessment just declare it there or phone up HMRC and they'll adjust your tax code next year. BTW in post #4 you said you were a basic rate taxpayer but by post #19 you became a higher rate taxpayer, what happened? HL can be expensive but for small SIPPs they are good and easy to use for a novice

My answer was in anticipation of being a basic rate tax payer next year. Thanks very much for your advice.

Shabbycat

Quick update on my current situation:-years

Nearly 53 years old.
Still mortgage. debt free and no dependants.
25 years of classic pension which will pay approx. £16200 when I'm 60 and 4 years in Alpha approx.£4800 when I'm 67.I will take the Alpha as and when I need it.
I'm back working full time so am a 40% tax payer.
I have 4 more years til I have a full state pension.
I aim to give up my job at the end of May 21 ( still needing 1 more year for full state pension) or if I can manage it May 22.

I have £16500 in VLS60 in a SIPP with HL. I pay in £300 per month.
I have £35000 in cash as follows:
£12200 in a cash ISA.
£11500 in interest paying accounts (3-5%)
£ 6600 in regular savers which are just about to mature
£ 3000 in a one year fixed bond
£ 1500 in an easy access account

I save £1500 every month.
I've been monitoring my spending over the last 12 months and my number is £15,000. This includes a decent holiday, major car repair and some major dental work so room for unexpected bills within that number.

I aim to use this money to bridge th gap between when I give up the job and claiming my pension at 60.

So my question is the same as last year, where is the best place to put my money??? Am I paying too little into the SIPP?? Is there anything else I should consider investing in other than equities? I may have a year off and then either start a small business or get a part time job, especially if I go at 55, but won't be looking to earn much more than £500-700 a month.
The regular savers are approaching maturity and one of the bank accounts bonus term is ending so have £10,000 that I need to place somewhere. Was considering a bond ladder?? How does this work? Does the interest pay at the end of the term?? I've monitoring interest received and predict it will be pennies under £500 this year so have to watch that.
Any suggestions gratefully received.

Many thanks

ColdIron

As a higher rate taxpayer I'd need a pretty compelling reason not to contribute to a pension or SIPP and give up all that tax relief. It might also allow you to reduce or eliminate any higher rate tax on your non tax privileged cash savings

Mnd

cloud_dog wrote: »

Either, as you please. Obviously HL provide a regular investment option and I think (would need to confirm) that you could set it up to collect the cash but not invest it, i.e. leave it in the cash account.

Alternatively, simply deposit the cash as and when.

I can confirm that I pay in monthly by direct debit and just leave as cash, also make ad hoc lump sum payments

Shabbycat

Thanks for the reply. I've been paying sufficient into my SIPP so I can claim back any 40% tax I've paid, plus a bit more. My only concern was investing for such a short timeframe as I will be needing the money in 3 to 7 years, although I have sufficient cash buffer so as not to sell when the market is down.
Maybe I should up my up my monthly payments into the SIPP??
I was also considering paying in a cash lump sum just before I stop working at 55 or 56 so I get the tax relief but earn interest in it til I'm 55 and can access it.

bostonerimus

You are in great shape to retire. You should definitely take full advantage of tax efficient savings and investments so do the ISA and SIPP to the max if you can....as a higher rate tax payer the SIPP might be best if you will be paying less tax when you retire.

Is your pension index linked? If it is you have your retirement spending covered already so there's no need to be adventurous. I like your idea of a savings bond ladder. That's where you buy savings bonds of 1,2,3,4,5 etc year terms and when the 1 year matures you use it to buy another 5 years savings bond. Eventually you have a ladder of 5 year bonds with one maturing each year.

VLS60 is also a very sensible investment for a SIPP in your situation. You have some equities and some bonds in there. I would consider putting as much as you can into the SIPP and also maintain enough in your ISA to bridge the gap to the pension start and be cash and short term bonds heavy as you don't wnat to risk money you have a short term plan to spend. I would also work as long as you can, the smaller the gap to bridge the better.

Shabbycat

Thanks for the reply Bostonerimus. At the moment I'm about a third invested and the remainder cash. Is that the right balance for my plan?? I think I'm going to increase my direct debit to to £500 which will be invested in the VLS60, Is there a platform that pays better interest on cash than HL with no charges??

bostonerimus

I'm not usually an advocate of thinking about chronological buckets of money, but it might be useful in your case. I'd keep enough in cash and fixed term savings bonds, ie that ladder, to comfortably bridge the gap between retirement and the pension starting. Then for longer term spending ie maybe 10 years into the future put money into VLS60...so you should be dividing your investments and savings to achieve those goals, once you have the gap bridged just plough everything into VLS60 in a SIPP and an ISA

will-he-payitoff

Shabbycat, what interest paying accounts are paying 3-5% ?