What would you do if you had £400 a month to save?

AngelOfTheNorthWest

That's very useful information about private pension v LISA tax implications, especially for me. Would this still be true for my OH? He is on about 30k at the moment without factoring in any bonus and he and employer make minimum contributions.

Thrugelmir

AngelOfTheNorthWest wrote: »

Oh yes we do have insurance too, but I'm thinking of the security of using it to build up some more assets.

Then spread the money available across the different pots. Impossible to predict the future. Having flexibility is importanr and the ability to withstand sudden financial shocks while still having an eye on the very long term.

Alexland

AngelOfTheNorthWest wrote: »

That's very useful information about private pension v LISA tax implications, especially for me. Would this still be true for my OH? He is on about 30k at the moment without factoring in any bonus and he and employer make minimum contributions.

If your partner is on a higher income then they are more likely to build a big enough pension pot to pay income tax in retirement. Don't get me wrong you should both contribute enough to get maximum employer matching. However if you are thinking of contributing more then as basic rate taxpayers consider a LISA.

Alex.

AngelOfTheNorthWest

His pot is apparently only going to be something like 70k at current contribution rates, so I'm not sure either of us are on track to be even basic rate taxpayers in retirement! But yeah, will look at the LISA as we both pay the maximum our employers will match.

Nobody seemed to think overpaying more on the mortgage was the way to go then? I find the idea of being mortgage free as soon as possible very seductive, but of course it's not necessarily the best use of funds purely in terms of how best to make the money work for you.

Alexland

Indeed assuming you both retire at State Pension age then at a circa 3.5% draw down rate then it might be that neither of your combined SP and workplace pension incomes cause you to be taxpayers in retirement.

Overpaying the mortgage does give comfort but over the long term S&S investments (in the pension or LISA wrapper) have historically produced more than a 2.19% return. It's a risk/reward decision for you to make.

kidmugsy

I'd consider the mortgage carefully. Is it fixed rate? If so, when does it mature? On remortgaging would going for a lower LTV reduce your interest rate? Could saving at 5% AER put you in a position to get a usefully lower LTV?

I'm a pessimist on likely stock market performance for the next few years, so you should allow for that in my comment.

Saving at 5% is what will give you max flexibility. Your next big decision would be what to do in a year or so's time.

AngelOfTheNorthWest

Good question. We have just over another 4 years to go on this fix, and I am of the view that rates are likely to increase a bit which is why we chose the longer fix. The value of the house is maybe 135-140k, so we're hovering just under 30% equity at this point, and with the current overpayment schedule we would be borrowing just under 60% LTV next time IF prices were to stay the same!

I'd pretty much thought that it made most sense to max out the 5% available to us, but I'm also conscious that with pensions (and therefore also the LISA?) money put in earlier is better than money put in later.

kidmugsy

In your shoes I think I might:

(i) Open a LISA each with a small sum, so that they've definitely been opened before age 40. Then late in every tax year until you've turned 50 you can consider adding more, depending on your circumstances at the time.

(ii) For pension saving beyond that necessary to gain the max employer contribution, just wait. Eventually you'll perhaps get better terms e.g. salary sacrifice, or higher tax rebates for basic rate tax payers, or whatever. That's when to contribute more.

(iii) Each time a 5% regular saver matures reconsider.

AngelOfTheNorthWest

Thanks for your thoughts. We both have a bit to go before 40 but it does no harm to get it started. I'm definitely thinking it makes more sense to look at other ways of retirement planning rather than simply putting more into not particularly generous employer pensions.

What do people think of the idea of focusing more on overpaying the mortgage until that's paid off at 50ish and then looking more at retirement options?