How are your savings and investments allocated?

BenjiCat_2

Hello,
Long time lurker here, have found these forums a useful resource for everything from DIY to pensions!

I will try to keep this brief, I have always been quite prudent with outgoings but only in the last year I have seriously started to think about making the best of my financial situation and investing for the long term future.

Stats:
- 30 years old
- 39k salary
- married wife also working
- no kids
- no loans, credit cards, finance etc
- £130k outstanding mortgage which is £480 a month minimum repayment but we are overpaying by an additional £570 a month
- rubbish pension - minimum workplace pension, have only been paying in since it started so April 2017 I believe? Currently paying in 6% + 2% employer
- instant access cash I have £5600 in a Marcus account and regular savers
- cash ISA - £7200 (also withdrawable at any time in an emergency)
- S&S ISA - £7100 (LS80 and an emerging markets ETF)

Thoughts:
- I think I should increase my pension contributions as that is the obvious weak spot, but I quite like the idea of having that money in a S&S ISA instead as it keeps options open?

- I am probably being too cautious with holding that much cash and should invest more into the S&S ISA especially whilst interest rates are so low, if I did lose my job our mortgage is small and general outgoings are also low?

- Are there any other/better investment vehicles I should be putting that cash into? I have looked into p2p lending and decided it wasn't really worth it.

I guess I am thinking I should be investing more of my salary each month, and also re-allocating some cash but not sure where.

TIA

jonnygee2

8% pension contributions isn't actually that bad but you should probably try to increase to more when you are able. Tax benefits usually make pensions the best option (by some way) for any savings you don't need before 55.

Personally I am 35. I have a pension fund of just under 50k with 20% contributions (salary 60k), all in equities.

Cash savings about 12k. About 6k in crowd funding shares (its a hobby!). Everything extra goes into mortgage over repayments rather than savings accounts, I have a mortgage for 300k (London!).

Personal thoughts - like you I could do more with some of my cash savings and may be over doing my pension. And I need to start putting money into doing up my house too.

Mr.Saver

- rubbish pension - minimum workplace pension, have only been paying in since it started so April 2017 I believe? Currently paying in 6% + 2% employer

This caught my eyes. The minimum workplace pension contribution in 2018/19 year is 3% + 2% employer, so you aren't paying minimal. You are paying slightly more than the minimum.

Pension gives you 20% tax relief, I bet your mortgage doesn't have this high APR. Think about it and then you'll know what's the right thing to do.

BenjiCat_2

Mr.Saver wrote: »

This caught my eyes. The minimum workplace pension contribution in 2018/19 year is 3% + 2% employer, so you aren't paying minimal. You are paying slightly more than the minimum.

Pension gives you 20% tax relief, I bet your mortgage doesn't have this high APR. Think about it and then you'll know what's the right thing to do.

Sorry, meant my employer contributes the minimum, I voluntarily increased mine almost as soon as it started.

Alexland

Have you considered a S&S Lifetime ISA? As you are basic rate and there is no tax on withdrawal it might be more efficient than making additional unmatched pension contributions. Unless you get salary sacrifice NI savings in which case it's about the same.

Alex

Mr.Saver

BenjiCat wrote: »

Sorry, meant my employer contributes the minimum, I voluntarily increased mine almost as soon as it started.

So, you and your employer are paying in total 9% into your pension, this isn't impressive. Unless you have other source of income at retirement (e.g. another pension, rent income, etc.), you really should increase your pension contribution if you want to keep the same life style you have right now.

Alexland

Our workplace pension recently sent out forecasts in a new format and it caused a few people to sit up and realise that if you pay peanuts in you will only get slightly more peanuts out again after adjusting for inflation.

Alex

Mr.Saver

Alexland wrote: »

Our workplace pension recently sent out forecasts in a new format and it caused a few people to sit up and realise that if you pay peanuts in you will only get slightly more peanuts out again after adjusting for inflation.

Alex

It didn't help my friend who believes his top priority is his mortgage and help to buy equity loan. He believes that his house will somehow become his reliable main retirement income source, although he has never had any experience of being a landlord.

fiisch

Are you planning on children? Are you planning a job move any time soon?

I am was in a similar place at 30 (I'm now 32 and with a child in tow) - earnings have increased significantly, but as a freelance contractor so much less security so greater need for easily accessible emergency funds, and wife no longer working.

Personally, I would not increase pension contributions as:

a). If you become a higher rate tax payer, that is when it makes (even) more sense (especially if you qualify for marriage tax allowance);

b). You might want more available savings to you if you are planning children in the foreseeable future.

I'd go with S&S ISA for now - if you're LTV is >60% on your house, I'd drop the overpayments too and put in to S&S ISA, but then I am a risk taker..!

kidmugsy

The most efficient way to overpay the mortgage may be for each of you to put £250 p.m. into a Nationwide regular saver paying 5% AER, and then use the annual maturity capital to pay the mortgage company.

What is your mortgage interest rate? What is your current LTV?

Unless you and your wife have unusually secure jobs your holding of cash doesn't seem excessive to me.

In your shoes I'd also pay attention to the comments above on the potential superiority of a LISA over bunging more than the sensible minimum into your pension.

Mr.Saver

fiisch wrote: »

Personally, I would not increase pension contributions as:

a). If you become a higher rate tax payer, that is when it makes (even) more sense (especially if you qualify for marriage tax allowance);

I hardly agree.
Pay more into pension now means you get the 20% tax now and you earn capital gains on the 20% too.
Also, judge by the amount OP pays into his pension, he is far away from the lifetime allowance. Therefore, contribute more to a pension now doesn't prevent him from paying more in the future if he becomes a HR tax payer.

fiisch wrote: »

b). You might want more available savings to you if you are planning children in the foreseeable future.

I agree, but secure the retirement is important too. OP will need to balance between pension and savings.