Investment Advice £30k + £300pm

Murphy_

Hi All,

I’m looking for some advice on how best to invest £30k + £300pm.

I’m 32 with no dependants and my current financial situation is as follows:

House worth approx £400k, £110k mortgage with 25 years remaining.

Cash (Marcus Online Saver) - £30,000

Pension (Standard Life BlackRock ACS World ex UK Equity Tracker - 85%, Vanguard Emerging Markets Stock Index - 9%, Vanguard FTSE UK All Share Index - 7%) - £24,000 + £583.33pm

S&S ISA (Vanguard VLS100) - £7,000 + £250pm

P2P (Ratesetter Rolling Market) - £1,000

I’m thinking of putting lump sums into both the pension and ISA and increasing my monthly ISA contribution to £500. I’d also be open to growing my P2P holdings.

is this the sensible thing to do or are there any other options i’ve missed? Would contributing to a LISA in my situation make sense?

Any advice on what you would do in my situation would be appreciated.

Thanks in advance!

Alexland

If you are paying higher rate tax and/or your employer operates salary sacrifice then making additional pension contributions is usually best but the money is likely to be inaccessible until at least age 58. Pension contributions need to be supported by sufficient relevant tax year earnings.

If you are basic rate then S&S LISA would beat a S&S ISA however the money would be tied up until 60 unless you paid the early withdrawal penalty.

What are your objectives?

Alex

Murphy_

Thanks Alex, I'm a basic rate tax payer and do utilise salary sacrifice.

I am currently contributing 17% and my employer 3% into my pension which Is the maximum they offer.

I’d like to retire early, ideally around 55 however i’m unsure how realistic this is at present.

Alexland

Well if your employer offers salary sacrifice then even at basic rate there is not much point getting a S&S LISA as the benefit is broadly equivalent to additional pension contributions. Still worth opening one before 40 to keep options open.

It is likely the age you can draw you pension will keep going backwards with increasing life expectancy (although the rate of increase is declining) so you might not get access until around 60.

As such it is worth considering a S&S ISA to bridge the gap. Although I like VLS60 and VLS80 if you want 100% equities there are better options than VLS100 even on the Vanguard Investor platform.

Alex

Murphy_

I currently hold a S&S ISA with CSD invested in VLS100. Current value is £7k with £250 added each month.

What fund would you recommend over this and would I be best to deposit a lump sum or invest smaller amounts gradually?

Would it be worth adding more to P2P to diversify my investments at all?

Alexland

If you are only invested in one Vanguard fund why would you pay CSD 0.35% when Vanguard Investor are 0.15%?

According to the Vanguard fee disclosure VLS100 has an OCF of 0.22%, transaction costs of 0.08% and is of course around 25% UK shares.

By comparison their FTSE All World ETF has an OCF of 0.25% and transaction costs of 0.01%.

Or you could build a cheaper blend of 90% in their FTSE Developed World ETF at 0.18%/0.01% and 10% in their Emerging Market fund at 0.27/0.03%

Or if you want to stay with CSD for whatever reason consider the HSBC FTSE All World fund.

I consider P2P a novelty and have only opened accounts for signup bonuses but otherwise the risk doesn't really seem to justify the return above cash.

Alex

Murphy_

Many thanks again Alex.

When I first started looking to invest the CSD platform was highly recommended however I wasn’t aware you could invest directly with Vanguard and the fees are certainly preferable. I will definitely look into switching.

Sorry for the potentially daft question but why would advise to move away from VLS100 fund. I understand there is a high uk bias but do my pension funds not balance this out? (BlackRock ACS World ex UK Equity Tracker - 85%, Vanguard Emerging Markets Stock Index - 9%, Vanguard FTSE UK All Share Index - 7%).

Finally, would you recommend investing in large sums or gradually month by month?

Alexland

I am not recommending anything just chatting and giving you some lower cost ideas to consider.

Yes your pension choices dilute your UK bias but you are still overweight overall with VLS.

Historically you are better putting money in earlier but you could get unlucky and it could crash shortly after. Lots of ways to get into the swimming pool.

Alex

Murphy_

I think I will keep things simple - 10k into pension, 20k into ISA and increase monthly contributions.

I will however investigate the funds you mentioned to see if they would be better suited and look at investing direct with Vanguard.

Thanks for your help.