Is it time I brave the world of investing or have I missed something?

hanb

Hi all,

Long time lurker who often thinks about this and then chickens out but I'll soon be gifted 50k and so I need to really think about what I'm doing.

I'll try and keep this brief but imagine some info on current standing would help:

I'm almost 32, my partner and I bought our first house almost 3 years ago & still have 2 years on our fixed term. The fixed term is just a top up (£28k) as the bulk of the mortgage is an employee deal at base rate so no point in overpaying that. We do overpay the 10% allowed on the top up (2.69%) each January. We're currently at about 56% LTV with 127k equity.

I'm a regular tax payer and I pay 8% in to my pension and my employer pays 12% (this is the max they offer) and that's currently worth 15k.

I then have money in various places:

Prem. Bonds 10,257
Marcus Account - 1.5% 12,060
HSBC ISA - 0.85% 320
HSBC Reg. Saver - 5% 2,000
Nationwide ISA - 1.1% 1,590
Nationwide RS - 5% 2,000

Current accounts (HSBC & Nationwide) for use 0% 1800. I don't have enough direct debits to utilise all the current account offers.

In the future we're likely to move house but not for a few more years I don't think. I guess kids could be on the cards in the next couple of years but very much undecided! We definitely won't be spending a chunk of money on a wedding!!

So, I think that's everything. Am I missing anything that I should be doing before I consider 'investing'? Or shall I start looking in to S&S ISA's and the likes now?

System

hanb wrote: »

I'm a regular tax payer and I pay 8% in to my pension and my employee pays 12% (this is the max they offer) and that's currently worth 15k.

That is very kind of your employee!

webjaved

Remember you can only put in £20k into a S&S ISA during the tax year. That would leave you with £30k. Not sure what you'd do with that.

MaxiRobriguez

I would question:
1) Your relatively low pension.
2) You have no exposure to stocks.
3) Too much allocation to premium bonds.

£20k into S+S ISA and £30k into Marcus.
Then £20k into S+S ISA in April 2020.
Then £10k and £10k from premium bonds into S+S ISA in April 2021

Buy a cheap global index tracker and be done with it. Use the money in future years to top up your position.

Increase pension contribution in the mean time if you can too. Even if company don't go up any further than 12%, you're still getting a 30% or so uplift on initial investment as avoiding tax implication.

You're doing OK though, well done.

hanb

Economic wrote: »

That is very kind of your employee!

Haha oops! I shall amend that now, thank you!

hanb

MaxiRobriguez wrote: »

I would question:
1) Your relatively low pension.
2) You have no exposure to stocks.
3) Too much allocation to premium bonds.

£20k into S+S ISA and £30k into Marcus.
Then £20k into S+S ISA in April 2020.
Then £10k and £10k from premium bonds into S+S ISA in April 2021

Buy a cheap global index tracker and be done with it. Use the money in future years to top up your position.

Increase pension contribution in the mean time if you can too. Even if company don't go up any further than 12%, you're still getting a 30% or so uplift on initial investment as avoiding tax implication.

You're doing OK though, well done.

Thank you!

1) I need to dig out whether I have anything from a previous job but considering it was before auto-enrolment I have little hope. I only upped my payments in to my pension the last couple of years and I hope for a payrise this September.
I guess I should look at sticking some more in there though.

2) Yep, I've always been a bit scared of the whole thing which is daft I know. The thought of just sticking 20k in and hoping not to lose it is a scarier prospect than complaining about low interest on regular ISA's though

3) That's 'leftover' from when I had my house deposit in there for relatively easy access. I was doing well when I had a lot more in there but now I'd say I win £25 every other month so could be worse but time to think about it.

Thanks again for your advice.

OldMusicGuy

You are already investing if your pension is DC, which it sounds like. So why are you worried about investing? A good starting point would be to see where/how your pension is invested and decide if that's right for you, and if you want to add to that.

IMO a combination of pension savings and S&S ISAs makes sense.

MaxiRobriguez

The pension is likely to be sat in a default fund if our friendly OP hasn't paid much attention to it, which will no doubt have too much allocation to UK stocks and too much allocation to bonds for their age.

It's not good enough just to be "putting money into a pension" - you need to know what the underlying investments are in order to grow your money most efficiently. At 32 you have probably three decades before you can access this stack of cash so now is the time to be taking on additional risk and going for 100% equities with a large emerging market allocation precisely because you don't want to be doing this in your 50's when retirement starts to loom in the nearish horizon and volatility suddenly becomes more important to manage.

hanb

OldMusicGuy wrote: »

You are already investing if your pension is DC, which it sounds like. So why are you worried about investing? A good starting point would be to see where/how your pension is invested and decide if that's right for you, and if you want to add to that.

IMO a combination of pension savings and S&S ISAs makes sense.

It's hard to navigate our pension site but it's with Standard Life and looks to be the below:

Composition of Portfolio by Fund:
SL Vanguard FTSE Developed World ex UK Pension Fund 50.0%
SL Vanguard FTSE UK All Share Index Pension Fund 50.0%

And then I have the option to switch to this (they would switch me automatically when I'm 10 years from retirement apparently).

Composition of Portfolio by Fund:
SL Vanguard UK Investment Grade Bond Index Pension Fund 33.8%
SL Vanguard UK Long Duration Gilt Index Pension Fund 33.3%
SL Vanguard UK Inflation Linked Gilt Index Pension Fund 32.9%

MaxiRobriguez

hanb wrote: »

It's hard to navigate our pension site but it's with Standard Life and looks to be the below:

Composition of Portfolio by Fund:
SL Vanguard FTSE Developed World ex UK Pension Fund 50.0%
SL Vanguard FTSE UK All Share Index Pension Fund 50.0%

As expected, far too much UK allocation and no emerging market exposure. At least there's no 40% bond allocation which is a bonus mind.

Edit: Editing as I've just seen you've edited your post around the option to change in 10 years... Don't change to that! It'll kill any growth in your portfolio when you still have 20 odd years left. Besides, surely you can change to funds that you want to choose? You might be limited to what SL offer, but they can't just offer you the choice of a inefficient stocks choice or a inefficient bond choice - you should be able to construct your own portfolio.

Edit2: I misread when they would switch you... sorry. It's definitely worth considering a more defensive portfolio ten years from retirement but 100% bonds is too much. You're not going to take all of your pension in one go at retirement anyway so you'd want to have at least a large minority allocation of stocks to continue growing the money even after retirement. A consistent 60% stocks, 30% bonds, 10% cash would probably be as defensive as you needed to get - live off the cash and sell stocks to top up your cash pot to keep it at a consistent 10%. If stocks are down, sell the bonds instead.

TLDR: See what other options for constructing a portfolio of your choice is.

webjaved

If worried about sticking in £20k into a S&S ISA - maybe stick in half and then drip feed into the ISA each month - or stick in £5k and go about it that way, build up some confidence in investing and then build on it. That is what I did.

Global Index Tracker is the way to go. Diversify as much as possible.