Savings Target

Tubemap

Good morning,

I am new on this forum but I have been following MSE for quite some time now and I thought it would be a great idea to get an external point of view on my wealth as well as get some ideas on how to further develop it.

Situation :

-Age : 28 ans.
-Living town : Currently living in London (north).
-Job : Used to work for an investment bank but now working for a Canadian investment company.

Cash Flows:

-Salary : Base salary just below 6 figures. Annual bonus and carry on investment up to 50% of my base
-Day to day spendings: I try to respect a strict budget of £500-600 a month (excluding my rent)
-Monthly saving capacity: c. £2,500
- No mortgage or debt

Current Wealth :

1. Stocks & Shares ISA : Monthly DCA started in January for £2,000 on (i) iShares Core MSCI World ETF USD Acc GBP for £1,500 and (ii) iShares $ Short Dur HY CorpBd ETF $ Dist GBP for £500. I wanted the latter on a Acc basis but it was not available with AJ Bell. I understand that the hedging is costly over the long term but could not find the non hedged ETF.

2. Help to Buy ISA : £200 a month, rate of 2.25% net.

3. I have a couple of boosted saving accounts, one with HSBC Premier at 5% and the other one with 1/2/3 at Santander with a rate of 3%. Both are maxed-out.

4. A 1-year Fixed Term Saving account with Atom at 2.03% net.

5. An account at Marcus by Goldman Sachs that I use for cash surplus. Rate of 1.5% net.

6. Finally I also have a Pension Plan but at the moment I do not maximise the contribution given I rather invest in something that I particularly know with low cost.

My Current wealth as of June 2019 is c. £61,000 excluding my Pension Plan.

I have a target of £75,000 by the end of december and I believe that this goal is achievable but it will depends on the capital market evolution during the following 6 months given my allocation.
Apart from the above target, my main goal is to make my savings growing. I do not have issue with taking risk if an only if I understand the underlying investment. I think that I will start considering buying something once I reach the £100,000 target.
One point which is worth noting is that I currently have £15,000 of liquidity of the Marcus Account.

I am posting today in order to get some ideas or line of approach on how to further optimise my wealth and get an external point of view. Your contribution will be much appreciated.

I also wanted to know whether some people here have an account at AJ Bell and whether this broker is appropriate to invest in foreign stocks.

Thanks a lot

grumiofoundation

1. But confused - Does this mean £2000 per month into stocks and shares ISA, if so this is above the £20k annual limit?

2. To maximise your savings it would
Depending on how much you have in helps to buy ISA and when you are looking to buy a LISA may well be a better option since you can pay in £4K per year rather than £2.4k in HTB.

5. Depends on 1. but can get 1.5% from a cash ISA, meaning you don’t pay tax on this interest.

6. Re pension: You should at a minimum be paying enough into your pension to maximise employer contribution. Further than that since pension contributions benefit from not having to pay tax £600 invested by you is £1000 invested in a pension - so for long term savings this is optimal.

Tubemap

Thanks for anwser Grumio

1. Confusing I must admit. the £2,000 per month is implemented since this month. I still have plenty of room before the £20,000 allowance given I did not use it entirely last year but I did transfer some money into the cash account before the end of the fiscal year so at the moment I am using the cash held into the S&S cash account and not the allowance.

2. At the moment I have c. £5,200 into my Help to Buy ISA. If I understand you completely, I should open an LISA? How does the government contribution work in practice? Is it paid every year on top of the interests?

5. Good question and I am not sure.

6. I will probably max-out the contribution by the end of the year in order to reduce my taxable income.

grumiofoundation

You can open a lifetime ISA today (new 1.4% cash ISA just been announced) with £1 then you have until the end of this tax year to pay in £4000 (this counts towards annual ISA allowance). If it turns out you will buy a house within next 12 months you just don’t contribute any further.

Next July once LISA has been open for 1 year you would be able use it towards house (at this point if you had paid in 8k so will get extra 2k, I think this would beat your help to buy in terms of government bonus).

1k bonus is paid at the end of the tax year so all the previous years bonus’ apart from the current tax year are already in the account.

https://www.moneysavingexpert.com/savings/lifetime-isas/

grnglide

1k bonus is paid at the end of the tax year s

No it isn't.
The bonus is paid in the month following the funds being deposited.


The "following year" was only for the first year the product was available, presumably to allow HMRC time to put the infrastructure in place.

Tubemap

Thank you both.

When you say "The bonus is paid in the month following the funds being deposited.", you mean following the funds being used for deposit to buy a house?

cloud_dog

Tubemap wrote: »

Thank you both.

When you say "The bonus is paid in the month following the funds being deposited.", you mean following the funds being used for deposit to buy a house?

No.

LISA bonus is added the month following a deposit, unlike the HTB ISA where the bonus is paid on purchasing a property; your solicitor actually needs to apply for the bonus.

Tubemap

cloud_dog wrote: »

No.

LISA bonus is added the month following a deposit, unlike the HTB ISA where the bonus is paid on purchasing a property; your solicitor actually needs to apply for the bonus.

Pardon me if I am slow to understand, I am not UK citizen and all of this is quite new for me.

So if I understand correctly, do you get the 25% bonus automatically even if you are not buying anything? If so, let's say I open a LISA today and put £4,000, i should get the £1,000 bonus next month?

cloud_dog

Yes. some other stuff to make it long

grumiofoundation

Tubemap wrote: »

Pardon me if I am slow to understand, I am not UK citizen and all of this is quite new for me.

So if I understand correctly, do you get the 25% bonus automatically even if you are not buying anything? If so, let's say I open a LISA today and put £4,000, i should get the £1,000 bonus next month?

Don’t forget you have to be using Money either to buy a house (under 450k) or you have to be 60+ to withdraw penalty free. Otherwise you pay 25% withdrawal penalty which is more than you put in (even inc. bonus) so only contribute if you are sure you will be using to buy house or if you are happy to leave in until 60.

benbay001

What are you actually saving for though? I am basically your age, earning a whole lot less than you and have basically the same out goings.

Savings are great, but saving more than half of your income 30 years before retirement is certainly odd.