LISA choices

cloud_dog

Grenage wrote: »

Sorry, yes - we have a salary sacrifice S&S system with Aviva. I am a BRT payer. I was not aware of the 12% NI saving on contributions!

Your company also pays 13.8% NI contributions, some really nice companies pass on some of this savings to you also. We have had some BRT posters on here where their actual contribution (reduction in take home pay) is only costing them a little over half of their actual contribution, i.e. recently a poster confirmed their company gave them half the company's NI 13.8% saving (6.9%) and for an imaginary £100 it was only costing them £61.10 (if my memory is correct).

Alexland

cloud_dog wrote: »

Ummm, just to be clear (as the OP hasn't explicitly stated this):
Is the OP paid via 'Salary Sacrifice' (sometimes call salary exchange)?

The OP stated they had access to salary sacrifice in the 2nd para of their opening post? The extra 12% employee NI saving covers the circa 15% effective tax in withdrawing pension income later. Most companies do not pass on employer NI savings.

cloud_dog

Alexland wrote: »

The OP stated they had access to salary sacrifice in the 2nd para of their opening post? The extra 12% employee NI saving covers the circa 15% effective tax in withdrawing pension income later. Most companies do not pass on employer NI savings.

The reason I asked, specifically, was because I have seen posts on MSE where posters mention salary sacrifice but they have used the term incorrectly when referring to 'standard' pension contribution coming out before taxation and I felt it worth confirming.

aroominyork

Grenage wrote: »

But if my emergency fund was in a bank account or such, it would barely have grown - it would possibly be worth less due to inflation. At least in the S&S ISA it's making great growth, and if I don't face a personal calamity, I'll be much better off in the long run.

You mean “At least in the S&S ISA it's made great growth”. If this was your emergency fund over the last six years which you didn’t need to draw on and which, in my view, you invested with too much risk… then great, you got away with it and have seen it grow. But the future might be different - as you say, if you don't face a personal calamity. Also, while I don’t know what you are invested in, the choice is not between 100% equities or 100% cash – there are multiple stopping points in between.

Grenage

aroominyork wrote: »

You mean “At least in the S&S ISA it's made great growth”. If this was your emergency fund over the last six years which you didn’t need to draw on and which, in my view, you invested with too much risk… then great, you got away with it and have seen it grow. But the future might be different - as you say, if you don't face a personal calamity. Also, while I don’t know what you are invested in, the choice is not between 100% equities or 100% cash – there are multiple stopping points in between.

Yes, you are correct; at the time it was probably too much risk - but I was six years younger. As you say, I got away with it; so in my present situation, surely there is no harm in keeping it in its current state?


Worst case the market tanks and I still have enough, best case it doesn't and I see better growth.


If the markets crashed to the point where it wasn't enough, I'd probably have bigger things to worry about.

bowlhead99

Grenage wrote: »

Yes, you are correct; at the time it was probably too much risk - but I was six years younger. As you say, I got away with it; so in my present situation, surely there is no harm in keeping it in its current state?

Well, you mentioned you were at the point that you've doubled your money and can take a 50% loss while still having more than you put in.

However, the amount you put in presumably *wasn't* at the level where you could lose your job or replace the roof, because you say, "but it's *now* at a level where I wouldn't have to panic for a while if I lost my job, or the roof needed replacing".

So when you say 'in my present situation, surely there is no harm in keeping it in its current state...", perhaps there is at least some potential harm, because in its current state the markets could move against you leaving in a position where you may be in trouble if you lost your job or needed a new roof while markets had tanked and you had your money tied up in equity funds.

Worst case the market tanks and I still have enough, best case it doesn't and I see better growth.

If you genuinely would have enough accessible if your existing funds tanked and your future money was invested in somewhere inaccessible like a pension - then I guess there's no harm in it.

If the markets crashed to the point where it wasn't enough, I'd probably have bigger things to worry about.

I suppose it depends on the magnitude of loss really. A global equities-only tracker could crash 40-60% over the space of a couple of years, and take some time to recover. If you can stand that, or if your funds aren't all in equities so would not be expected to fall so far, you are probably OK.

Still, you mention only having invested for six years, and if you have been feeding the money in gradually over that time (so the money's been invested less than 6 years on average) and has more than doubled, you could feasibly expect it to halve in a bad crash.

It's not really the case that we need to be as far gone as a post-apocalyptic wasteland for you to shrug off a deep equity crash as, "oh well I guess I can't afford to lose my job now, but it's more important to sharpen my zombie-fighting skills and keep my kids safe from cannibals than worry about any of that".

Grenage

Thank you for your chorine comprehensive reply.

I moved my emergency money into an ISA 6 years ago, and have been drip feeding 10% of my take-home on a monthly basis - I plan to increase to 15%.

I should have been clearer in my original post that the emergency money is twice what I'd now need, but the monthly additions have added on top. I could bear a 50% loss and be ok.

I'll stock up on canned food and sharpen my sword for the latter situation.