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Compound interest

edited 30 November -1 at 12:00AM in Savings & Investments
25 replies 1.8K views
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  • Dazed_and_confusedDazed_and_confused Forumite
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    I am absolutely self employed and file my tax returns I can assure you on that.

    You'd be surprised at the number of people who start a pensions thread and say they are self employed and then after several different people have posted useful responses (based on the op being self employed) the op suddenly mentions that they aren't actually self employed but are the director of a limited company and don't have any self employment income :mad:
  • Mrc44Mrc44 Forumite
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    :wall: well I can assure you I am self employed :beer , does my thought of opening the s&s isa and letting that lump some sit and grow over 10+ years in there whilst investing £5000 lump sum and £200mnth in to a SIPP every year sound like a viable option or would that be not making my money work for me as good as it could?
    Sorry for sounding clueless on finances I’m just trying to get a good understanding and a bit of a head start before paying to see a IFA with regards to make my money work better than sitting in the Marcus account.
  • Alistair31Alistair31 Forumite
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    Mrc44 wrote: »
    :wall: well I can assure you I am self employed :beer , does my thought of opening the s&s isa and letting that lump some sit and grow over 10+ years in there whilst investing £5000 lump sum and £200mnth in to a SIPP every year sound like a viable option or would that be not making my money work for me as good as it could?
    Sorry for sounding clueless on finances I’m just trying to get a good understanding and a bit of a head start before paying to see a IFA with regards to make my money work better than sitting in the Marcus account.

    Within the S&S ISA and SIPP, what do you intend to invest in ?
  • AlbermarleAlbermarle Forumite
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    Would a s&s isa perform as good as a SIPP over such time frame?
    The key thing to understand here is that a SIPP or an ISA do not perform, they are simply a tax wrapper ( in the jargon) . Your money in both will be invested in funds linked to the financial markets . If you have the same fund in both they will perform the same . If you have different funds in each they will perform differently .
    The difference is that with a pension you get tax relief on your contributions and you potentially pay tax when you take the money at 58( or later ) With a S&S ISA you get no tax relief on contributions and no tax or restrictions when you can take the money . The pension has the tax advantage ( especially for a 40% taxpayer ) but is less flexible.
    does my thought of opening the s&s isa and letting that lump some sit and grow over 10+ years in there whilst investing £5000 lump sum and £200mnth in to a SIPP every year
    It's difficult to say what is exactly right for you but it does not seem an unreasonable plan.
    paying to see a IFA with regards to make my money work better than sitting in the Marcus account.
    Do not want to be rude, but I do not think the sums you are talking about are really IFA territory and they are not cheap . In any case your questions have been largely answered for free on this forum ;).
    Suggest you do some more research/googling and if you have any other questions please feel free to ask.
  • edited 12 January 2020 at 11:36AM
    Sheriff_FatmenSheriff_Fatmen Forumite
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    edited 12 January 2020 at 11:36AM
    Mrc44,
    1. Its all about you deciding when you would like to spend that money; its difficult to decide

    2. With your emergency fund covered + no mortgage + ongoing income (ability to save more if you can/like), will you really need that 10k in 10 years time or will you have saved some more for your spending plans?

    3. The sooner you get money into your pension the better; you will need it if you get there. You get massive tax benefits; its a no-brainer.

    4. The only question is whether to invest your pension just now into equities or lower risk cash/gilts, i.e. the equity markets have had a good time last 10 years; some folk may be twitchy about a crash. You could either put it in as a lump-sum, drip payments. As your plan is 10+ years I would suggest stick it it as a lump some deciding on your own personal preferred split between equities/gilts (bonds), e.g. 80%/20%
  • Mrc44Mrc44 Forumite
    50 posts
    10 Posts
    Thank you very much for that informative reply Albermarie, That has cleared a few things up for me and I shall definitely be taking your advice and going away and doing some more reading/googling. Is there some good providers you could recommend regarding s&s ISAs and sipps? I hear about H&L , vanguard and Aj bell a lot but are these necessarily the best?
    Thank you appreciate your help.
  • Mrc44Mrc44 Forumite
    50 posts
    10 Posts
    Thank you for your reply sheriff fatmen,
    In regards to “that” money then more than likely I probably won’t need it in 10years time and can/will be saving more in the meantime for other spending plans which is why I said about putting it in the best place it would reap the best % for me as at the moment it’s just sat in an account paying 1.4%. I could put in more but I like the comfort of having a set amount to hand if ever I need it. I am comfortable with the risk of letting said amount ride out any dips over a longer period of time to hopefully grow and return a good % long term.
    Thank you for your advice , appreciate it
  • jimjamesjimjames Forumite
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    Aminatidi wrote: »
    You won't get 4% without taking some risk on your capital.

    That's probably the key question here, do you want a cast iron guarantee that the amount you put in will be there at the time you come to need it.

    Also remember that some companies paying high rates that are offering "guarantees" are completely worthless. Rates above 4% that are not teaser rates from a high street name that claim to pay guaranteed rates are likely to be scams.

    Investment means taking risk. Offers that claim to give high returns with no risk are likely to be the riskiest options of all.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • AlbermarleAlbermarle Forumite
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    Is there some good providers you could recommend regarding s&s ISAs and sipps? I hear about H&L , vanguard and Aj bell a lot but are these necessarily the best?
    First I will just sort of repeat my previous point . The funds you are invested in are more important than the pension provider . You can see the companies you mention like supermarkets , you might prefer one to the other but its what you buy off the shelf to eat that is most important.
    Vanguard are a bit different in that you can only buy their own brand funds in their ISA ( SIPP not available for a few months )
    The best known ones , who offer a full range of funds in ISA or SIPP are
    HL : A J Bell : Interactive Investor : Fidelity and Iweb/Halifax share dealing.
    They all have different charging structures and it can be that the 'best ' for an ISA is not necessarily the best for a SIPP.
    At the end of the day it is easy to transfer out if you do not like them . Have a look at this.
    https://monevator.com/compare-uk-cheapest-online-brokers/
  • Mrc44Mrc44 Forumite
    50 posts
    10 Posts
    Thank you again for your helpful reply Albermarie ,
    I shall take all of what you have said onboard and it’s clear I need to do a lot more reading/research on the matter and which funds would be best to invest in.

    Can you just confirm I have this right : a s&s isa and SIPP are both essentially a tax free “wrapper” where you can invest in the same funds just with the SIPP you get the tax relief and your money is locked away until you reach 58?

    If I have it right (I’ll do more reading to be sure) my plan would be to open both a s&s isa and a SIPP and make a lump sum deposit in both but with the s&s isa I would just leave the £10’000 (I don’t mind the high risk element of trying to make my money grow best it can over a 10yr period with this) and then would make weekly/monthly (is weekly better?) contributions to my SIPP until retirement. Regarding the s&s isa I just like the idea of being able to touch said money in My early forty’s if ever a need arose as opposed to having to wait till I reached 58. I do and will have money available elsewhere but this is all new to me and once I’ve learnt and dipped my toe in the water of investing and build more confidence I will up my investments accordingly. I just wish I had learnt all about making my money work harder for me and invested in my teens/early 20s rather than 30!!!
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