Investment Newbie

Andolini

Hi,
Looking for some general advice as I am new to investing and trying to get myself organised. 
I have the following:
Company share scheme which allows me to purchase shares each month with my earnings before tax. If I leave them where they are for 5 years, I do not pay tax and insurance on them when I sell them. I have a limit of £150 per month that the company will allow me to purchase shares with. This doesn't sit too well with me as its all invested in one company, despite the tax benefits it may bring.
I was thinking/my question
1.Continue paying into this scheme, but once shares mature, sell them and transfer them into a S&S ISA. Kind of use this as a feeder into a S&S ISA.
2.Cancel and just pay the money direct into a S&S ISA.
3.Do something completely different?
*I am already paying 10% into a company pension scheme with the company adding 11.5% to this. I also sacrifice my 10% annual bonus into the same pension scheme.
 I have £125k remaining on the mortgage but no other debt/bad debt
I also have a 6 month disaster fund in a basic savings account with quick access.    
I am approaching 40 with 2 kids.
Thanks.

kuratowski

You did give quite a lot of detail in your post, but there are a couple of questions:

Is your employer matching your share purchases (i.e. partnership shares)?
Are you a higher rate taxpayer?
How close are you to hitting the annual allowance (for pension contributions)?
Have you checked what assets your pension fund is invested in, and made sure they are suitable for you?
Do you have a Lifetime ISA (LISA)?

As you said, the company share purchase scheme is tax efficient.  But so are pension contributions, and LISAs.

Andolini

Hi, Thanks for the reply.
No match or contribution from my employer for the shares. Just my payments pre-tax.
I was a high-rate tax payer but using pension contributions to bring me back under the basic rate threshold.
Not sure what my maximum pension contribution is (I'll need to check), but I am sure I have more capacity if needed.
Not checked the assets associated with the pension fund, so that's a good action for me.
Don't have a LISA.  

kuratowski

Thanks for the answers.  Of course this is a personal decision, but in my view without employer match, the employee purchase scheme is not that attractive.  As you've identified yourself, this gives you exposure to a single stock, which may be unwise unless this represents a very small % of your invested assets.   Since your pension contributions are already bringing you under the higher rate threshold the tax+NI saving from buying the shares through the scheme is 32% [a return of 47% as 100/68 = 1.47] but that benefit has to be weighed against the volatility of the price of the shares you're buying.  And of course ,should you leave your employer in less than 5 years, you would lose the tax benefits.  Only you yourself can say whether you feel the trade-off is worth it.

Pensions wise the annual allowance is 40k (which includes your employer's contribution).

You said you're approaching 40, you can open a LISA any time before your 40th birthday but not after.  As a basic rate taxpayer the return on a LISA is equivalent to salary sacrifice pension contributions (i.e. 85/68 = 1.25), so it's horses for courses really.  Both wrappers are better than a S&S ISA, if you're saving for the long term and don't mind the age requirement before you can access them.

My personal view is that, in your shoes, I would stop the share purchases and put the extra into the pension (until you start hitting the annual allowance) and then use up the LISA allowance before starting a S&S ISA.

Andolini

Thanks for this. Greatly appreciate the advice.

Alexland

On the company share scheme I would certainly be tempted if it was a good company whose share price was likely to hold or grow for the duration of the scheme but would then sell at the end of the minimum term to diversify.

On the pension contributions wouldn't it make more sense to organise your regular contributions to remain below higher rate tax and then put 100% of your bonus into the pension? That way you are being tax efficient regardless of if your bonus is paid or not. Also using your pension to keep your income below £50k might unlock child benefit payments. Even if you get a good bonus and need to contribute more than £40k in a tax year this may be possible with carry forward allowance from previous tax years.

It's worth opening a S&S LISA now to keep your options open after age 40 and it provides roughly the same benefit as a basic rate sal sac pension contribution but for me the main advantage is that it doesn't count towards the pension lifetime allowance. We will use our LISAs from age 60 to recycle into my wife's pension and help the kids out with house deposits, etc in their 20s.

RASH28

Hello ,
I am planning to invest in 6 month bond in Vanquish bank and would like to know if it's safe?

eskbanker

RASH28 said:

Hello ,
I am planning to invest in 6 month bond in Vanquish bank and would like to know if it's safe?

Safety of savings is generally considered to equate to membership of the deposit guarantee scheme, which in the UK context is the Financial Services Compensation Scheme (FSCS) - savings in Vanquis Bank, as explained on its website, are covered by this, up to £85K per person.