Please suggest as completely confused paying off mortgage OR to invest?

mazibee

Dear All Seniors/ Experienced memebers,
Please I need help of  MSE, saving and investment experts.
Me and my wife bought a house worth 350K last year, deposit was £60K and mortgage £290K 25 years, joint mortgage.
5 Years Fixed
Product end date Juy 2024
Interst Rate 2.14%
Loan Balance = £283579.97
Monthly Mortgage £1254.00

Due to Covid 19 uncertainity I applied for the three months payment holiday, in case things go wrong.

I am 46, spouse is 45. I work full time 42K pa and my wife works part time 10k pa,  have two children, daughter just started Uni and son 9 years old.

Me and my spouse have approx £40K sitting idle in our saving accounts , we are getting approx £0.35 every month from Barclays since the interest raetes have gone down.

My workplan pension is with Nest
The Retirement Pot value with NEST as of today is £5.5K, last week I have changed the fund to Nest High Risk Fund.

My Wife's work plan pension is with Jsainsbury Plc and they use L&G

She also also doing a permamnet job and have pension with NEST, her current pension is with J Sainsbury and they use L&G
She also worked few yers bank and they used NEST
The Retirement Pot value with NEST as of today is £2.1K, last week she have changed the fund to Nest High Risk Fund.
The Retirement Pot value with L&G as of today is  £1.0K, last week she have changed it HSBS Global Growth Fund.
She is planning to transfer her NEST pension amount to L&G is it a good idea to combine both her pensions

Out the money we have in saving accounts, we can spare £20k at the moment and can gradually increase each month/ year. We want to use this amount wisely, that can help us in retiring a bit early so  what can be the best use of this £20K ( I knows its a very bigh amount but we need to start with something)

Options we have considered till now
1) Deposit £20K in the mortgage account
2) Open S&S ISA with HL, Vanguard , AJ Bell , buy some fund woth 10K, Balance £10K buy some selective stocks/ trusts few stocks (few FTSE 100 stocks with high yield close to hovering around 52 W lows , or invest in some funds like SMT / PCT)

I know that everyone has their own personal choice and also the past performace is not a guarantee that itw ill perform in future, I also know that in stocks and shares value can go down as well,

Please can someone senior suggest whether the subscrition to the premium services on website like fool.co.uk or morningstar,co uk are worth going for if one need to deal in buying and selling sahres

Please can any anyone help us what to do if they are in a situation similar to us and what should be the best plan of action.

@dunstonh

@AnotherJoe
@bowlhead99
@cshohan4
@colsten
@Alexland
@Albermarle
@xylophone

Another_Saver

mazibee said:

Dear All Seniors/ Experienced memebers,
Please I need help of  MSE, saving and investment experts.
Me and my wife bought a house worth 350K last year, deposit was £60K and mortgage £290K 25 years, joint mortgage.
5 Years Fixed
Product end date Juy 2024
Interst Rate 2.14%
Loan Balance = £283579.97
Monthly Mortgage £1254.00

Due to Covid 19 uncertainity I applied for the three months payment holiday, in case things go wrong.

I am 46, spouse is 45. I work full time 42K pa and my wife works part time 10k pa,  have two children, daughter just started Uni and son 9 years old.

Me and my spouse have approx £40K sitting idle in our saving accounts , we are getting approx £0.35 every month from Barclays since the interest raetes have gone down.

My workplan pension is with Nest
The Retirement Pot value with NEST as of today is £5.5K, last week I have changed the fund to Nest High Risk Fund.

My Wife's work plan pension is with Jsainsbury Plc and they use L&G

She also also doing a permamnet job and have pension with NEST, her current pension is with J Sainsbury and they use L&G
She also worked few yers bank and they used NEST
The Retirement Pot value with NEST as of today is £2.1K, last week she have changed the fund to Nest High Risk Fund.
The Retirement Pot value with L&G as of today is  £1.0K, last week she have changed it HSBS Global Growth Fund.
She is planning to transfer her NEST pension amount to L&G is it a good idea to combine both her pensions

Out the money we have in saving accounts, we can spare £20k at the moment and can gradually increase each month/ year. We want to use this amount wisely, that can help us in retiring a bit early so  what can be the best use of this £20K ( I knows its a very bigh amount but we need to start with something)

Options we have considered till now
1) Deposit £20K in the mortgage account
2) Open S&S ISA with HL, Vanguard , AJ Bell , buy some fund woth 10K, Balance £10K buy some selective stocks/ trusts few stocks (few FTSE 100 stocks with high yield close to hovering around 52 W lows , or invest in some funds like SMT / PCT)

I know that everyone has their own personal choice and also the past performace is not a guarantee that itw ill perform in future, I also know that in stocks and shares value can go down as well,

Please can someone senior suggest whether the subscrition to the premium services on website like fool.co.uk or morningstar,co uk are worth going for if one need to deal in buying and selling sahres

Please can any anyone help us what to do if they are in a situation similar to us and what should be the best plan of action.

@dunstonh

@AnotherJoe
@bowlhead99
@cshohan4
@colsten
@Alexland
@Albermarle
@xylophone

If you're new to investing, and you have not learned securities analysis, you should not be buying individual shares.
Subscribing to fool or Morningstar is a completel waste of money - it's just advertising and marketing and they send you different "tips" every week.
Your mortgage rate suggests a balanced approach to paying it off early would make sense - an investment into a broad global index fund has a decent chance of returning more than your mortgage rate before you retire. There is no right or wrong answer, this is one of those areas that comes down to personal preference.
Putting money into a higher risk fund does not necessarily mean higher returns - emerging markets have underperformed the wider global market over the long run because people underestimate the risks and assume "high growth economy = high returns" (long story short, this doesn't work).
For that kind of longer term investing, if you're sure you won't need the money before retirement then a SIPP would make sense. An S&S ISA would be more suitable if you think you may need the money earlier.

BlueLeaf

OP your pensions are very small for your age, you should consider investing more into your pensions.

Albermarle

For a couple in their mid 40's your pension provision is very very low . At this rate you will be working until you are 70 and/or having a poor retirement.
Why is that , was one of you not working for a long time, or did you not join the employers pension scheme maybe ?
Depending on how your employer takes your contribution from your salary , it could be better to increase your contributions from your salary each month rather than adding a lump sum . Or do both .

Me and my spouse have approx £40K sitting idle in our saving accounts , we are getting approx £0.35  every month from Barclays since the interest raetes have gone down.

You need to move this to a better interest paying account , even if you do not keep all of it .

https://moneyfacts.co.uk/savings-accounts/

She is planning to transfer her NEST pension amount to L&G is it a good idea to combine both her pensions

She might as well , it will not make much difference either way due to the low amounts involved 

mazibee

Thanks @Another_Saver for your reply

We will look into SIPP but our concren is that if we put money in any private pension scheme or even put the money in our mortgage account , we can not take the money out in case when we need it in case of some sort of emergenct. On the other hand if we if we  put money in S&S ISA we can take the money out, We dont have any plans to take the money out for the atleast next 10 years and knowthat there is a chnace that we we need the money it can be lower than what we invested.

Thanks @BlueLeaf for your reply.

Yes we know that our pension pots are very very small as compared to our age, and thats is the reason I posted to get suggestions the MSE experts here on the forum.

Thanks @Albermarle for your reply.

As mentioned above yes we know that our pension is very very low. My wife is a house wife and she only works part time.

I joined the pension scheme few years back, pension is taken out my salary monthly 5% and I think employer contribution is 3%

What I understand from what you have said is to increase my pension cobtribution from my monthly salary to ??? and please can you explain what will be the benefit of it,

My main concren is that we have around £40 k in our saving acocunt. We plan to leave £20K in some saving account which pay higher rates as compared to what we are getting now, use the rest £20k either to repay the mortage or invest to get the maximum growth to increase the capital.

Not sure which route to opt.

Albermarle

Not sure which route to opt.

This pension/investment vs mortgage is a regular topic on the forum and there are opinions on both sides.

It usually comes down to the fact that the rational thing to do is invest, but a lot of people have an emotional issue about 'getting the mortgage off their backs ' In the end it is for you to do what you feel is best for you as a family.

What I understand from what you have said is to increase my pension cobtribution from my monthly salary to ??? and please can you explain what will be the benefit of it,

There are three different ways that an employer can organise their payroll for pension contributions. One of them is called 'salary sacrifice' or ' salary exchange' . I this case the employee and employer saves on some NI contributions .

So in this case , contributing more via your salary would be better than adding a lump sum separately .

On the other hand if we if we  put money in S&S ISA we can take the money out, We dont have any plans to take the money out for the at least next 10 years 

Due to your age then in 10 years time ( or maybe 11) you will have access to your pension anyway, and due to tax relief there is a minimum 6.25% advantage for investing in a pension rather than a S&S ISA. Maybe better anyway you can not touch it because you really need to increase those pension pots .

Thrugelmir

mazibee said:

Due to Covid 19 uncertainity I applied for the three months payment holiday, in case things go wrong.

What could go wrong?  Better to focus on reducing the large debt you owe rather than increasing it.  At this current time how secure is your employment? This may determine the best course of action. 

mazibee

@Albermarle Thanks for your time and reply again.

Mine is the Salary Scarifice Pension.
So basically investing in S&S will be a better idea than to pay off the the mortgage with the £20K we plan to take out of our savings account.

@Thrugelmir Thanks for your time to reply.

I was on Furlough for two months and was being paid,   topped up by my employer , but at that time of uncertainity I have no idea how things will go in the future, so went for the mortgage payment holiday.

I plan to pay that amount of (3 x 1254 ) bank in the mortgage account.
I work in the Automotive industry and future/outlook seems fine at the momet untill unless COVID19 second wave hit the Automotive sector too hard this time.

steampowered

The state pension is £9,100 per year - assuming you will have the 35 years of contributions needed to qualify for the full state pension. You can start receiving the state pension from age 68.

Could you live on £9,100 per year? If not, you need to address your pension situation. 

I would also investigate what your wife's state pension situation is. If she is a house wife or working part time you might want to think about whether she is likely to get the full state pension or not - and if there is anything you can do about that.  

It sounds to me like you are going to be better off using the £40k - which right now will be losing value each year due to inflation - to boost your pension contributions. You'll be able to claim 20% tax relief when it goes into the pension, meaning your £40k becomes £48k, plus you'll start generating investment returns (the investment funds in your pension might be expected to generate 6-7% a year over the long term). That's got to be better than putting £40k into repaying the remortgage.

It sounds like 8% of your salary is going into your pension. This would be a good start if you were in your early twenties, but is too low for people that have small pension pots in their forties.  Is there any way you could increase your pension contributions?

Eco_Miser

mazibee said:

Due to Covid 19 uncertainity I applied for the three months payment holiday, in case things go wrong.
Why, when you have £40k sitting in the bank earning virtually nothing?
I was on Furlough for two months and was being paid,   topped up by my employer , but at that time of uncertainity I have no idea how things will go in the future, so went for the mortgage payment holiday.

Otherwise described as borrowing an extra £3762, when you had ten times that in cash.

Me and my spouse have approx £40K sitting idle in our saving accounts , we are getting approx £0.35 every month from Barclays since the interest rates have gone down.

My workplan pension is with Nest
The Retirement Pot value with NEST as of today is £5.5K, last week I have changed the fund to Nest High Risk Fund.

When the stock markets drop again, affecting your pensions, (and ISA if you open one) will you resort to masterful inactivity, knowing that these things happen, or will you sell/switch to low risk funds?

Given your action in applying for an unneeded mortgage holiday, I fear it will be the second.

If you are going to go for investments, I suggest you read the archives at Monevator

mazibee

Thanks for your time to reply @steampowered

I logged in my HMRC account

You can get your State Pension on 2041. Your forecast is £145.96 a week £634.67 a month, £7,615.98 a year Your forecast is not a guarantee and is based on the current law is based on your National Insurance record up to 5 April 2020 assumes that you’ll contribute another 20 years does not include any increase due to inflation You currently have 8 years on your record and you need at least 10 years to get any State Pension. If you have lived or worked overseas (opens in new tab), your time abroad may help you make up the 10 years you need to get any State Pension. £145.96 is the most you can get You cannot improve your forecast any further, unless you choose to put off claiming. If you’re working you may still need to pay National Insurance contributions until 2041 as they fund other state benefits and the NHS. Your forecast may be different if there are any changes to your National Insurance information. There is more about this in the terms and conditions.

I logged in my wifes HMRC account and it shows

You can get your State Pension on 2042. Your forecast is £168.42 a week £732.33 a month, £8,787.92 a year Your forecast is not a guarantee and is based on the current law does not include any increase due to inflation You need to continue to contribute National Insurance to reach your forecast Estimate based on your National Insurance record up to 5 April 2020 £58.29 a week Forecast if you contribute until 5 April 2042 £168.42 a week £168.42 is the most you can get After State Pension age, 2042, you no longer pay National Insurance contributions.

We moved in this country in 2010, Also no idea why my forecast is less that my wifes for the state pension.