Youngish and inexperienced - How am I doing?

MoneySavingAlly

Alexland said:

Is your total income causing you to pay any higher rate tax? If so you should really look into additional pension contributions as £15k is low for your age (OK I know theres a LISA too but it's still not great). I don't see why you would reduce your mortgage debt provided it remains affordable and the LTV on each property is good enough to get access to the best interest rates. The offset means you have a good cash buffer that would last a while. A well invested pension should grow faster than the mortgage interest rate.

Yes, I am in the higher rate tax band.  I will consider adding further towards a pension. 

The LTV on the properties are under 60% so I can usually get the most competitive rates when mortgaging. Yes, the offset gives me liquidity.  After investing further in a pension do you have any other suggestions?

Thanks

MoneySavingAlly

cattie said:

Well done, I wish I'd been in such a position when I was your age, but alas left to bring up my son alone with no support from my ex. (

Personally I'd not be comfortable being in debt whilst having good savings, even if loan was from family. Is your home mortgaged & if so is it a repayment mortgage? If interest only I'd be wanting to switch to repayment so I could see an end then be working my way to overpay & aim to reduce the term of my mortgage before approaching retirement.

Thank you, and sorry about your ex not taking responsibility.

Debt does not really bother me as long as I’m not getting into debt buying cars and other junk then I’m fine with it.  I would rather use cheap credit and continue to invest.  I do not want to be taking on too much risk though by borrowing too much.  

Thanks

Alexland

MoneySavingAlly said:

Yes, I am in the higher rate tax band.  I will consider adding further towards a pension. 

Paying enough into your workplace pension to bring your total income below higher rate tax is essentially deferring the income to later in life when you are more likely to be a basic rate taxpayer in retirement (and you can take 25% tax free).

MoneySavingAlly said:

The LTV on the properties are under 60% so I can usually get the most competitive rates when mortgaging. Yes, the offset gives me liquidity.

In which case it really doesn't make sense overpaying them as the rate is low and it sounds like you are at almost zero risk of defaulting on them. Even at current stock market valuations the sensible S&S investments in your pension, LISA and ISA accounts are likely to grow at double your mortgage rate over the long term (with some ups and downs along the way).

MoneySavingAlly said:

After investing further in a pension do you have any other suggestions?

Critical illness and personal accident insurance? Life insurance if you have any dependants.

Albermarle

Paying enough into your workplace pension to bring your total income below higher rate tax is essentially deferring the income to later in life when you are more likely to be a basic rate taxpayer in retirement (and you can take 25% tax free).
Normally good advice but the OP said this 
I have a salary sacrifice DB pension with employer. I am not so clued up on pensions, but I know my employer contributes 10% and I match.
OP - A DB pension is very good to have nowadays , even with a 10% contribution. If you can stay with your employer then it will build up over the years to give a nice guaranteed income .
So to get maximum higher rate relief benefit you would have to contribute to a separate DC pension ( and you already have the L& G  one , presume from past employment ) 

ChilliBob

A small point but in addition to the offset, which I had, also do an overpayment on the mortgage each year from the offset if you can 
This will mean lower early repayment charges when you get there. Just my opinion, as I was keen to get rid of the mortgage as quickly as I could  

Alexland

Albermarle said:

Normally good advice but the OP said this 
I have a salary sacrifice DB pension with employer. I am not so clued up on pensions, but I know my employer contributes 10% and I match.

Yes I assumed that was a typo of DC because of course an employer wouldn't provide a percentage contribution on a DB pension they are taking on the obligation to fund the scheme to pay a defined benefit.

MoneySavingAlly

MoneySavingAlly said:

After investing further in a pension do you have any other suggestions?

Critical illness and personal accident insurance? Life insurance if you have any dependants.

I have death in service with my job but i'm not sure about critical illness or personal accident cover.  I don't have any dependants, do you think this is still required?

MoneySavingAlly

Albermarle said:

OP - A DB pension is very good to have nowadays , even with a 10% contribution. If you can stay with your employer then it will build up over the years to give a nice guaranteed income .
So to get maximum higher rate relief benefit you would have to contribute to a separate DC pension ( and you already have the L& G  one , presume from past employment ) 

It is a DB pension that I have, I aware they are rare now.  But what I am not sure about is how do you compare a DB pension against a DC?  Also, I'm not sure how long I will stay with my current employer as it depends on job satisfaction, progression opportunities etc.
Yes, the L&G pension is from previous employment.

What is your opinion of my portfolio?  Thanks for your input.

Alexland

MoneySavingAlly said:

I have death in service with my job but i'm not sure about critical illness or personal accident cover.  I don't have any dependants, do you think this is still required?

What would you do if you were unable to work following a stroke or loss of limbs? Ok the very worst case claims are unlikely but then it's not that expensive either (depending on your age and how much cover you buy) especially if you can get group rates via your employer. Some employers also offer Permanent Health Insurance which can also be useful.

MoneySavingAlly said:

But what I am not sure about is how do you compare a DB pension against a DC?

As a rule of thumb you multiply the annual DB benefit by 35x as that's roughly how much money you would need to have invested in a DC scheme (at the point of retirement) to provide the equivalent income. Obviously it could be more or less depending on the exact scheme details and any lump sum it might give at the start.

MoneySavingAlly

ChilliBob said:

A small point but in addition to the offset, which I had, also do an overpayment on the mortgage each year from the offset if you can 
This will mean lower early repayment charges when you get there. Just my opinion, as I was keen to get rid of the mortgage as quickly as I could  

I have the offset tracker and I was of the understanding that I could pay off as much as I like after the tracker period (2 years) expires?  Is my understanding wrong?
Thanks