Ideas for investment on pension, ISA etc.

IamWood

Dear all,
I come here to seek investment ideas if I may please.
I am a man at age about 48 with salary around £75,000 at the moment. Mortgage was paid off a few years ago thanks to my previous employment. I have savings about £100,000. I also have two pension pots from my employments: Pot A (£200,000) with Aegon BalancedLifeStyle, Pot B (£50,000) from my current employment with Legal & General MultiAsset 3. My current pension contribute is 5% of salary.
I've never paid attention to my personal finance. All my saving is currently sitting in my current account. Considering the current situation I start to thinking of retirement plan, however I have not idea where I should start.
I'll be grateful if the forum can share ideas.

Initial thoughts after reading:
1) Open S&S ISA for me and wife (make use of the tax free savings)
2) Increase my pension contribution to gain some tax relief. How much should I increase if it's desirable?
3) I'd like to make a lump sum payment to pension pot to reclaim some tax relief for the last couple of years. Is it a good idea? and how much if so?
4) My boy is going to university next year and I'd like to gift him some money if he behaves of course

I'm a completely newbie in terms of investment. Please bear with me if I have been silly. Any ideas would be most welcome!
Thanks very much in advance!

tacpot12

We all start out knowing nothing about investing, so well done for making it as far as thinking about it!

Increasing your pension contributions would make a lot of sense. You can find out from your employer if there is scope to make the payment via the payroll, or from your bank. 

Making a one-off contribution to your pension would also make sense. You can use the carry forward rules to allow you to use any unused allowance from the previous three years as long as you have been contributing to a registered pension scheme. There are some more details here: Carry Forward Annual Allowance (pensionsadvisoryservice.org.uk)

I would not be too generous to your son until you know what his studies are going to cost him and you. You might find that if he drops out of Uni he will owe money either in student loans or rent, so I would hang onto £20K as an emergency fund for you, and bonus for him if he completes his studies without needing to draw on this emergency fund at the Bank of Dad. He will likely need it as a deposit on a house if he wants to buy somewhere.  

You should have some emergency funds for yourself, so I would keep at least £10K in cash (in addition to the 20K) for your son. 

If you find you have anything left after keeping £30K in cash, and maxing out your pensions, you could help Mrs. IamWood top up her pension, but it might be better to start a Stocks & Shares ISA in your own name. In terms of what to invest in, a large, well-diversified fund investing in global equities and bonds would be a safe choice.  Something like the Vanguard LifeStyle 60% Equity Fund is a good fund to use as a comparison with other funds to see if you can find anything better. If you have more that £20K to invest in a S&S ISA, split the amount between you and your wife. There is not reason why you shouldn't invest in different funds to your wife, but it might be as well to agree with her that if your funds do better than hers, you will even this out and vice versa. 

Albermarle

As a higher rate taxpayer , increase pension contributions are the most obvious place to start. The tax relief is  a generous gift from the government for higher earners 
Every £100 going into your pension costs you £60 and even when you have to pay some tax when you take from the pension , you still see a massive % tax benefit.
I would significantly increase current % contributions first , then think about lump sums next .
Both the pensions are invested in relatively conservative investments . You might want to look at these again after maybe learning some more about personal finance /investments . More importantly though to take advantage of the tax relief by adding more.
Suggest some knowledge improvement in these areas would benefit you and your family in the coming years . You could start by reading this forum more regularly. It has helped a lot of people, including me .Also have a look at these links and your pension providers websites usually have some useful guidance about investing etc ,
Pensions & Investing - MoneySavingExpert
Free and impartial money advice, set up by government - Money Advice Service

marycanary

There are lots of knowledgeable people on this forum who provide great information (regrettably I'm not one of them so I will just make a few observations). The main issue is that your questions are too vague to elicit sensible answers.

IamWood said:

Initial thoughts after reading:

1) Open S&S ISA for me and wife (make use of the tax free savings) Could be a good idea if you are happy to take some risk and you intend to keep the money invested for 5+ years (ideally longer). If you want to retire early they might be able to fund the years before the pension is available or just provide additional spending money later on. At the moment it is doing nothing for you in the bank.

2) Increase my pension contribution to gain some tax relief. Another good idea many people here would endorse. 5% is low, will your employer contribute more if you do? How much should I increase if it's desirable? That depends on how much income you want/need in retirement. Once you know that you can work backwards from there, taking into account the amount of state pension you will have, (do check that out on the government website) There are limits to the amount you can contribute each year and over a lifetime. How is your wifes pension? It might be more tax efficient to add to her pot if this option is available.

3) I'd like to make a lump sum payment to pension pot to reclaim some tax relief for the last couple of years. Is it a good idea? Very probably,  if you have no other plans for the money and you are happy to lock it away until retirement.  and how much if so?   The Annual Allowance is £40k you can carried forward from 3 previous years but only up to the level of your taxable pay.

4) My boy is going to university next year and I'd like to gift him some money if he behaves of course  Great. lucky lad.

I suggest you,
1) read the threads on here and the Pension Board for a while 
2) work out what it is you hope to achieve. Once you have your aims identified you can work out how to achieve them
3) do additional research. There are some good books on pensions and a couple of reasonable YouTube sites. Ask if you would like recommendations 
4) keep asking questions as you become more knowledgeable and your plans firm up

IamWood

Big thanks to tacpot12 and Albermarle. Really appreciated!
I like the idea of increasing my pension contribution and I'm not that far from 55 if I'd like to draw money from it.

Personally how much should I increase pension contribution percentage-wise? Does 20% sound silly? Is it a good idea to maximise my contribution into a lower tax band?
I really like the idea of an emergency fund or bonus scheme for my boy. He's losing lots of motivation during the current lockdown environment.
I'm thinking of two S&S ISA: HSBC global strategy, and Vanguard lifestrategy according to the advice from this forum. I may have both (one for me and the other for mrs) to balance the savings out.
Lots of stuff to learn but am excited about it.
Thanks again!

IamWood

I suggest you,

1) read the threads on here and the Pension Board for a while 

Will do.
2) work out what it is you hope to achieve. Once you have your aims identified you can work out how to achieve them

Great idea, will work on it.

3) do additional research. There are some good books on pensions and a couple of reasonable YouTube sites. Ask if you would like recommendations 

Yes please. A link would be great. Thanks.

4) keep asking questions as you become more knowledgeable and your plans firm up

Will do.

Thank you very much marycanar!

JohnWinder

Browse the 'money' shelves of your libraries and bookshops. Dodge the books on 'how to be a millionaire in 20 seconds' and become as expert as you'll need to be with something like Tim Hale's 'Smarter Investing', and Jason Butler's 'Wealth Management'

Albermarle

Personally how much should I increase pension contribution percentage-wise? Does 20% sound silly? Is it a good idea to maximise my contribution into a lower tax band?

Many higher earners ( especially from 50 onwards ) contribute as much as needed so in the end they pay no or little  40% tax . There are some limits to this but at your salary level this would work OK , as long as you could afford it of course .

I'm thinking of two S&S ISA: HSBC global strategy, and Vanguard lifestrategy according to the advice from this forum

Be clear that a S&S ISA is just somewhere you hold investments that are then tax sheltered . Your money is actually in the investments .

For example you could hold both the investments you mention ( and many more ) within just one S&S ISA .( that offered both ) 

To confuse things , sometimes the same company operates the ISA and provides the funds but you should keep it clear in your mind that you are investing in the funds and not the ISA as such.

FirstTimeSolo

Sorry to add my own question on to this thread but thought might be better than opening a new thread. 
How do pension lumpsum payments work? If I add a lumpsum using my savings into a private pension, do I then claim the tax refund on that amount? 

eskbanker

FirstTimeSolo said:

Sorry to add my own question on to this thread but thought might be better than opening a new thread. 
How do pension lumpsum payments work? If I add a lumpsum using my savings into a private pension, do I then claim the tax refund on that amount? 

It's not a refund as such, but basic rate tax relief will automatically be added to payments you make into a private pension, at 20% of the gross amount, i.e. if you pay in £80, the pension pot will be credited with £100.  If you need more detail, including anything to do with higher rate tax if applicable, then it probably would be worth reading https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief and/or posting on the pensions board.

FirstTimeSolo

Thank you @eskbanker I do pay higher tax and have workplace pension but I know shamefully little about pensions. 
Edit: I read through the link. Am I correct in thinking that if I earn £100k and I start a private pension and add £40k to it, I would get 20% tax relief automatically and claim the remaining 20% using a self assessment form?