Optimum level of S&S ISA vs pension for beginners

BuildTheWall

Having exhausted my savings for down payment of our house, we are slowly building up the emergency savings and ISAs. We have the option to increase our salary sacrifice, but wondering how much / what ratio do people keep the savings in ISAs before going full pelt for pensions? 

2 years worth of expenses?
50k?
100k?
or say contribute 1:4 in ISA vs pension?

Secret2ndAccount

We need a couple more details from you: how old are you, and what income tax bracket are you in?

Paying into your pension, particularly using Salary Sacrifice, gives you the best value because of the tax and NI you avoid.

If you were 55, this would be a no-brainer as it would be pretty easy to get some money out of your pension if you needed it. I'm guessing you are in your 30's? So anything you pay into a pension will be stuck in there for a long time. That doesn't mean don't save for pension - it means you do want to balance by keeping some in ISA or similar.

If you are a higher rate taxpayer, then the benefits (tax saving) of the pension are even greater, which tilts the balance back towards pension contributions. So, for example, if you are a few k into the 40% tax bracket, we would likely recommend you sacrifice all of that into the pension, so you just became a 20% taxpayer again.

You don't say what kind of ISA's you have. Personally, I think 2 years of cash is too much. Some of that money in the ISA's should be in equities so that it grows; you have many years of inflation ahead of you. So 6-12mths of cash, then the rest invested.

Will you need more money  for a move to a bigger house?  Will you need a large amount of accessible funds when your kids go to Uni? These things would point to keeping more back from your pension. So think about what large bills you can predict before you are 58.

Thrugelmir

If in doubt spread your free cash around. Save some as cash, overpay the mortgage, increase the pension contributions. Unfortunately it's not always possible to predict what the future might hold and make definitive long term decisions. Flexibility is the key. 

barnstar2077

It really depends on what you view the ISA money as being for.  If it is just emergency cash, then six months expenses would seem reasonable.  If on the other hand you want to retire before you can access your pensions then you will need to work out how much you will need to live on, and for how long for, to determine what split between ISA and pensions.  Also, as mentioned above, if you are a higher rate tax payer it will be worth paying more into your pension.

maxsteam

If you are a beginner in terms of stocks and shares, my advice would be to start with a small amount (£1k or less, perhaps) and to invest in a FTSE 100 company or one of the larger funds. Once you have an idea about the mechanics of investing in stocks and shares you may be confident enough to invest larger amounts. £50k is too much for a first time investment.
At some point you will no longer consider yourself a "beginner" but there is no magic ratio to aim for. It's simply down to personal preferences and circumstances.

TVAS

This about risk what type of person you are. Would you feel secure having 2 years emergency fund, 1 year, 6 months. When you get a mortgage, paying this is your number one priority.  

Stocks and Shares Isa
I agree start lowish however one has to start somewhere and as you say down payment of house would imply you are youngsters. I would do regulars to take advantage of pound cost averaging. This means when the market falls the price of the funds fall so you will be buying more units. Say £500 per month each?
It is generally assumed younger people can take more risk as you have time. To have an attitude to risk of Balanced is reasonable for a first time investor. A Balanced fund is a mixture of equity, and bonds. 
Balanced funds can be high low and medium in risk so the more equities the higher the risk. Property funds will be taking a  battering because commercial property is now overvalued. Bonds i.e. government gilts are currently low yield other bonds such as corporate bonds pay higher yield thus higher in risk and there will be more company insolvencies in the coming months. Look at Vanguard they are cheap.

Salary Sacrifice
Yes especially if the employer gives you the NI saving as a bonus to the amount of salary you are giving up. I would do this after you have your mortgage because you want your gross to be as high as possible. SS is useful if you are going into another tax bracket or if you receive a high bonus. 

You need to read the financial press I recommend the Telegraph, You need to listen to Money Box on Radio 4.  You need to  increase your awareness. So I knew Debenhams and Arcadia where in difficulties before Covid because it was owned by a deal maker (Green) rather than a retailer who until only recently got a smart phone. So the demise of these companies is a case of old person who knows nothing about technology did not higher younger techy versus the new kids on the block Asos and Boohoo both firms started this century.