Advice on my investment and savings plans please

kerrjp

Hi Everybody,
Resurrecting my old thread https://forums.moneysavingexpert.com/discussion/5910172/advice-on-my-plans-please
Time has moved on and I could do with some opinions again as last time it was very helpful, Please if anyone wants to read the original thread and then look at my current position and comment it would be appreciated.
So we finally got our planning permission and we completed our build in June 2020. 
As was suggested in this thread it did overrun and caused more expense than I had anticipated, we did end up replacing our kitchen and some other bits so we went over our initial budget and contingency.  We cancelled our planed Disney trip and used the funds to help with the extra debt.
Once the build was complete I targeted paying off the extra debt incurred so couldn't save very much as I had hoped but have now started correcting that.
our current position is as follows:-
Outstanding mortgage : 380k 3 years left on 1.9% fix
House Value : 800-830k 
Nutmeg ISA : 14,250
Vanguard ISA: 18,600
Aviva pension: 16k  --- this is being transferred to Vanguard SIPP at the moment
Emergency fund: 6k

I have been fortunate to not have had any breaks in contracts and have just secured a new contract from April for 12 months with the view for future extensions.
Now I have cleared the additional borrowing that I took on a 0% credit card for the house I am planning how to maximise the above for our future.
So based on current figures I plan to allocate funds as follows:-
£900 from Ltd company to pension
£1000 to Vanguard Isa
£1000 to Nutmeg Isa
anything left I am splitting between mortgage overpayment and small contributions to junior S&S isa's I set up for my children recently (they are 8 and 6 now so thought it best to get them started with something growing also). 

The above figures are subject to change depending on monthly income but these are representative of most months.
I am very aware that for my age (38) my pension is low but I am attempting to rectify that and although i am splitting my investments between pension and S&S ISA's I see these as a collective of investment for supporting us in the future and for our retirements.  If anyone has any comment or suggestion on tweaks or alterations that they think might be more optimal please let me know as I have found the help on this board extremely helpful in the past.

Many Thanks everyone

grumiofoundation

I assume one of you will be paying into vanguard and the other into nutmeg stocks and shares ISA?
Since an individual can only contribute to one stocks and shares ISA each tax year so (unless you do some ISA transfer shenanigans) you can't be able to pay into both. 

Tax wise would be more efficient to pay more into your pension(s), in particular maximising any 40% tax relief you can get (if higher rate tax payer) and mitigating child benefit clawback.
  
If you don't already have one you might want to consider (both) opening a stocks and shares Lifetime ISA (can only open if under 40). Depending on your salary this may be more tax efficient than a pension (contribution limit max. £4000 per person per tax year).

jimjames

If you run your own company then pension payments would seem to make more sense from a tax perspective than taking money out to put in a S&S ISA. Paying more into S&S ISAs than pension seems to be the wrong way round especially if it can be done from Ltd company payments pre tax.

Thrugelmir

What do you plan to do with the investments in the ISA's?   Three pronged plan to increase emergency savings (cash ISA),  overpay mortgage and increase pension contributions would be my approach. Flexing the allocation as the future unfolds. 

kerrjp

Hi grumiofoundation, Yes my wife and I have a S&S ISA each so it is split between us both, I will look at LISA but as the pension is being paid into from my Ltd company it has the corporation tax benefit .

Hi jimjames I take your point on the pension and ISA amounts being the wrong way round, I agree that with the reduction in corporation tax the pension looks under utilised my worry is and always has been that I am adverse to having the money locked up as it is in the pension whereas the ISAS are available etc... even though I plan to stay invested for the longer term having the ability to access always seems more comforting than the pension to me although that maybe misguided? 

Hi Thrugelmir I have been considering the S&S Isa's and the Pension as long term investments to fund our retirements as and when that happens basically hedging my bets by having the S&S ISA available before the pension if needed etc....  I definitely also do not want to forget the mortgage debt as its a big number, I am very much leaning towards trying to use multiple attack approach i.e. save for retirement and reduce my mortgage as we go, almost diversifying my investments across debt and savings if that makes sense.

Thanks for the input guys critique definitely helps, I know a lot of people are of the view that overpaying the mortgage at the moment is a bad choice against investing but the figure I have for 25 years worries me even thought the LTV is pretty good.

Any other thoughts welcome :-)
  

Thrugelmir

kerrjp said:

Thanks for the input guys critique definitely helps, I know a lot of people are of the view that overpaying the mortgage at the moment is a bad choice against investing but the figure I have for 25 years worries me even thought the LTV is pretty good.


  

That's only because market returns over recent years have been exceptionally good, aided by record low interest rates etc. Good times never last for ever. As once everybody copies an idea the overall returns naturally diminish. The winners are the ones that get in the lift on the ground floor.  For the average person paying down the mortgage quicker is a form of insurance.  A paid for home provides security and removes for most people the largest single financial outgoing. That forces them to earn a given wage to service the debt every month. 

DireEmblem

Regardless of age, with 16k in your pension, I would suggest trying to up this significantly.  You are already aware of this, and there should be some tax advantages to contribute more to this as well.

Secondly, look at the fee difference between your Nutmeg and Vanguard ISA's.  I think the fees you would get through Nutmeg on their cheapest managed option is about 0.69%.  With Vanguard, I think the platform fee is 0.15%, and their average fund charge is about 0.2%.  Your Nutmeg has to perform at least 0.34% better than your Vanguard fund just to match its performance.  Costs are not always the be all and end all, but they are probably much the same investments I would expect.

AnotherJoe

Pensions ARE long term so you need to get your head round that and not be concerned about "tying it up" thats the point !

You are losing a LOT of money by not putting the bulk into pensions instead of ISAs.

Nutmeg is not really great for investing compared to other the choices you have

csgohan4

OP, will you be happy with a pension of less than 50k in total when you retire?
Stop living the now and think about the future, because it will be coming and you will regret not saving and spending it now. 

if your worried about tying it up, have a big enough emergency fund. 

Can you live on state pension? if not, get cracking on that pension

kerrjp

Thanks everybody for your comments, I hear loud and clear that the pension needs building up asap, I will look at upping that contribution from my Ltd company to approx £1500 a month and then see what i have left as take home that i can split between mortgage and Stocks and Shares ISA.  Any suggestions on a different Stocks and Shares ISA other than Vanguard and Nutmeg? I will keep my Vanguard but look to move my wife's Nutmeg ISA to somewhere with lower fees, I could move it to Vanguard as I like the Life strategy funds and the fees structure but somewhat wary of having all our stocks and shares ISA's and my pension all with Vanguard. 

Eco_Miser

You need to distinguish between the ISA manager and the contents of the ISA. Vanguard happen to provide both.

For managers/platforms see Monevator's list. I use Iweb for long term holding.

For content, there's the multi-asset funds from Vanguard, Blackrock, HSBC, etc., passive index funds, active stock-picking funds and ITs, REITs (property) and others.  Much the same as a pension can invest in.

See the many discussions here, at Monevator, and many other places.