S&S ISA investment choice 14 November 2021 at 10:41AM in ISAs & tax-free savings 6 replies 242 views

NannaH

It’s for 5/6 years until early retirement, then the pot will be used alongside a DB pension and one (of 3) DC pension to fund 5-6 years until State pension.

The ISA is for a tax free income (in addition to his DB pension and drawdown from one DC pot that will use his personal allowance). 
I don’t know whether to just replicate our Sipp investments, or take a different approach as the money will be invested for less time and needed for a shorter time frame.
  It will be for approx. £50k,  £20k can go in this tax year,  then probably £400 a month.
Looking at our 3 Sipp portfolio,  it’s Global with approx. 45% US bias / 12% UK and 10% Europe. 

I just want better growth than the .5% we’ve got in a savings account.  Fairly low risk given the time frame. 

Any ideas? 

jimjames

5/6 years is quite a short timescale especially if you aren't investing all now but it doesn't actually sound like it really will be 5-6 years. What happens at that point? It appears that you will be looking to take income at that stage not sell all the investments? Or is there another reason why the money will be invested for less time than the SIPP?

Albermarle

Without knowing all details , is there a reason not to just to top up the DC pensions ( and get tax relief) instead of opening a S&S ISA ? ( maybe earnings are not high enough ?)  Even if you pay tax on the pension income there is still a 6.25% tax benefit in favour of the pension.

Looking at our 3 Sipp portfolio,  it’s Global with approx. 45% US bias / 12% UK and 10% Europe. 

Do you mean it is all 100% equity ? If so you might want to derisk a little as you are not that far off when you will start taking them .

NannaH

Not 100% but a good 75-80% currently overall - only one SiPP will be used for early retirement, DH’s Charles Stanley one, currently £100k - 20% of it is in a Vanguard target retirement 2025 fund, another 40% is in VLS80, we don’t want to add more as our pensions are so uneven and I’m limited to paying in £3600.  Mine should be £80k ish at 67. 

My Sipp and DH’s current work pension ( which will become a Sipp when he retires as Aegon has a high .75% management  fee) will carry on growing until SPA and we will add £3600 x 2 each year. 

The ISA idea is so we will have a joint £22-24k tax free income for the 5 years to 67.  

It will be DH’s £5500 forces pension + approx. £8k drawdown from the Charles stanley pot + £10k from savings.
I want to preserve my SIPP till 67 so I can draw enough to make up my personal allowance with my state pension.    He will pay some tax at 67,  his DB and State will be £16k, before drawing from his other DC pot. 

He’s also got another tiny dc pension he will take as a small pot on early retirement, can’t see it getting over £5k,  so that 1st year he won’t need to draw very much, if anything from his Sipp. 

He will also add the whole of his DB pension into one of his pots between 60 and 62, unless he can afford to retire at 60, which is doubtful as we still have a mortgage which I’ve just fixed at 1% for 3 years and then we’ll pay the remaining balance with savings, will be about £12k. 

NannaH

Sorry, that should be 10% in the target retirement fund,  I sold half the SMT holding recently  and put it in. 
I was planning to sell other funds over the next couple of years to derisk a bit,  maybe all of SMT and some/all of Fundsmith. 

Albermarle

To be honest ,it sounds like you have it all under control 

NannaH

I think I might just shove £20k in an ISA between now and March and put it in the 2025 target fund then start to add £3-400 a month come April.  

That still leaves us £25k in our joint savings account,  we’ll probably need a new roof at some point in the next few years.