£20k nest egg - I want to be tax efficient and safe

jimjames

SavvyNew2016 said:

penners324 said:

£1000 in interest per year.
Ie if it's in an account earning 1% you would need £100,000 in the account. 

Why have you stopped paying into your pension? This seriously needs attention.

 You’re right though, I really need to give this some serious attention though hence wanting to put my money into something safe for the future. 

Safe for the future doesn't necessarily mean that the value doesn't fluctuate in the short term. Inflation means that anything in savings is losing buying power each year if interest is 0.6% and inflation is nearing 5%. You've mentioned buying a BTL but also that you want savings to be safe. The two are not really compatible. I guess what I'm trying to say is that there are various different risks and whichever option you choose will have a mix of those risks. Investments will fluctuate in value but long term should beat inflation. Savings will be a fixed value but will lose value to inflation. Buying a rental property will have other risks and the hassle of managing it as well as possible high tax rates on the income. It certainly isn't tax efficient like a pension or ISA.

Albermarle

You’re right though, I really need to give this some serious attention though hence wanting to put my money into something safe for the future. 

You have to be careful with the word 'safe' .

In a bank savings account your money is safe , but will earn less interest than inflation . So although it is safe , the value of your money goes down every year. As due to inflation prices are rising faster than your savings are gaining interest. So even in a bank savings account your money is indirectly at risk. 

If you invest in Stocks and shares , your capital is at risk , but your potential gains are higher .If you stick to mainstream investments ( in pension or a S&S ISA) the value could drop significantly in the short term but would not drop to zero .In the long term though you would expect to gain and by more than inflation. See this link.

Long-term investing: Increasing your chances of positive returns (nutmeg.com)

I am not saying what you should do, but good to be aware of that in some ways , your money is never truly safe or risk free. 

london21

Make pension contribution.
Low cost/risk passive index fund.
Overpay mortgage 

Schwarzwald

• £12k into pension as probably yielding highest after tax return
• £4k mortgage repayment
• Keep £3k in cash account as emergency fund as you are currently unemployed and also have a house.
• Spend £1k on a financial advisor to help you sort your retirement planning (might be the highest yielding investment of all of the above)

adam06_2

I know you said you don't want the risk of stocks and shares, but you also talk about buy to let as a possibility.

In my mind, a well balanced diverse stocks and shares portfolio is less risky than buy to let and you are good on tax as you can put £20k per year into a stocks and shares ISA.

pjread

adam06_2 said:

I know you said you don't want the risk of stocks and shares, but you also talk about buy to let as a possibility.

In my mind, a well balanced diverse stocks and shares portfolio is less risky than buy to let and you are good on tax as you can put £20k per year into a stocks and shares ISA.

More to the point, I've never had my portfolio call me at 2am because the boiler's packed up or the roof is leaking