Where do i start?

Gaz012012

Hello. I'm 46 years old and money has always been a struggle. 

For the first time in my life things are on the up and would appreciate any thoughts where i go from here please.

I have just recently moved over to the 40% tax bracket. I am working out what to increase my pension contributions to make best use of my income. Currently getting 16% from me/emploter combined.

I don't have much in the way of savings but now need to look to build on this. I don't think paying much more into my pension is the right move in case if ill health.

There seems to be tons of different saving/investing accounts these days. I have begun reading up but what do you think is my next port of call?

I'm planning on doing some shares as more of a fun thing just to see what i can do. Not a lot of money and will invest monthly.

Is a s&s ISA maybe my next move? 

If anymore info is required please shout.

Thanks in advabce of any views etc

Albermarle

If you plan to invest outside a pension , then it is better to do that within a S&S ISA, as it removes all potential tax issues.
Not all S&S ISA's have the facility to invest in individual shares, but some do . However buying individual company shares is risky and better to buy funds that are more diversified.

16% into your pension is not bad but are you making best use of the tax relief for 40% taxpayers which is very generous? If you could post your salary and how much you contribute then that could be useful.

Gaz012012

Thanks for your response - appreciated. 

I am only just over and my salary is currently £60k. I pay 6.5% into my pension and my employer puts 9.5%. With each pay rise i have increased the %.

I used Which pension calculator that estimated my final pot would be around £370k. From what i have read thats pretty conservative?

I can afford to pay more into my pension. I'm also looking to save or invest so i have some funds available if needed. 

I think based on above a good few k is currently attracting 40% tax

tebbins

In that case, see if you can voluntarily up your pension contributions to more like 16-17% from you, to take your post-pension income below the higher rate threshold, currently £50,270. Currently you're paying 40% tax on £60k x 93.5% - £50,270 ~ £2,330
Put that difference of £5,830 in a SIPP or workplace pension and, assuming it's a defined contribution scheme, and you're a basic rate taxpayer when you retire, you'll only pay 15% tax instead of 40% because you get 25% as a tax free lump sum and pay 20% basic rate tax on the remaining 75%.

This is very simplified.

El_Torro

Before upping your pension contributions I would get an adequate emergency fund in place, in easily accessible cash. One of the best homes for an emergency fund is Premium Bonds, though as interest rates rise it’s not clear whether Premium Bond prizes will also rise. 

An emergency fund is typically between 3 and 6 months worth of expenses. Some people have more than this, some have less. It’s up to you to decide what is the appropriate size for you.

Thrugelmir

Are you debt free? 

Buying shares shouldn't been viewed as fun. The markets will happily take your money off you without a second thought. 

Having cash savings so that you don't have to use expenseive sources sources of credit in the future should be your first objective. Not all about you earn in interest but what you ultimately pay. 

lozzy1965

Another vote for putting anything in the 40% tax bracket into a pension.  Understand that it will be inaccessible until you are 55 though.
This also assumes that the amount you are left with is enough to live off to your personal requirements.  Also also assume no debts?

duckson

lozzy1965 said:

Another vote for putting anything in the 40% tax bracket into a pension.  Understand that it will be inaccessible until you are 55 though.
This also assumes that the amount you are left with is enough to live off to your personal requirements.  Also also assume no debts?

It’ll be 57 at least until he could access it. 

Albermarle

OP - Do you know by which method your pension contributions are taken from your salary . There are three ways

Relief at source- the contribution comes out of your taxed pay . The pension provider adds basic rate tax relief and you have to claim the higher rate relief from HMRC

Net Pay - A confusing name as it means that your contributions are taken before tax is taken . So you get all the relief automatically as you do not pay tax on the contributions in the first place

Salary sacrifice/exchange - Your salary is reduced by the amount of your contributions and a proportionately larger employer contribution is made . Once again this automatically gives you full tax relief but also you pay a bit less NI as well. 

I used Which pension calculator that estimated my final pot would be around £370k. From what i have read thats pretty conservative?

Well it is way above what the average is . Also I would try a couple more calculators ( your pension provider probably has one )
What is important is if the figure is in todays money /has taken into account estimated inflation, and is that the figure at 65? Maybe you want to retire earlier.
Also it depends how the pension is invested and how well those investments/markets  perform ( or not ) 
 

Gaz012012

Thanks all.

Some good food for thought there.

A small amount of debt but cleared soon.

Small amount of savings accessible so I definitely need to be increasing them. Never considered premium bonds so will take a look.

Its salary sacrifice for pension.

In a few years will look to increase pension contributions but dont want to tie too much up in case, thats why i was thinking s and s isa, however dont think any tax benefit to that.

Is there anything else tax efficient i should consider? Was thinking seeing an IFA, as most is pretty standard stuff not sure its worthwhile?

The stocks per month is genuinely just a hobby. I realise i could lose the lot, i lose more in the pub so im comfortable with that side of it

Albermarle

Is there anything else tax efficient i should consider? 

You will struggle to find anything more tax efficient than being a higher rate tax payer paying into a pension. It is so generous there is always talk that the Treasury will announce in a budget that it is to be stopped/reduced .

For each £100 going into your pension it costs you £60 + you save £2 in NI as you are salary sacrificing.

When you take the pension you will get 25% tax free and most likely pay 20% tax on the rest ( maybe less) .

So for £58 you get £85 back , ignoring any investment growth .

With any investments it is recommended you keep them ideally for over 10 years to ride out the ups and downs. Although with a S&S ISA you can withdraw the money at any time it is not recommended to withdraw  in the short to medium term . 

As you are 46 you will be able to access your pension in 11 or 12 years .