Mortgage/Pension Advice

TheBunting

Hi everyone,

I am just about to turn 30 years old, I am in full time employment as a Plumbing & Heating Engineer. I have been saving for a first house and am looking to hopefully get something within 2022, although the prices houses have been going for lately have been astronomical. I am looking for a bit of advice on what I should be going for when it comes to a mortgage and what to do about a pension. As soon as I get a house and can confirm I can comfortably handle the payments, I want to eventually/hopefully get into buying and renting out property (however that could be years down the line).

So regarding savings.. I have a Help to Buy ISA as my cash ISA which I have been putting the max (£200/month) into since I opened it. I have another TSB savings account with the rest of my cash savings in it. These are the two accounts I have for using to buy a property. I also have a S&S ISA with Vanguard Lifestrategy funds that I pay £100/200 into monthly as basically an emergency/retirement fund that I dont want to touch when it comes to buying a property.

With regards to a pension, I only currently pay into my auto enrollment one with my work, which is peanuts compared to my weekly wage. I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

So in summary, I am looking for some advice on all the above subjects. When I eventually find a house that I like and can purchase, do I stretch myself by paying as much deposit as I can and go for the shortest term possible I can afford? Or the opposite? I am not sure what strategy to use when I have visions of buying property, renovating them and either renting out or selling on. Being a tradesman that works on new builds I have a lot of experience and friends/family with various trades I could use to renovate property cheap and efficiently. It will boil down to how long it takes to save up for a deposit once buying my first home. Do I open up a private pension and start paying into that? Or just ramp up how much I put into my S&S ISA monthly and use that instead?

I understand this is a bit all over the place with all these different topics I am wanting advice on, however I reckon that there could be some people here that are in (or have been in) a similar situation to me and can help.

Thanks

Albermarle

With regards to a pension, I only currently pay into my auto enrollment one with my work, which is peanuts compared to my weekly wage. I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

It is an unusual comment from your accountant at work. It is possible he/she does not understand pensions very wel,l or as some misconceptions. Pension performance is mainly affected by what your money is invested in within the pensions. This would be the same whatever pension provider you used. There can be some differences between pension providers. For example the level of fees and the choice of investments, but the differences will not be that great. Plus it is obviously easier just to increase your work contributions, than opening a new pension.

Suggest you tell us who the auto enrolment provider is and you will get some feedback.

Also do you know how your work contributions are taken from your salary ? Is it via a salary sacrifice scheme ( ask the accountant if you do not know) 

grumiofoundation

TheBunting said:

Hi everyone,

I am just about to turn 30 years old, I am in full time employment as a Plumbing & Heating Engineer. I have been saving for a first house and am looking to hopefully get something within 2022, although the prices houses have been going for lately have been astronomical. I am looking for a bit of advice on what I should be going for when it comes to a mortgage and what to do about a pension. As soon as I get a house and can confirm I can comfortably handle the payments, I want to eventually/hopefully get into buying and renting out property (however that could be years down the line).

So regarding savings.. I have a Help to Buy ISA as my cash ISA which I have been putting the max (£200/month) into since I opened it. I have another TSB savings account with the rest of my cash savings in it. These are the two accounts I have for using to buy a property. I also have a S&S ISA with Vanguard Lifestrategy funds that I pay £100/200 into monthly as basically an emergency/retirement fund that I dont want to touch when it comes to buying a property.

With regards to a pension, I only currently pay into my auto enrollment one with my work, which is peanuts compared to my weekly wage. I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

So in summary, I am looking for some advice on all the above subjects. When I eventually find a house that I like and can purchase, do I stretch myself by paying as much deposit as I can and go for the shortest term possible I can afford? Or the opposite? I am not sure what strategy to use when I have visions of buying property, renovating them and either renting out or selling on. Being a tradesman that works on new builds I have a lot of experience and friends/family with various trades I could use to renovate property cheap and efficiently. It will boil down to how long it takes to save up for a deposit once buying my first home. Do I open up a private pension and start paying into that? Or just ramp up how much I put into my S&S ISA monthly and use that instead?

I understand this is a bit all over the place with all these different topics I am wanting advice on, however I reckon that there could be some people here that are in (or have been in) a similar situation to me and can help.

Thanks

If you live outside London the HTB ISA can only be used for a house costing 250k or less. (450k in london).

If this house price limit might be an issue you could look at a lifetime ISA which can be used on properties up to 450k everywhere. You can also pay in 4000 per (tax) year for a 1000 bonus. However must be open for 12 months before you can use so if you are looking at buying this year then would not be suitable.

In terms of mortgage term the longer the term the more you will pay in interest. But if you are going to invest the money elsewhere, esp. if via pension, you would be looking to beat the interest on mortgage.

If you do tale a longer term but then decide you want to pay of mortgage faster you can overpay. 

When you say you have an emergency/retirement fund in S and S ISA this seems a bit strange. Having funds you might need in the short term in stocks and shares is not generally recommended (as can drop in value in short term) and money for retirement would be more tax efficient in a pension.

Would agree with above comment on workplace pension

dunstonh

I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

If your works pension uses salary sacrifice then its better to use that rather than have an individual pension.   

However, at your age and a basic rate taxpayer, then a LISA would be better.

TheBunting

Albermarle said:

With regards to a pension, I only currently pay into my auto enrollment one with my work, which is peanuts compared to my weekly wage. I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

It is an unusual comment from your accountant at work. It is possible he/she does not understand pensions very wel,l or as some misconceptions. Pension performance is mainly affected by what your money is invested in within the pensions. This would be the same whatever pension provider you used. There can be some differences between pension providers. For example the level of fees and the choice of investments, but the differences will not be that great. Plus it is obviously easier just to increase your work contributions, than opening a new pension.

Suggest you tell us who the auto enrolment provider is and you will get some feedback.

Also do you know how your work contributions are taken from your salary ? Is it via a salary sacrifice scheme ( ask the accountant if you do not know) 

Thanks for your reply.

I thought that this was their response because, if I up my wage contributions weekly, will that not mean my employer has to contribute more aswell? That was why I thought they told me to look into a SIPP. The platform I log into to view my pension is Standard Life. I do not know what sacrifice scheme is? All I know is I am PAYE and my pension contributions are deducted automatically before I get paid just the same as my tax and NI. 

TheBunting

grumiofoundation said:

TheBunting said:

Hi everyone,

I am just about to turn 30 years old, I am in full time employment as a Plumbing & Heating Engineer. I have been saving for a first house and am looking to hopefully get something within 2022, although the prices houses have been going for lately have been astronomical. I am looking for a bit of advice on what I should be going for when it comes to a mortgage and what to do about a pension. As soon as I get a house and can confirm I can comfortably handle the payments, I want to eventually/hopefully get into buying and renting out property (however that could be years down the line).

So regarding savings.. I have a Help to Buy ISA as my cash ISA which I have been putting the max (£200/month) into since I opened it. I have another TSB savings account with the rest of my cash savings in it. These are the two accounts I have for using to buy a property. I also have a S&S ISA with Vanguard Lifestrategy funds that I pay £100/200 into monthly as basically an emergency/retirement fund that I dont want to touch when it comes to buying a property.

With regards to a pension, I only currently pay into my auto enrollment one with my work, which is peanuts compared to my weekly wage. I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

So in summary, I am looking for some advice on all the above subjects. When I eventually find a house that I like and can purchase, do I stretch myself by paying as much deposit as I can and go for the shortest term possible I can afford? Or the opposite? I am not sure what strategy to use when I have visions of buying property, renovating them and either renting out or selling on. Being a tradesman that works on new builds I have a lot of experience and friends/family with various trades I could use to renovate property cheap and efficiently. It will boil down to how long it takes to save up for a deposit once buying my first home. Do I open up a private pension and start paying into that? Or just ramp up how much I put into my S&S ISA monthly and use that instead?

I understand this is a bit all over the place with all these different topics I am wanting advice on, however I reckon that there could be some people here that are in (or have been in) a similar situation to me and can help.

Thanks

If you live outside London the HTB ISA can only be used for a house costing 250k or less. (450k in london).

If this house price limit might be an issue you could look at a lifetime ISA which can be used on properties up to 450k everywhere. You can also pay in 4000 per (tax) year for a 1000 bonus. However must be open for 12 months before you can use so if you are looking at buying this year then would not be suitable.

In terms of mortgage term the longer the term the more you will pay in interest. But if you are going to invest the money elsewhere, esp. if via pension, you would be looking to beat the interest on mortgage.

If you do tale a longer term but then decide you want to pay of mortgage faster you can overpay. 

When you say you have an emergency/retirement fund in S and S ISA this seems a bit strange. Having funds you might need in the short term in stocks and shares is not generally recommended (as can drop in value in short term) and money for retirement would be more tax efficient in a pension.

Would agree with above comment on workplace pension

Hey, thanks for your reply.

I do not live in London, I live in Scotland and I will be the only person living in the house, so £250k is more than what I will be needing. I am looking for a 3 bed semi detached and these are between £150/200k in the areas I am looking so this is not an issue. I seen that with the H2B bonus it is capped at £3k is this true? If so then there is no need for me to have any more than £12k in this ISA? This is why I have a normal savings account with the majority of my savings in it as well. Both are easy to access for gathering funds for a deposit.

This is the issue, I do not know if I can beat the interest rates of the mortgages as they are starting to rise again. The only way I think it would work would be paying lower mortgage payments so I can save up for an additional property and start buying to let. That is a whole other topic for in the future though.

As for the S&S ISA, this is aimed to be a long term investment, hence putting it into S&S. Using it in the short term would only be in a clear emergency, like if I hit some sudden financial struggles (getting injured and not being to work for example). Working in construction, this is a possibility. Hence the meaning behind the S&S ISA.. Funds I can access if REALLY needed and I don't need to wait until I am a certain age to access it like what a pension would mean.

So if I wanted to up my wage contributions into my workplace pension, do I contact Standard Life about this, or my work to let them know I wish to do so?

Thanks.

Linton

TheBunting said:

Albermarle said:

With regards to a pension, I only currently pay into my auto enrollment one with my work, which is peanuts compared to my weekly wage. I have contacted the accountant in the work office regarding raising how much I pay in from my weekly wage but get told it is not worth it and I am much better opening up a private pension. However, when it comes to looking at all these different pensions I am not sure what to go for.

It is an unusual comment from your accountant at work. It is possible he/she does not understand pensions very wel,l or as some misconceptions. Pension performance is mainly affected by what your money is invested in within the pensions. This would be the same whatever pension provider you used. There can be some differences between pension providers. For example the level of fees and the choice of investments, but the differences will not be that great. Plus it is obviously easier just to increase your work contributions, than opening a new pension.

Suggest you tell us who the auto enrolment provider is and you will get some feedback.

Also do you know how your work contributions are taken from your salary ? Is it via a salary sacrifice scheme ( ask the accountant if you do not know) 

Thanks for your reply.

I thought that this was their response because, if I up my wage contributions weekly, will that not mean my employer has to contribute more aswell? That was why I thought they told me to look into a SIPP. The platform I log into to view my pension is Standard Life. I do not know what sacrifice scheme is? All I know is I am PAYE and my pension contributions are deducted automatically before I get paid just the same as my tax and NI. 

If employers match employees contributions it is almost certain to be only up to some limit.  There is no legal requirement to match employees contributions at all.  You need to find out the specific details for your employers scheme.

Albermarle

I thought that this was their response because, if I up my wage contributions weekly, will that not mean my employer has to contribute more aswell? That was why I thought they told me to look into a SIPP. The platform I log into to view my pension is Standard Life. I do not know what sacrifice scheme is? All I know is I am PAYE and my pension contributions are deducted automatically before I get paid just the same as my tax and NI. 

Your employer is only obliged to make minimum legal contribution of 3% ( and you 5%)

Some employers will increase their contributions ( up to a limit) if you increase yours, but this is voluntary/company policy.

You really need to find out why the accountant recommends you to open a new pension. Fundamentally there is nothing wrong with Standard Life, although as said before you maybe able to get lower fees elsewhere ( or maybe not).

Salary sacrifice is a way of taking pension contributions from you, by reducing your salary, rather than making a specific deduction from your normal salary . Some employers do it this way and some do not . The reason to do it this way is that it saves you and the employer some National Insurance payments.