How's my plan?

consciousobservation

Good evening,
I've been squirrelling away various pots over the years and have recently come into some money which has meant the figures are getting quite significant (for me). I just want to check i'm not making any costly mistakes.

Age: 34
Pension pot: £32,500 - currently paying in £380 p/month including employer and tax relief
S&S ISA: £31,000 in Vanguard LS80 - paying in £250 p/month
2 year 4.5% bond - £10,000
Premium bonds - £9,000
Other instant access savings - £36,000

Outstanding mortgage: £290,000ish

I know I am cash heavy, so the plan is to put around an extra £1000 per month into the S&S ISA to take advantage of the likely dip in unit price which will occur over the next 18 months or so (£18,000)

Our mortgage is fixed for the next 4 years at 1.4% so we are going to put £200 a month into a cash savings account which should easily beat that and then when we re-mortgage chuck that in as an over-payment. I would also like to put some of my cash savings into the mortgage at the same time (maybe £5000 ish depends on the situation at the time and if we are close to an LTV band).

This still leaves around £32,000 in cash which is wasted opportunity and I would like this figure to be more like £20,000. This may seem like a lot to some of you but I am being cautious with the economic situation and more importantly where mortgage rates will settle.

In terms of our lifestyle/required retirement incomes - we live modestly and enjoy low cost hobbies such as walking and days at the beach. I can't see that changing as we get older so I don't need a huge pension.

Aim: Reduce mortgage to a negligible amount and be able to reduce work hours as soon as practicable - 60 would be nice, 55 even better.

Just checking i'm not making any glaring mistakes and what would you do with that £12,000 cash?

Dazed_and_C0nfused

Why are you opting for more S&S ISA over pension?

There may be a good reason but pension beats S&S ISA for most people.

Ciprico

You could consider putting as much as possible in pension... Taking full advantage of tax relief and tfls.  Salary sacrifice if employer allows.  And "engineer"  repaying mortgage when you can access pension.

This guy explains it well

https://youtu.be/MWadHLKMgB4

LHW99

Dazed_and_C0nfused said:

Why are you opting for more S&S ISA over pension?

There may be a good reason but pension beats S&S ISA for most people.

Although you do need to keep an emergency pot, and if you may need the money before (currently) 55, then S&S ISA's would possibly be more appropriate for money you want to invest.

MX5huggy

Have you got a Lifetime ISA? £4k per year could be going towards one of them.

Then I think you’re under weight in pension. 

The mortgage is big so I understand you might want to work on it (depending on if you earn £25k or £80k to a degree). But here is the alternative view on using pension to pay of mortgage https://youtu.be/MWadHLKMgB4

consciousobservation

Dazed_and_C0nfused said:

Why are you opting for more S&S ISA over pension?

There may be a good reason but pension beats S&S ISA for most people.

Only being able to access it early, I am saving now but I don't want to get into old age and have excess money and not have the health or desire to enjoy it. In 15-20 years time I'd rather start to spend the S&S ISA on clearing mortgage, hobbies, travelling, house deposit for children etc.

enthusiasticsaver

I agree that putting money in a stocks and shares isa is a good move.  I have got to the point where taking anything out of my SIPP costs me tax as my DB pensions are using up my PA whereas drawing on my isa is tax free so having a second stream of income is wise especially if you want to access it early and I question the wisdom of favouring pensions above everything else as many seem to do. 

I also think that overpaying the mortgage is sensible given it is fairly large but you are only 34 so plenty of time to address this. What percentage of your income are you putting into your pension?  

In this day and age keeping a decent emergency fund is a priority.  

You are doing well and seem to have a good grasp of your finances. 

noclaf

Not sure how is your job security situation, could you easily change roles in your industry etc....my point being having a slightly bigger emergency pot/cash buffer isn't always a bad thing esp in the current climate if you take advantage of the increasing cash a/c interest rates.

As a ref point combined with my employer matching, 21% of my monthly gross goes into pension., I've put in more in the past but whilst important not to neglect pension contributions esp if you are in 40% income tax bracket its hard to strike a balance between pension and ISA's, I certainly struggle though avoiding 40% income tax and saving a bit of NI helps! Good luck, overall I think you are on the right track and of course make sure you review your investments it not already done.

dunstonh

consciousobservation said:

Dazed_and_C0nfused said:

Why are you opting for more S&S ISA over pension?

There may be a good reason but pension beats S&S ISA for most people.

Only being able to access it early, I am saving now but I don't want to get into old age and have excess money and not have the health or desire to enjoy it. In 15-20 years time I'd rather start to spend the S&S ISA on clearing mortgage, hobbies, travelling, house deposit for children etc.

What is your definition of old age?  You are only 25 years away from being able to access the pension.
What age do you plan to retire?

At 34, you will be in your 50s in no time.   Time perception accelerates as you get older.

Why the focus on clearing the mortgage?   If it is affordable and interest rates cheap, then it is likely to be financially worse to clear the mortgage with your investments.   

A combination of things is usually the best option (including the mortgage overpay method and S&S ISA) but perhaps you are underestimating your retirement years somewhat.  

MEM62

consciousobservation said:

Dazed_and_C0nfused said:

Why are you opting for more S&S ISA over pension?

There may be a good reason but pension beats S&S ISA for most people.

Only being able to access it early, I am saving now but I don't want to get into old age and have excess money and not have the health or desire to enjoy it. In 15-20 years time I'd rather start to spend the S&S ISA on clearing mortgage, hobbies, travelling, house deposit for children etc.

@consciousobservation You are nowhere near heavily weighted enough in your pension.  You need to prioritize this over your S&S ISA.  You also have too much in cash.  Reducing it to the £20K figure you have suggested would be prudent and give you more than enough available cash should you need it.  

Albermarle

I know I am cash heavy, so the plan is to put around an extra £1000 per month into the S&S ISA to take advantage of the likely dip in unit price which will occur over the next 18 months or so (£18,000)

Your plant to add £1000 p month of excess cash is not a bad one, but attempting to predict the future in financial markets is usually doomed to failure.

It does seem very likely that many economies in the world, will have a rough time over the nest 18 months, but there is no guarantee at all that financial markets will go down, or up.

The markets look ahead and what is expected to happen in the next 12/18 months is already 'priced in'. In fact in the last few weeks markets have gone up significantly.