Savings Advice for myself and my kids and tax efficency

jpaul25

Hi All.

In the last year or so I have finally started to think about saving for my kids, whilst also looking to be tax efficient.

I'm 38, and I only recently started to contribute to my company pension, contributing 5% of my monthly salary which is matched 10% by my company. Nesting me a nice little pot every month for my retirement.

I have also managed to put away around £30k into a Santander savings account, which is our rainy day fund and is paying out 2.75%, I have been keeping an eye on different accounts and recently moved from Chase which was giving 2.15%

Ive never really understood ISA's no matter how much I read and not sure if I should be putting the £30k savings into an ISA or is it better in a standard savings account.

Im always worried about sticking money into fixed term accounts as you never know what might happen and I might need access to that money.

Im also looking to start savings accounts for my kids. I want to put away £150 a month for each of my 3 kids, they are all still relatively young, under 5. I don't know if I should just set up standard savings accounts, look at Junior ISAs or premium bonds, or look at S&P Index Tracker fund or something like that.
My biggest concern is always the government getting a piece of the pie.

I am a higher tax bracket earner and I really want to try and reduce my tax bill in anyway I can. My wife also doesn't work so every penny I earn goes towards saving for rainy days, saving for the kids and paying the bills.

I have never entertained a conversation with an IFA.

I did do this when I was on secondment in Africa a few years ago, and all they ended up doing was wanting to sell me life insurance policies and not help me save and be more tax efficient.

So in a nut shell lots of questions, lots of things I don't understand and need to have a better outlook on how to save better, and how to be more efficient, soa ny advice would be apprecaited.

Albermarle

jpaul25 said:

Hi All.

In the last year or so I have finally started to think about saving for my kids, whilst also looking to be tax efficient.

I'm 38, and I only recently started to contribute to my company pension, contributing 5% of my monthly salary which is matched 10% by my company. Nesting me a nice little pot every month for my retirement. If you are really starting from zero at 38 ( why?) then 15% is inadequate to build up a decent sized pot ( unless you have a very high salary)

I have also managed to put away around £30k into a Santander savings account, which is our rainy day fund and is paying out 2.75%, I have been keeping an eye on different accounts and recently moved from Chase which was giving 2.15%

Ive never really understood ISA's no matter how much I read and not sure if I should be putting the £30k savings into an ISA or is it better in a standard savings account. Saving within an ISA means that any interest is not subject to tax. Saving outside an ISA means interest may be subject to tax. As a higher rate taxpayer then any interest over £500 pa will be taxed at 40%.

Im always worried about sticking money into fixed term accounts as you never know what might happen and I might need access to that money. That is a personal decision.

Im also looking to start savings accounts for my kids. I want to put away £150 a month for each of my 3 kids, they are all still relatively young, under 5. I don't know if I should just set up standard savings accounts, look at Junior ISAs or premium bonds, or look at S&P Index Tracker fund or something like that.
Due to their young age it is better to look a stocks and shares JISA, as it will have many years to ride out the ups and downs of the markets.
My biggest concern is always the government getting a piece of the pie. See next comment.

I am a higher tax bracket earner and I really want to try and reduce my tax bill in anyway I can. My wife also doesn't work so every penny I earn goes towards saving for rainy days, saving for the kids and paying the bills. Paying more into a pension is a very tax efficient method of investing for the future, especially so for a higher rate taxpayer. Doing this is probably the most tax efficient thing you can ever do.

I have never entertained a conversation with an IFA.

I did do this when I was on secondment in Africa a few years ago, and all they ended up doing was wanting to sell me life insurance policies and not help me save and be more tax efficient.

So in a nut shell lots of questions, lots of things I don't understand and need to have a better outlook on how to save better, and how to be more efficient, soa ny advice would be apprecaited.

See above comments in bold, especially the last one. 

jpaul25

Thanks for your reply.

So will I be able to set up an individual Stocks and Shares JISA for each of my kids?

Start with putting £500 in each one, and then add £150 a month to it for the foreseeable future.

Are there any tax implications to me for doing this?

I see the allowance is £9000

I don't understand how this all works. So If the JISA starts with a £500 in it, and then I contribute £150 a month. It will take over 4 1/2 years to reach £9000

However if I put in a lump sum one year say in 2024 and it meets the £9000 what does this then mean?
 Can I contribute more than £9000 to the pot? as there all so young I will eventually go over the £9000 so what happens then?



Regarding my pension and only doing it now. I worked the last 10 years in South Africa, and didn't have a pension there, moved back in 2020 and only started really thinking about these things now. Im fortunate enough to have a reasonably well of family and have always thought I will be looked after, however I more and more focused now on thinking about myself and wanting to save for myself rather than relying on any future inheritance.

IM luckily enough that my salary is rather high, and I'm contributing over £1,200 a month to this pension pot which I hope will be enough for my future.



Should I be putting this £30k I have in savings into my own stocks and shares ISA? or should I leave it in a savings account at 2.75%

I was reading about a 1year Investec Deposit which pays 4.16% so it might actually be better off doing this I suppose. 1 year cant be that bad. I don't think I could do it longer than that for fear of something happening.



Ive also been reading this morning about Child Credits, marriage credits etc etc, we don't take advantage of any tax credits, my wife doesn't work, however she is South African and cant claim any tax credits until she gets her perm residence as she is on a visa.


Sorry so many questions, so many thoughts going on as to what I should and shouldn't be doing.

sevenhills

Put £20k into your pension this year, then in 20 years time you will be able to give them £20k plus the increased value.

jpaul25

sevenhills said:

Put £20k into your pension this year, then in 20 years time you will be able to give them £20k plus the increased value.

I would but I dont own a property, and I am trying to build on that pot to buy a house in the next year or two.

Lucky enough to have some big commission checks in the next year or so which will enable us to have a deposit, so I don't want to touch that pot.

Albermarle

So will I be able to set up an individual Stocks and Shares JISA for each of my kids?

Start with putting £500 in each one, and then add £150 a month to it for the foreseeable future.

Are there any tax implications to me for doing this?

I see the allowance is £9000

I don't understand how this all works. So If the JISA starts with a £500 in it, and then I contribute £150 a month. It will take over 4 1/2 years to reach £9000

However if I put in a lump sum one year say in 2024 and it meets the £9000 what does this then mean?
 Can I contribute more than £9000 to the pot? as there all so young I will eventually go over the £9000 so what happens then?

The allowance is £9K maximum per tax year. There is no limit on how big the JISA gets eventually.
This provider is often mentioned as they do not charge fees for running the JISA, although of course there will be a charge for any investments in the JISA. Other providers are available.
Junior ISA | Invest in a Junior Stocks and Shares ISA | Fidelity

Should I be putting this £30k I have in savings into my own stocks and shares ISA? or should I leave it in a savings account at 2.75%

In simple terms
If you think you might need the money is less than 5 years, then put it in a savings account.
If the time scale is 8 to 10 years or more invest it in a S&S ISA.
If it is for retirement, put it in your pension . Due to higher rate tax relief adding £30K, it will actually only cost you £18K.
Although some tax will probably be payable when you withdraw it, you will still see a huge tax benefit ( around 25%)
There are some limits to how much you can add to a pension though, and of course you will be late Fifties before you can access it.

Eco_Miser

Cash ISAs are savings accounts on which you don't pay income tax. Virgin Money currently have one paying 3%, so better than the 2.75% you have, should you decide on a savings account after reviewing Albermarle's post.

xylophone

Virgin Money currently have one paying 3%, so better than the 2.75% you have, 

He will need to open a current account with Virgin in order to access the 3% rate on the ISA.

https://www.yourmoney.com/saving-banking/top-paying-easy-access-cash-isa-offers-3-but-theres-a-catch/

He can only contribute £20,000 in this tax year.

If his wife also opened a current account, she too would have access to the 3% ISA.

xylophone

I am a higher tax bracket earner and I really want to try and reduce my tax bill in anyway I can. My wife also doesn't work 

So subject to HIB?

https://www.gov.uk/child-benefit-tax-charge

Consider increasing pension contributions?

https://adviser.royallondon.com/technical-central/pensions/state-benefits-pension-manuals/child-benefit-avoiding-the-tax-charge/