£2500 per month

MoneySavingDilemma

Hello, I'm looking for a bit of advice, my wife and myself will soon be debt free, no obligations with children or any other household bills or outgoings going forward.

We both have great jobs and bring in what is now a really good salary for our household, the question I have is after all our outgoings we will have the above amount to save/invest and with it being the first time in our lives we've had such money I'm just looking for general ideas of where to start looking and what's the best avenues to go down.

Some context, we have all bills covered, we have money every month for each other and holidays and activities so the £2500 is purely to save/invest or create another source of income going forward, both in stable jobs and we're in our early 30's.

Any advice/help would be welcome.

Thanks!

Dazed_and_C0nfused

What pension provision do you have?

Are you currently in DB or DC schemes?

Are either (or both) of you higher rate taxpayers?

Would you be happy tying up additional funds for your retirement?

Band7

First things first: create an emergency account, easy access, with 6-12 months living expenses.

Then consider additional pension contributions.

Band7

NB Have you both got life insurance, Power of Attorney, and wills? 

MoneySavingDilemma

Hi,

So thanks for the information and questions so far!

To answer them, we both have workplace pensions and contribute around £600 between us and our employers per month.

We both have life insurance plans, power of attorney and wills all done and drawn up.

I'm a higher rate tax payer and in Scotland, my wife is borderline, also I'm not sure what DB OR DC are to be quite honest.

Dazed_and_C0nfused

DB = defined benefit

DC = defined contributions

Defined benefit are also known as final salary or CARE pensions.  What you contribute into the standard DB scheme doesn't matter much, you get a pension based on the scheme rules.  For example with the current NHS scheme you accrue 1/54th of your salary as a pension each year.

Defined contribution is where you build up a pot of money and use that in retirement, usually buying an annuity or drawing down money.  Or taking it all in one go.

You should do some reading up on pensions so you can understand how good or not your current provision is.

As a Scottish higher rate payer additional pension contributions can be very tax efficient.

Albermarle

I think with this amount to put away each month ( in addition to current pension contributions) you are probably looking at a mixture of increased pension contributions, either to your workplace pension or a new one.+ building up some cash savings+ overpaying mortgage ( if you have one) + investing via a Stocks and shares ISA ( one each maybe )
You need to either spend some time reading and researching investing/saving/ pensions 
Or with nearly £40K pa to invest, I am sure you would have no trouble finding an IFA to help you ( at a cost of course).

You could start here:
Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)
Investing in stocks for beginners: how to get started - MSE (moneysavingexpert.com)
How to invest in a stocks and shares Isa: The quick and easy guide | This is Money
Pensions and retirement | Help with pensions and retirement | MoneyHelper
Savings accounts: 2.86% easy access or up to 4.6% fixed (moneysavingexpert.com)

Also regular reading of this forum and the related pensions forum, can help increase your knowledge, although remember you can not take every post as hard fact, as opinions of posters vary on different topics.

Victorwelldue

You may also want to consider income protection insurance (PHI) if not already in place; the type that pays you a tax free income until retirement or specified age if you were unable to work due illness etc.

egroeg1980

Think it's been said already, given your situation - PENSION PENSION PENSION. 

You're no way near your max of 40k py and by doing so, you'll actually get money BACK which surpasses ANY savings account or investment you can possibly achieve... 

Given we're in January and you seem to be doing well financially, check what you've paid thus far this year and max out your contribution before April!!! As I say, you'll get a cash kick back if you make this directly yourself on a SIPP alone - and then a top up on your self assessment after April. 

Get that sorted first and see what you have left of the 2500 after. 

It's a no brainer! 

Qyburn

The downside of pension savings is that you can't access for something like 25 years. But almost certainly worth an increase to take you out of 41% tax, for every £1,000 added to the plan your effective out of pocket cost is only £590.

Albermarle

pecunianonolet said:

Sorry for jumping on the back of this as in a similar situation what concerns tax and monthly savings of my partner and I with a likelihood to have the monthly saving increasing to up to 3k next year after salary increases. With one major difference: Not planning to retire in the UK and actually planning to move to a warmer EU country by 2024/2025.

Got a workplace pension with Standard Live at my current employer investing in some sort of shares they signed me up with. Employer contribution 4% and I 5%. Not as good as my previous one with 7% own and 18% employer contribution but salary was much higher so made the move.

Would it still be wise to look into maxing out a pension, even if only for a short while, as I think I can't contribute further once moved and there will be most likely tax liabilities with foreign income once I reach pension age. My current strategy was to get as much disposable income now, make it work as hard as possible with interest and use that pot to buy overseas property. 

Any thoughts?

It is a completely different question, involving foreign tax laws. So best to delete the post and start your own thread.