Does this plan work for six figure sum?

PieHard

I'm in the fortunate position of having a six figure sum to save/invest. Having read through some of the threads, what do you think to the below?

Assuming £150k in cash at the moment - £100k of which is sat earning no interest at all and £50k is in premium bonds. 

We have a small mortgage of £40k which I would pay off as is now on variable rates. 

Put £20k into S&S ISA for 22/23 and another £20k in 23/24.

Leave £30k in premium bonds.

Put £20k in best easy access account.

Another £20k in best 12 month no access. 

I'd also like to save monthly as part of a regular saver account through surplus from my salary. Approx. £2k per month.


I am a HR tax payer, my partner is a BR tax payer. 

Aim - I think - is to maximise return over short term (1-3 years) as we're potentially looking to purchase another house in the future and therefore do not want to have locked money away without an ability to access it.

Any thoughts or observations much appreciated. 

Frequentlyhere

I know you said you don't want to lock money away for too long, but how healthy is your pension? Putting in some/all of your higher rate tax eligible income for this year/next year could give it a very tax efficient boost.

My only other thought is that your stated aim to maximise short term return might be at odds with investing in shares (depending what you're putting in those ISAs) as you might find them worth less than you've put in over a 1-3 year timeframe

masonic

Would the £40k in the S&S ISA be needed for the house purchase in 1-3 years? As there is a reasonable risk there given the short timeframe for investing.

Otherwise, it might be worth adding notice accounts and "limited access" accounts into the mix, as these would give you higher rates than easy access, but would still allow you to access when needed.

ColdIron

PieHard said:

I am a HR tax payer

An observation, as a higher rate taxpayer it would be be foolish to ignore a pension contribution with some of the money for the 66% uplift. You won't get that anywhere else

PieHard

Useful things for me to consider. 

On pensions, I have a workplace pension which, including employer contributions, I put 17% into. Perhaps I need to check out the quantum in there currently and work out whether on track for retirement needs.
As my earnings will be over 100k this tax year and therefore taxed at marginal rate of 60%, this is probably even more relevant. 

PieHard

masonic said:

Would the £40k in the S&S ISA be needed for the house purchase in 1-3 years? As there is a reasonable risk there given the short timeframe for investing.

Frequentlyhere said:

My only other thought is that your stated aim to maximise short term return might be at odds with investing in shares (depending what you're putting in those ISAs) as you might find them worth less than you've put in over a 1-3 year timeframe

Again, I'm not entirely sure what I "should" be doing but locking away for a long time makes me nervous.

I am conscious that that money has been doing nothing for me since I've had it due to my cautious nature and expected spend on a larger property and therefore have missed out on returns I should have been getting. 

Is it simply a question of moving the mix more towards high interest notice and limited access accounts than S&S ISAs? 

masonic

Investing for 1-3 years is generally too short a time frame to ensure a likely positive return. While you can access your S&S ISA at any time, you may find your £40k capital is worth less than £40k at certain times, possibly a lot less, so that is the risk you take. The risk of making a loss decreases the longer you invest, and it is generally negligible over 10+ years.

If you can afford to lock any money away for the long term, there is a huge advantage to doing so via your pension.

Otherwise, the S&S ISA cash could be diverted to a fixed cash ISA (where access is permitted subject to interest penalty), or those other non-ISA accounts mentioned.

Albermarle

I am conscious that that money has been doing nothing for me since I've had it due to my cautious nature

Nothing wrong with having a cautious nature, but avoiding risk is a risk in itself.

PieHard

Albermarle said:

I am conscious that that money has been doing nothing for me since I've had it due to my cautious nature

Nothing wrong with having a cautious nature, but avoiding risk is a risk in itself.

Oh I know! Been kicking myself. 

bostonerimus

Given your salary I'd be looking at maximizing any tax benefits available to you and first on that list is your pension. So max out your pension contributions to get the tax relief and use your windfall to replace the additional income going into the pensions. If you are conservative I'd put the windfall into a 5 year ladder of fixed rate savings bonds/accounts, or if you want a bit more risk you could use some of it for a global equity or multi-asset fund...get as much into ISAs as fast as you can.

PieHard

Thank you for your comment. 

Not sure what you mean exactly by a 'ladder', could you expand?

On pensions contributions, this may be a stupid question but is it simply a case of speaking to my employer or do I go direct to the overall pension provider?

Could I go back and amend 21/22 also as my salary was similar then. I have already done my tax return for last year which I assume means I cannot now revisit but I remember reading you could make pension contributions for a prior year if you hadn't already maxed out.