Best way to invest about 200k

london21

Hi All,

I am a higher rate tax payer and pay into my pension but not a large amount about £400pm as I am still some years away from retirement and do not like that the pension age keeps increasing.

I have money in various savings accounts such as Santander, chip and Tandem.
I have around 11k in 1 year fixed ISA maturing in January, some money in shares, around 55k in Vanguard ISA funds Inv Fds Ftse Gbl All Cap Index GBP. 

Property is also an option but dislike that tax is charged on revenue rather than profit section 24 etc. 

Thinking maybe invest more in vanguard funds although not all will be ISA, will get new allowance in April and then transfer 20k to ISA funds. 

amanda1024

Might be worth looking at Lifetime ISA too (although obviously not for the whole £200k). Looks like you have the right idea with ISAs more generally.

Pension is probably the most tax efficient way to save but can see the rationale for not putting all your savings in - how much does your employer contribute? One recommendation I’ve seen for how much overall pension contributions should be is to take the year you started paying into the pension and divide by two - so eg if you started when you were 30, the recommendation would be 15% of your pre-tax income, including the employer contribution.

Mark_d

Personally I would increase pension contributions to keep taxable income out of the higher rate bracket.

Do you own your own home, with a mortgage?  If so then overpaying gives you the equivalent of tax free savings and also lowers your LTV ratio when it comes to remortgaging.

Given your age, could the Lifetime ISA feature in the financial plan for your lifetime?

ProDave

london21 said:

Hi All,

I am a higher rate tax payer and pay into my pension but not a large amount about £400pm as I am still some years away from retirement and do not like that the pension age keeps increasing.

It is the state pension age that keeps increasing.  you can retire earlier than that on your private pensions, currently age 55.

If you put more in private pensions, you can draw some of it faster in the early years of retirement until you reach state pension age.

london21

amanda1024 said:

Might be worth looking at Lifetime ISA too (although obviously not for the whole £200k). Looks like you have the right idea with ISAs more generally.

Pension is probably the most tax efficient way to save but can see the rationale for not putting all your savings in - how much does your employer contribute? One recommendation I’ve seen for how much overall pension contributions should be is to take the year you started paying into the pension and divide by two - so eg if you started when you were 30, the recommendation would be 15% of your pre-tax income, including the employer contribution.

Does the 15% include employer's contribution? employer puts in 8% even if I do not put in any.

Was looking into LISA but pension better been a higher rate tax payer.

Maybe next year will increase pension contribution. 

london21

Mark_d said:

Personally I would increase pension contributions to keep taxable income out of the higher rate bracket.

Do you own your own home, with a mortgage?  If so then overpaying gives you the equivalent of tax free savings and also lowers your LTV ratio when it comes to remortgaging.

Given your age, could the Lifetime ISA feature in the financial plan for your lifetime?

Thanks will increase pension contribution to reduce tax bill as when I get paid bonus a big chunk currently goes on tax. 

Yeah own home on mortgage, did put in a small amount overpayment but will pay it down more with increase in rates currently as current fix ends in February. 

Lifetime ISA looked into it but then decided to pay into work pension instead as I get taxed 40% on part of my income. 

Thanks  

london21

As a higher rate taxpayer, you get 40% tax relief on your pension. Additional rate taxpayers get 45%. This saving easily beats the government's 25% top-up on Lifetime ISA contributions.

But other than pension any other investment or stick with funds.

Albermarle

It is the state pension age that keeps increasing.  you can retire earlier than that on your private pensions, currently age 55.

The age that you can withdraw from a pension is increasing to 57 and maybe will be 58 at some point.

However 40% tax relief is very generous and should be taken advantage of whilst it lasts. Which maybe forever but it costs the Treasury many Billions, so....

xylophone

I am a higher rate tax payer and pay into my pension but not a large amount about £400pm 

But as a higher rate tax payer, pension contributions are very tax efficient - you might do well to consider increasing your pension contributions and using some of the £200,000 as income replacement.

You have a cash ISA - are your investments held in a stocks and shares ISA?

london21

Albermarle said:

It is the state pension age that keeps increasing.  you can retire earlier than that on your private pensions, currently age 55.

The age that you can withdraw from a pension is increasing to 57 and maybe will be 58 at some point.

However 40% tax relief is very generous and should be taken advantage of whilst it lasts. Which maybe forever but it costs the Treasury many Billions, so....

currently base is 70k and last bonus was 25k.

currently put in 420 which equates to 525 and employer puts in 466 monthly.

Will increase to between 1000-2500 still undecided.

london21

xylophone said:

I am a higher rate tax payer and pay into my pension but not a large amount about £400pm 

But as a higher rate tax payer, pension contributions are very tax efficient - you might do well to consider increasing your pension contributions and using some of the £200,000 as income replacement.

You have a cash ISA - are your investments held in a stocks and shares ISA?

It's just the lack of access until near retirement age, I somewhat like flexibility but need to change my mindset.
if I was to max my pension and only pay 20% tax then will be monthly contribution of 3727 but then monthly income will look really small. Will go gradual. 

I have around 11k in cash ISA will move in January to funds ISA.

I have about 55k in funds ISA currently with Iweb