Investment Advice??

Macka09

Albermarle said:

I did notice on there app that I could also use them for an ISA which is very handy. I’m right in thinking the ISA can only have £20k paid in annually aren’t I?

Aj Bell only offer a Stocks and Shares ISA.

I think what you are looking for is a CASH ISA where you can keep your savings ?? 

Yes I was thinking of a cash ISA. 

Roger175

Macka09 said:

Thanks again Roger for the input. 

Out of curiosity, what is the timeframe of the 6% based on please? 

I did notice on there app that I could also use them for an ISA which is very handy. I’m right in thinking the ISA can only have £20k paid in annually aren’t I?

Where do people keep there 6 month salary substitute?

If anyone knows an adviser in the Midlands area they’d recommend that would be great, just so I haven’t gotta pester you guys here. 

Macka

Others have already commented, but the 6.25% comes about as follows - you but in £800, AJ Bell claim the tax relief and add another £200 so you now have £1,000 in your SIPP account. That will hopefully grow, but assuming we stick with the original deposit, when you get to retire, you get the first 25% tax free, so on your £1,000, you draw £250 tac free and are taxed on £750. @ 20%, this is £150, so you have £850 in your pocket, a gain of £50, which is 6.25% more than you deposited.  

However, that's a worst case scenario. Firstly, if the pension investments have grown, you get growth on that extra and secondly, take my situation, where I have retired early. I now have seven years as a non-earner before my state pension kicks in and mops up my tax free band (currently £12,570). Therefore I can draw out money each year entirely tax free, as long as I keep below that threshold. Given that most of my contributions were put in to mop up higher rate tax, that works out to a 66.67% gain.

Regards ISAs, yes the limit is currently £20k per year and can be a combination of cash ISAs and S&S ISAs. AJ Bell only do S&S ISAs as Albermarle says. Regards where to put your emergency cash (I assume that's what you mean by '6 months salary substitute'), I would say the best instant access current account. We use Santander which is at 5.2%, but I think that's now closed.

Mikeeee_2

Roger175 said:

Macka09 said:

Thanks again Roger for the input. 

Out of curiosity, what is the timeframe of the 6% based on please? 

I did notice on there app that I could also use them for an ISA which is very handy. I’m right in thinking the ISA can only have £20k paid in annually aren’t I?

Where do people keep there 6 month salary substitute?

If anyone knows an adviser in the Midlands area they’d recommend that would be great, just so I haven’t gotta pester you guys here. 

Macka

Others have already commented, but the 6.25% comes about as follows - you but in £800, AJ Bell claim the tax relief and add another £200 so you now have £1,000 in your SIPP account. That will hopefully grow, but assuming we stick with the original deposit, when you get to retire, you get the first 25% tax free, so on your £1,000, you draw £250 tac free and are taxed on £750. @ 20%, this is £150, so you have £850 in your pocket, a gain of £50, which is 6.25% more than you deposited.  

However, that's a worst case scenario. Firstly, if the pension investments have grown, you get growth on that extra and secondly, take my situation, where I have retired early. I now have seven years as a non-earner before my state pension kicks in and mops up my tax free band (currently £12,570). Therefore I can draw out money each year entirely tax free, as long as I keep below that threshold. Given that most of my contributions were put in to mop up higher rate tax, that works out to a 66.67% gain.

Regards ISAs, yes the limit is currently £20k per year and can be a combination of cash ISAs and S&S ISAs. AJ Bell only do S&S ISAs as Albermarle says. Regards where to put your emergency cash (I assume that's what you mean by '6 months salary substitute'), I would say the best instant access current account. We use Santander which is at 5.2%, but I think that's now closed.

This is good advice. The best instant access savings account is Tandem at 5% (5.11% annually as it pays interest monthly). 

Mikeeee_2

Mikeeee_2 said:

Roger175 said:

Macka09 said:

Thanks again Roger for the input. 

Out of curiosity, what is the timeframe of the 6% based on please? 

I did notice on there app that I could also use them for an ISA which is very handy. I’m right in thinking the ISA can only have £20k paid in annually aren’t I?

Where do people keep there 6 month salary substitute?

If anyone knows an adviser in the Midlands area they’d recommend that would be great, just so I haven’t gotta pester you guys here. 

Macka

Others have already commented, but the 6.25% comes about as follows - you but in £800, AJ Bell claim the tax relief and add another £200 so you now have £1,000 in your SIPP account. That will hopefully grow, but assuming we stick with the original deposit, when you get to retire, you get the first 25% tax free, so on your £1,000, you draw £250 tac free and are taxed on £750. @ 20%, this is £150, so you have £850 in your pocket, a gain of £50, which is 6.25% more than you deposited.  

However, that's a worst case scenario. Firstly, if the pension investments have grown, you get growth on that extra and secondly, take my situation, where I have retired early. I now have seven years as a non-earner before my state pension kicks in and mops up my tax free band (currently £12,570). Therefore I can draw out money each year entirely tax free, as long as I keep below that threshold. Given that most of my contributions were put in to mop up higher rate tax, that works out to a 66.67% gain.

Regards ISAs, yes the limit is currently £20k per year and can be a combination of cash ISAs and S&S ISAs. AJ Bell only do S&S ISAs as Albermarle says. Regards where to put your emergency cash (I assume that's what you mean by '6 months salary substitute'), I would say the best instant access current account. We use Santander which is at 5.2%, but I think that's now closed.

This is good advice. The best instant access savings account is Tandem at 5% (5.11% annually as it pays interest monthly). 

I hold Tandem and a regular £200pm saver at 8% with Nationwide 

Macka09

@Roger175 that certainly helps thank you. And @Mikeeee_2 they seem to be very good rates for the accounts they are. 

eskbanker

Mikeeee_2 said:
The best instant access savings account is Tandem at 5% (5.11% annually as it pays interest monthly). 

Tandem's gross rate (for monthly interest) is 4.89%, giving 5% AER after allowing for compounding.

There are a few easy access accounts with better interest rates, up to 5.22%:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#easyaccess

Nurse2047

A few good videos on here if helps 
https://youtube.com/@DamienTalksMoney?si=HaoZ2Nc3avPJebAW

https://youtube.com/@TheHumblePenny?si=afBWpNvt8uHB2nXs

https://youtube.com/@JamesShack?si=fJELg2y1yrnFL6kc

They really helped me to to understand how to get started with retirement planning. 

jamesd

MartaUK said:

I'm also self-employed so I opened the LISA with the hope of keeping it until 60 as the government adds the 25% bonus. Not sure if it is any better than a pension or SIPP.

It's worse. Pensions are protected from bankruptcy, other legal claims and benefit means tests. ISAs aren't. Sole traders and the self employed generally have higher chances of the legal claims than most of us.

jamesd

Roger175 said:

Dunstonh

You can be a right miserable git sometimes. This thread has been started by somebody who clearly didn't know where to start and didn't know the first thing about investments etc. Nobody has encouraged him to do anything other than take action to start a SIPP and buy some relatively sensible investments. 

Dunstonh was entirely correct and beat me to making sure that Macka09 knows that bad years in a global tracker will see that sort of drop. Look at the reaction to the loss of the friends.

It's vital that we explain to newcomers that it works like a rollercoaster in reverse. Long term gain but drops along the way. If we don't prepare them the drops are likely to scare them out of investing and also undermine their trust that they will get decent guidance here. Tell them in advance and they will learn that we try to tell them the negatives as well as the positives and that increases trust.

Macka09, if you don't think you can handle seeing that sort of drop you can add bonds to the mixture and a popular and good company called Vanguard offers a range of funds called Lifestrategy which do that. Crudely, if you use Lifestrategy 80 you'll see only 80% of the drop but growth will also be reduced to around 80%. Similar for 60 doing 60%. Everyone has a "risk tolerance" and picking a blend with a drop that doesn't cause you to panic sell or lose sleep is important. There are other ways to get the mix but the Lifestrategy range is widely used and respected.

I've been studying and doing this long enough to know I can handle that but I'm not you and you need to aim for what your stomach can handle, not mine!

In investing bonds means buying loan contracts from a government or companies that pay you interest, not paying into a term deposit account. A bond fund does the individual bond buying for you so no need to wonder how to do that.

Roger175

jamesd said:

Roger175 said:

Dunstonh

You can be a right miserable git sometimes. This thread has been started by somebody who clearly didn't know where to start and didn't know the first thing about investments etc. Nobody has encouraged him to do anything other than take action to start a SIPP and buy some relatively sensible investments. 

Dunstonh was entirely correct and beat me to making sure that Macka09 knows that bad years in a global tracker will see that sort of drop. Look at the reaction to the loss of the friends.

It's vital that we explain to newcomers that it works like a rollercoaster in reverse. Long term gain but drops along the way. If we don't prepare them the drops are likely to scare them out of investing and also undermine their trust that they will get decent guidance here. Tell them in advance and they will learn that we try to tell them the negatives as well as the positives and that increases trust.

Macka09, if you don't think you can handle seeing that sort of drop you can add bonds to the mixture and a popular and good company called Vanguard offers a range of funds called Lifestrategy which do that. Crudely, if you use Lifestrategy 80 you'll see only 80% of the drop but growth will also be reduced to around 80%. Similar for 60 doing 60%. Everyone has a "risk tolerance" and picking a blend with a drop that doesn't cause you to panic sell or lose sleep is important. There are other ways to get the mix but the Lifestrategy range is widely used and respected.

I've been studying and doing this long enough to know I can handle that but I'm not you and you need to aim for what your stomach can handle, not mine!

In investing bonds means buying loan contracts from a government or companies that pay you interest, not paying into a term deposit account. A bond fund does the individual bond buying for you so no need to wonder how to do that.

I accept the point entirely and it wasn't the fact that the risk was being pointed out by Dunstonh, it was the blunt statement he made with absolutely no context or the further 'rollercoaster' type explanation which you have given. It was as if it was just aimed at scaring a new investor.