Please explain to a numpty what my best course of savings action should be

EthicsGradient

Investing you own money in a pension still comes out ahead of putting it in an ISA - marginally, if you pay the same tax rate on withdrawals from it after you retire as you do before, or more so if some or all of it is taxed at a lower rate (if all the rental income goes to just you, or just to your wife, then you or she could be on the cusp of becoming a higher rate taxpayer, in which case pension contributions to keep you below that threshold would definitely be worth it. If the rental income is split between you, you've each got a bit more room).

I would think you'd get better value putting extra contributions into a personal pension than more into Nest, which charges 1.8% on contributions, and a 0.3% annual charge on the total value, and many SIPPs can beat that. 

Look for sites that compare SIPP providers with your needs (eg a £20k lump sum now, and then maybe a bit each year - you and your wife's drop in income from around £90k before tax to 2 state pensions, £12k rental income and maybe just a couple of thousand from your Nest pensions might be a shock, so think about what you'd like in retirement - or are you planning on eg selling the rental property and gradually eating up the proceeds?). eg

Find the best Pension for you | Boring Money

eskbanker

jay_ftw said:

eskbanker said:

You can open a SIPP with any investment platform, but that doesn't inherently entail better returns than the workplace one, it depends entirely on what each is invested in....

Hope I'm not being to vauge...my wife puts a lot of her income into her workplace pension, far more than what her employer matches. I believe the investment fund is typical low risk one (I'm in the middle of finding out exactly where it is and suggesting she go for something higher risk if the platform offers it (surely it does) she is 34). My question, would she be better off opening a SIPP and investing the amount over the employers matched contribution into a global index fund? 

There should be investment choice available in any contemporary workplace pension, so exercising that choice would normally make more sense than working round an unsuitable default.  However, best not to derail OP's thread, so discuss elsewhere if you wish to continue....

chrissychris

MEM62 said:

chrissychris said:

I just opened a cash isa with charter savings (£20k invested at 5.03%).

At the risk of being accused of hair-splitting, if it is in a cash account it is not 'invested'. Invested implies S&S. 

chrissychris said:

threlkeld53 said:

Your question is too difficult to answer in a general way. You need to supply much more info regarding your circumstances.

For example, age, employment status, emergency savings, pensions etc.
You mention that you have no mortgage, nor kids. Are those two situations likely to change in the future?

51 years old
My nest pension with around £24k in it

At your age you are way behind in your pension provision.  It is the most tax-efficient way to provide for your retirement income and you need to be ploughing as much into it as you possible can.  Some research / reading on this subject would serve you well.   

i was under the impression it's better to put spare money elsewhere for a better return

Where is 'elsewhere' and why so you think that would give you a better return?  Your pension is just a tax wrapper.  It is the investments within it that dictate how well it grows (tax free) and you have some choice in those.     
 
  

i know i know, i've had an unconventional life, and didn't get around to a pension until super-late.

I think I was looking at pure % interest rates which led me to thinking about where best to place spare cash? Probably wrong, I'm sure. I am, after all and per thread title, a numpty.

eskbanker

Don't be too hard on yourself - if you have annual rental income of £11.5K, that's a pretty handy revenue stream if it continues into retirement, or presumably if it doesn't then you'd have a sizable chunk of equity from which to generate income.  Buy-to-lets aren't always recommended as an alternative to pensions, but if that's where you're starting from then you're not necessarily in a bad place....

Perhaps a bit of a side issue but have you checked your state pension forecast, as topping that up with voluntary contributions (if beneficial) can be very cost-effective?

Albermarle

I think I was looking at pure % interest rates which led me to thinking about where best to place spare cash? Probably wrong, I'm sure. I am, after all and per thread title, a numpty.

My advice would be to work on not being a numpty   

The more general guidance ( if you have no debts) is ;

If you may need the money in the next 5 years - cash savings

If you may need the money in 5 to 10 years - mixture of cash savings and investments

If you are saving for retirement - Pension

Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)

Pensions and retirement | Help with pensions and retirement | MoneyHelper

chrissychris

EthicsGradient said:

Investing you own money in a pension still comes out ahead of putting it in an ISA - marginally, if you pay the same tax rate on withdrawals from it after you retire as you do before, or more so if some or all of it is taxed at a lower rate (if all the rental income goes to just you, or just to your wife, then you or she could be on the cusp of becoming a higher rate taxpayer, in which case pension contributions to keep you below that threshold would definitely be worth it. If the rental income is split between you, you've each got a bit more room).

I would think you'd get better value putting extra contributions into a personal pension than more into Nest, which charges 1.8% on contributions, and a 0.3% annual charge on the total value, and many SIPPs can beat that. 

Look for sites that compare SIPP providers with your needs (eg a £20k lump sum now, and then maybe a bit each year - you and your wife's drop in income from around £90k before tax to 2 state pensions, £12k rental income and maybe just a couple of thousand from your Nest pensions might be a shock, so think about what you'd like in retirement - or are you planning on eg selling the rental property and gradually eating up the proceeds?). eg

Find the best Pension for you | Boring Money

thanks, i know absolutely zero about SIPPs so I'll have a read

chrissychris

eskbanker said:

Don't be too hard on yourself - if you have annual rental income of £11.5K, that's a pretty handy revenue stream if it continues into retirement, or presumably if it doesn't then you'd have a sizable chunk of equity from which to generate income.  Buy-to-lets aren't always recommended as an alternative to pensions, but if that's where you're starting from then you're not necessarily in a bad place....

Perhaps a bit of a side issue but have you checked your state pension forecast, as topping that up with voluntary contributions (if beneficial) can be very cost-effective?

Thanks!  I've checked my state pension and apparently i can't improve it any more...



The rental income isn't a buy-to-let, it's a commerical property leased out to a friendly business for the last 20 years. I've kept the rent super-low as the guy's 1) a friend and 2) an excellent and secure tenant. 
If and when he shuts up shop, which he will at some point, the rent would probably double or triple if the rates that all the other businesses on the parade are paying is anything to go by.

I actually own the entire building, which is worth (hard to say exactly but) approx somewhere between £2 million - £5 million, conservatively.

My wife is from an eu country and when my mother eventually dies there's nothing really keeping me here, so we'll probably move there. My wife owns 3 properties in the capital city of her country. So the future is relatively secure, and even a miniscule state pension would go a fair way.

Neither of us have any significant material demands much beyond just staying alive for a while tbh.
I've just got spare money lying dormant in my currrent account that I thought I should put to work, which is what prompted me to make this thread.

chrissychris

Albermarle said:

I think I was looking at pure % interest rates which led me to thinking about where best to place spare cash? Probably wrong, I'm sure. I am, after all and per thread title, a numpty.

My advice would be to work on not being a numpty   

The more general guidance ( if you have no debts) is ;

If you may need the money in the next 5 years - cash savings

If you may need the money in 5 to 10 years - mixture of cash savings and investments

If you are saving for retirement - Pension

Pensions: Everything you need to know for retirement - MSE (moneysavingexpert.com)

Pensions and retirement | Help with pensions and retirement | MoneyHelper

this is good basic guidance, thank you very much

jimjames

First step is to move that £20k from your current account to a savings account. Then decide what to do with it long term. You're throwing money away when you can earn 5% on that rather than nothing.

chrissychris

jimjames said:

First step is to move that £20k from your current account to a savings account. Then decide what to do with it long term. You're throwing money away when you can earn 5% on that rather than nothing.

exactly, so what i was broadly looking for was advice on the best place to put it for now, just to get it doing something, at least