My new savings Plan

Greyhound_love

So me and my fiance are getting married this year. We have had TERRIBLE financial education which meant we racked up a lot of debt very quickly between 18 and 24yo. After financial advice I went bankrupt (scotland) 2 years ago which is now discharged and my partner is going bankrupt this year. However the point of this post is we are now wanting to be more disciplined with money. We are going to set up 3 different things 

1. Emergency Fund 
2. Medium Savings Goal 
3. 1st Time House Deposit. 

For the 1.EF we are going to put it into Premium Bonds. Reason being it adds that "lottery" aspect to it. That very slim chance of winning. Plus its not a notice account meaning in an emergency we can access the funds relatively quick. This is controversial however its what we think will work best. 

For the 2. MSG we are going to utilise both our ISA allowances and open a Stocks & Shares ISA. This will allow the money to hopefully grow a little whilst saving as this money will be used for purchases that we previously maybe got on finance or on credit cards. I.E not buying it until we got the cash. 

For the 3. House Deposit we are going to utilise the ISA allowances again by opening a Lifetime ISA. This again will allow us to use the government bonus plus we will be saving for a minimum for 6-8 years waiting on the bankruptcies to fall off our reports. 

Can I get peoples thoughts on this set up. I understand the premium bonds are controversial however I think it'll be the best way for us. 

Also does anyone know if we use £10K of each of our allowances in this tax year and that  £10K is still in our ISA next year will that be deducted from next year's ISA allowance? 

eskbanker

Greyhound_love said:

Also does anyone know if we use £10K of each of our allowances in this tax year and that  £10K is still in our ISA next year will that be deducted from next year's ISA allowance? 

You each have a £20K annual ISA contribution allowance, so could pay up to £40K into ISAs between you every year - the 'I' stands for Individual so there's no concept of sharing joint accounts.

Mark_d

I think your strategy should depend on the amount of money involved  This is all linked in with attitude to risk.

I'm not against premium bonds but it's important to understand that their strength is in their tax-free status.  If you're using it as an instant-access cash savings account, your average return will be less than what you can get elsewhere.  Also, if you don't put a lot of money in to premium bonds it's statistically very likely that you get little to no return.

I think you need an amount of accessible cash savings (maybe £10k each) to cater for one-off and unforeseen expenses.  But after you've built this us, then a stocks & shares lifetime ISA is possibly your next goal if you're planning for the long term.  AJ Bell is good for this but I'm sure there are other alternatives.

The next thing to focus on would be you pension.  If your employers matches contributions up to 5%, then pay in at least 5% if you can, to maximise what you're getting.

Stocks & shares ISA are good things to have but if you're maintaining a good level of cash, paying £4k each into LISA and paying in at least 5% pension contributions - will you have much left?  If you have anything left I'd suggest you enjoy it in the knowledge that you're making good progress to secure your future.

Greyhound_love

Hi - eskbanker said:

Greyhound_love said:

Also does anyone know if we use £10K of each of our allowances in this tax year and that  £10K is still in our ISA next year will that be deducted from next year's ISA allowance? 

You each have a £20K annual ISA contribution allowance, so could pay up to £40K into ISAs between you every year - the 'I' stands for Individual so there's no concept of sharing joint accounts.

Yeah we understand they are separate accounts and allowances. We will each have 1 each of the above. The accounts are individual however the intentions for them are joint. 

Greyhound_love

Mark_d said:

I think your strategy should depend on the amount of money involved  This is all linked in with attitude to risk.

I'm not against premium bonds but it's important to understand that their strength is in their tax-free status.  If you're using it as an instant-access cash savings account, your average return will be less than what you can get elsewhere.  Also, if you don't put a lot of money in to premium bonds it's statistically very likely that you get little to no return.

I think you need an amount of accessible cash savings (maybe £10k each) to cater for one-off and unforeseen expenses.  But after you've built this us, then a stocks & shares lifetime ISA is possibly your next goal if you're planning for the long term.  AJ Bell is good for this but I'm sure there are other alternatives.

The next thing to focus on would be you pension.  If your employers matches contributions up to 5%, then pay in at least 5% if you can, to maximise what you're getting.

Stocks & shares ISA are good things to have but if you're maintaining a good level of cash, paying £4k each into LISA and paying in at least 5% pension contributions - will you have much left?  If you have anything left I'd suggest you enjoy it in the knowledge that you're making good progress to secure your future.

Hi - thanks for responding. The amount of money going into this isn't going to be alot. We are low on the household income scale. I will be going into fulltime work next month (£23k) and my partner is unable to work due to health so reliant on disability benefits (not affected by my income) (£11.5k) so around £34K on household income. 

I understand that I could utilise a higher interest paying account instead of the premium bonds however what we currently struggle with is we'd rather spend £10 a week on scratchcard and lottery tickets than saving it so by using the premium bonds it's allowing us to check each month if we were 'winners' if that makes sense. Plus the more we 'spend' (save) on premium bonds the higher chance of winning (still relatively low)  

The LISA we have each opened is a Stocks and Shares Lifetime ISA with Moneybox. 

With the pension side of things this isn't something we have hugely looked into. Once I start with my new employer I'm going to transfer my previous employers pension into moneybox and handle it that way. Unsure on what to do for my partner as his has stopped as he's not working. Should we start a SIPP for him? 

friolento

With low savings, you are not likely to benefit from ISAs for a long time, except perhaps LISAs. EDIT: I am no expert in savings when you are on benefits, so my comments only apply to the working partner.



If you are planning to use the LISA for a propoerty purchase, I would stick with the cash version, not S&S.

Definitely also put as much as you can into your pensions - at least as much as the maximum your employer will contribute.

https://www.moneysavingexpert.com/savings/isa-guide-savings-without-tax/

Greyhound_love

friolento said:

With low savings, you are not likely to benefit from ISAs for a long time, except perhaps LISAs. EDIT: I am no expert in savings when you are on benefits, so my comments only apply to the working partner.



If you are planning to use the LISA for a propoerty purchase, I would stick with the cash version, not S&S.

Definitely also put as much as you can into your pensions - at least as much as the maximum your employer will contribute.

Hi 

The reason we chose Stocks and Shares rather than cash was because we have to wait at least 6 years to buy as that is when our bankruptcies will fall off our reports. Therefore the Stocks and shares has more time to ride out any fluctuations on the market. 

With the pension. If my new employer is going to contribute say 6% does that mean as a minimum I should be contributing at least 6% also? 

*had to remove the link in my quote reply as I'm a new member* 

friolento

Greyhound_love said:

The reason we chose Stocks and Shares rather than cash was because we have to wait at least 6 years to buy as that is when our bankruptcies will fall off our reports. Therefore the Stocks and shares has more time to ride out any fluctuations on the market. 

But that just applies to money you put in this year. If you add some next year, it just has 5 years, 4 years only thereafter, and so on. Also, the stockmarket could be in the doldrums in 6 years time, just when you'd want your money. I think you'd be on much safer grounds with a cash LISA. Your decision, obviously.

Greyhound_love said:

With the pension. If my new employer is going to contribute say 6% does that mean as a minimum I should be contributing at least 6% also?

If your employer puts in 6% regardless of your own contribution, you could probably get away with putting a litte less in yourself (your older self will probably not be very pleased with you, however). But often anything above 3% from the employer is conditional on the employee contribution. You need to look at the terms of your pension scheme. Generally: put as much in as you can afford. https://www.moneysavingexpert.com/savings/discount-pensions/

ColdIron

Greyhound_love said:

friolento said:

With low savings, you are not likely to benefit from ISAs for a long time, except perhaps LISAs. EDIT: I am no expert in savings when you are on benefits, so my comments only apply to the working partner.



If you are planning to use the LISA for a propoerty purchase, I would stick with the cash version, not S&S.

Definitely also put as much as you can into your pensions - at least as much as the maximum your employer will contribute.

With the pension. If my new employer is going to contribute say 6% does that mean as a minimum I should be contributing at least 6% also?

The chances are that you will be offered the standard arrangement these days. 3% employer contributions and 5% employee. If that is the case your employer will not be matching your contribution anyway so no. While pension provision is important, I think given your age and circumstances I would focus on saving for a deposit

Greyhound_love

friolento said:

Greyhound_love said:

The reason we chose Stocks and Shares rather than cash was because we have to wait at least 6 years to buy as that is when our bankruptcies will fall off our reports. Therefore the Stocks and shares has more time to ride out any fluctuations on the market. 

But that just applies to money you put in this year. If you add some next year, it just has 5 years, 4 years only thereafter, and so on. Also, the stockmarket could be in the doldrums in 6 years time, just when you'd want your money. I think you'd be on much safer grounds with a cash LISA. Your decision, obviously.

Greyhound_love said:

With the pension. If my new employer is going to contribute say 6% does that mean as a minimum I should be contributing at least 6% also?

If your employer puts in 6% regardless of your own contribution, you could probably get away with putting a litte less in yourself (your older self will probably not be very pleased with you, however). But often anything above 3% from the employer is conditional on the employee contribution. You need to look at the terms of your pension scheme. Generally: put as much in as you can afford. 

Hi 

I get what you mean yeah. I'll reconsider the type of Lifetime ISA we will choose. Thank you for the alternative thoughts. 

With the pension I'll need to wait and see which type of pension scheme they're offering. Thank you. 

Greyhound_love

ColdIron said:

Greyhound_love said:

friolento said:

With low savings, you are not likely to benefit from ISAs for a long time, except perhaps LISAs. EDIT: I am no expert in savings when you are on benefits, so my comments only apply to the working partner.



If you are planning to use the LISA for a propoerty purchase, I would stick with the cash version, not S&S.

Definitely also put as much as you can into your pensions - at least as much as the maximum your employer will contribute.

With the pension. If my new employer is going to contribute say 6% does that mean as a minimum I should be contributing at least 6% also?

The chances are that you will be offered the standard arrangement these days. 3% employer contributions and 5% employee. If that is the case your employer will not be matching your contribution anyway so no. While pension provision is important, I think given your age and circumstances I would focus on saving for a deposit

Thank you for your response. Any advice for my partner who is on benefits therefore not contributing to any pension ?