We'd like to remind Forumites to please avoid political debate on the Forum. This is to keep it a safe and useful space for MoneySaving discussions. Threads that are - or become - political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

Financial plan: What would you do?

Hi all. I'm a long-time lurker and would like some advice from the 'hive mind' please.

Current situation: Female, age 40, no dependants (none planned), 100%-debt free, higher rate tax-payer. I own a small but adequate low-value house (approx 150k). Minimal outgoings, no car or expensive holidays. Earning 62k pa (will rise to 72k in 5 years) and can earn 15-20k overtime...

But my NHS job will probably be obsolete in 15 years and I could easily end up dropping back to minimum wage (due to niche qualifications). I want to make the most of what's coming in now to buffer against this. Although saying that, I could live on minimum wage.

I have 116k in savings: 55k currently in ISAs, with 20k lined up for the 2025 allowance and another 20k bond maturing in time for the 2026 one. I've got 5k in a Barclays Rainy Day 5% instant access account. 16k in Premium Bonds, which I'm now adding a minimum of 2k to every month.
I have an NHS Pension which is something like 10% of my income, and I've signed up to overpay 500pcm (plan ends in October). I'm thinking of increasing this to 1000pcm at this time.

What else would you do?

I've been looking at the Hargreaves Lansdown Lifestrategy and Vanguard Retirement funds, after hearing about them on a podcast. I could probably throw 250pcm at one of those over the next 15+ years and not be too upset if they tanked.

 Any advice would be much appreciated - thank you  :)
«13

Comments

  • Linton
    Linton Posts: 17,925 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Are you paying enough into pensions to avoid higher rate tax?  When would you like to retire?  How much are you spending now on day to day living?  How much income will you need in retirement?

    Given your relatively high income and apparently low expenditure, maybe you could retire before you can access your pension(s). In that case putting money into an S&S ISA may be better as you can access it earlier even though it is somewhat less tax efficient than a pension.

    You can only rationally decide how to iinvest your money when you know what you want it for, how much you need and when you need it.
  • Mark_d
    Mark_d Posts: 1,934 Forumite
    1,000 Posts First Anniversary Name Dropper
    edited 5 February at 9:44AM
    My position is not too different to yours in terms of age, salary, spending and wealth.

    We own a two bedroom flat (on mortgage) that is big enough for us and is well located.  We would like a brighter and more spacious property but due to the costs associated with moving (mostly stamp duty), we're going to be sensible and stay put until retirement.  If you're reasonable happy with where you like, and you can make it work for you, then staying put is not a bad idea - though you don't have the stamp duty barrier that we have.

    I would suggest you seriously bump up your pension contributions.  I pay 40% of my salary in to pension each year.  It's about tax efficiency and investment growth.

    For your wealth that's available before retirement, you could probably benefit from reviewing your investments.  I have the majority of my investment in shares.  I have a corporate bonds to balance the risk in my portfolio.  I also have 50k in Premium Bonds to give me a 4% tax free return, whilst keeping my ISA allowance available for my shares.
  • Thanks for your responses. I was working all-out to clear the mortgage first, so this whole savings malarkey is new territory for me in the last 2-3 years. My basic pay also only shifted above the tax threshold a couple of years ago, so learning how to be tax-savvy is also a learning curve.

    With the fluctuating overtime, it's hard to predict what would keep me under the threshold. There is something scary about putting 2-3k per month into something I can't access for 20-25 years. I have to sign a contract for additional salary deduction and my current one now runs until October. I believe this additional NHS pension can be accessed as a separate pot, for example, if I decided to retire at 60. 

    As I say, I just started buying Premium Bonds and my spare income can go there next until I've maxed it out. Probably sometime next year.

    Forgive my poor terminology. If I were to put money into a managed fund, would I be better using my ISA allowance for that?

    First world problems, eh? Thanks again.
  • jaypers
    jaypers Posts: 966 Forumite
    500 Posts Second Anniversary Name Dropper
    Are your ISAs cash or investment? If the former, would seriously consider looking at Funds within an ISA wrapper. With the now low CGT allowances, you’ll and up with a potential issue doing this outside of an ISA.

    And as others have said, throw as much at your pension as you can, obviously without impacting all of the life things you want to do now. 
  • Linton
    Linton Posts: 17,925 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Hung up my suit!
    Thanks for your responses. I was working all-out to clear the mortgage first, so this whole savings malarkey is new territory for me in the last 2-3 years. My basic pay also only shifted above the tax threshold a couple of years ago, so learning how to be tax-savvy is also a learning curve.

    With the fluctuating overtime, it's hard to predict what would keep me under the threshold. There is something scary about putting 2-3k per month into something I can't access for 20-25 years. I have to sign a contract for additional salary deduction and my current one now runs until October. I believe this additional NHS pension can be accessed as a separate pot, for example, if I decided to retire at 60. 

    As I say, I just started buying Premium Bonds and my spare income can go there next until I've maxed it out. Probably sometime next year.

    Forgive my poor terminology. If I were to put money into a managed fund, would I be better using my ISA allowance for that?

    First world problems, eh? Thanks again.
    Yes, if there's a choice ISAs are best used for investments rather than cash.  Apart from the tax saved, putting investments into an S&S ISA means you dont have the hassle of dealing with CGT.
  • Albermarle
    Albermarle Posts: 25,912 Forumite
    10,000 Posts Sixth Anniversary Name Dropper
    Firstly be aware that the NHS pension is very good, and the fact you are already buying additional pension, should mean you will have a good solid pension, even if you end up only working for the NHS for the next 15 years rather than longer.
    For the rest, it depends largely on time scales as to when you might need the money. In very approx terms;

    Money needed in the next 5 years - cash savings, Premium Bonds etc
    Money needed for retirement - pension ( either more NHS or a separate personal pension)
    Money needed in 10/15 year ( or before pensions become payable) - Investments, ideally via a Stocks and shares ISA ( simpler and tax free that way) 
    Money needed between 5 and 10 years - mixture of cash ( or something similar) and investments.

    The logic is that investments nearly always outperform cash savings over a long period, but can be volatile in the short term. 
    Investing is a lot simpler ( and cheaper)  nowadays than it used to be, due to the internet.
  • Linton said:
    Yes, if there's a choice ISAs are best used for investments rather than cash.  Apart from the tax saved, putting investments into an S&S ISA means you dont have the hassle of dealing with CGT.
    Thanks for your answer. I thought the 20k annual ISA allowance was tax free. Do I have to pay CGT if I accumulate a boat load of cash ISAs? Sorry for being a total noob!
  • So overall, the message is "increase my pension overpayments" and "obtain S&S ISAs".

    I can definitely make my next ISA S&S rather than cash and boost my pension payments in the autumn. Thank you :)


  • The logic is that investments nearly always outperform cash savings over a long period, but can be volatile in the short term. 
    Investing is a lot simpler ( and cheaper)  nowadays than it used to be, due to the internet.
    Thank you for your thoughtful response. I do need to think about how much I want 'on hand' and how much I feel comfortable with locking away. It's crazy because I'm thinking about sums of money I never thought I'd have. Nobody in my family has experience of this either.

    You never know what's going to happen in the future. For all I know, the NHS will be privatised before I retire. Even if it isn't, I could well have to relocate with my job before the end, as cost-cutting causes services to be restructured. I'm currently living somewhere with very cheap housing and an equivalent house in other towns would be 2-3x the price.

    Thanks for triggering me to think about how I spread everything out though. It will be useful!
  • gwynlas
    gwynlas Posts: 2,044 Forumite
    Part of the Furniture 1,000 Posts Name Dropper
    Please also think about critical illness cover as life events might mean you need to retire early.
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 348.2K Banking & Borrowing
  • 252.1K Reduce Debt & Boost Income
  • 452.4K Spending & Discounts
  • 240.8K Work, Benefits & Business
  • 617K Mortgages, Homes & Bills
  • 175.6K Life & Family
  • 254K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 15.1K Coronavirus Support Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.