Pay rise..what to do with it?

happymum37

Hubby just got a 10k pay rise. It will be for at least a year as its all contact dependant.
We have no mortgage and no debt. 

Anyway we now are in the fortunate position of that coming in.  He will go from 40k to 50k per year.  He's going to up his pension contributions by another 1 or 2% but we are very low on savings..we have 15k ish and that's it and about 10k in jewlery I inherited years ago but have never sold.

What would be the best savings account / ISA to put the cash into? We have never had it so don't need it for anything. 

We are currently saving £1k a month on top of this after we wiped our savings buying 2 new cars in the last 2 years. Hopefully they will last us for a very long time as he last ones we sold for scrap.

Thank you

george4064

If you won’t need the money for at least 5 years, but preferably for longer (ie 10 years) you should consider investing, via a Stocks & Shares ISA. Otherwise, check MSE best savings rates.

You don’t mention your ages, that might help guide best course of action.

happymum37

george4064 said:

If you won’t need the money for at least 5 years, but preferably for longer (ie 10 years) you should consider investing, via a Stocks & Shares ISA. Otherwise, check MSE best savings rates.

You don’t mention your ages, that might help guide best course of action.

I'm 44 and hubby 49. He wants to retire at 60  i would like to retire at 57 or 58 but most likely it will be at 60. 
Happy to tie this money up for ten years 
We don't have an isa i will look into one . Thank you

friolento

What are your own pension arrangements? Would your husband be happy to make contributions to your pension?

Regarding ISA: these are individual, you cannot share them.  Read the MSE guide for ISAs.

Kaizen917

Probably not the answer you are looking for but its worth considering some of this payrise going towards pension, especially if it can be via salary sacrifice. When money isnt needed for current needs/wants, it becomes pretty efficient to do that even if it sounds dull not seeing more money hit our current account. Personally, after crunching my numbers on what my potential tax bill might look like, I allocated circa 80% of my last significant rise this way but I get its not what everyone would do. 

For cash savings in particular, there is an option to use that monthly 1k by opening few regular savers and spread that money between them monthly. Its somewhat fiddly but they tend to offer better rates. If you are within 20k or so in cash savings, you are unlikely to exceed the tax free threshold on the interest from them. 

If its cash ISA that you look for, then MSE itself tends to maintain a list of best ones on offer so any of those should be fair game. Personally, Im not a huge fan of cash ISAs as their longer term nature conflicts with how they fail to beat inflation. The fact that its a 20k yearly limit thats on a "use it or lose it" basis makes more sense to stick to investment ISAs instead.

penners324

Increase pension contributions more, open S&S ISAs, open decent high interest savings accounts 

saajan_12

happymum37 said:

Hubby just got a 10k pay rise. It will be for at least a year as its all contact dependant.
We have no mortgage and no debt. 

Anyway we now are in the fortunate position of that coming in.  He will go from 40k to 50k per year.  He's going to up his pension contributions by another 1 or 2% but we are very low on savings..we have 15k ish and that's it and about 10k in jewlery I inherited years ago but have never sold.

What would be the best savings account / ISA to put the cash into? We have never had it so don't need it for anything. 

If you want to tie the money up until you're close to retirement then a pension is likely the best bet as your gains 
are tax free and you delay the income tax. 

If you expect to leave it for 10+ years but want the option to withdraw early if really needed, then a S&S ISA is the next best - gains still tax free, just slightly less efficient than pensions. 

If you may need the money in the next 3-5 years then high interest savings account or Cash ISA. The difference is just that the ISA would be tax free on interest, but at your numberes you likely aren't paying tax on interest yet so if you can get a better rate in a non-ISA account that may be better for the short term. However at the rate you're saving, you may well want to put some in ISAs esp if husband is close to being a higher rate tax payer. 

born_again

 It will be for at least a year as its all contact dependant.

Given the unknown timespan. Is a SS Isa they way to  go rather than a cash ISA?

strawb_shortcake

I'd also bear in mind £10k doesn't mean an extra £10k in your pocket. My next promotion will see me get a £10k pay rise but after tax and increased pension contributions my additional take home is £500 a month 

DRS1

If he is earning £50k pa then he is knocking on the door of higher rate tax.  But if you have rounded the number down to the nearest 10k then maybe he is already there.  Pension contributions will help with that.  Interest received outside an ISA will not.  It may be easy to trip over from having £1000 PSA to just £500.  So an ISA is a good idea even if it is "only" a cash ISA

happymum37

friolento said:

What are your own pension arrangements? Would your husband be happy to make contributions to your pension?

Regarding ISA: these are individual, you cannot share them.  Read the MSE guide for ISAs.

I'm a police officer but have not been in that long and am part time.  I already over pay into mine by an extra £150 per month. 

  Hes going to increase his pensions - its pretty appalling. His boss puts in 5% and he has been putting in 13% i think for only about 5 years. 

His pension pot is at about 150k at the moment