property, pension, isa

olb81

these are the 3 big areas it makes sense to put most of my money

but in what proportions?

i have a few thoughts………..

property:

somewhere to live, no rent to pay, tax efficient being your own home, not counted against in a benefit claim

pension:

25% uplift on contributions due to tax relief, however may not have much choice of funds, locked away for the future, will not affect a benefits claim

isa:

no tax to take it out at any time, can invest in whatever funds you like, however this will be counted against you as savings if you make any sort of benefits claim

any other thoughts and comments about these 3 massive things and what do you do yourself or recommend?

HedgehogRulez

Age, family, salary, health, savings, pension provision?

Details are important

InvesterJones

Some more researching probably needed - pensions don't really have a 25% uplift for example, but they should be income tax neutral at point of entry so that you pay the income tax on the way out instead - if there is a change of salary bands this can be an uplift, likewise if the tax-free sum is maintained that's another advantage. Trying to prioritise things based on tax or benefits effect might be the wrong way round of looking at things.

El_Torro

Asking what proportion should be in each pot seems to be a bit of a theme lately. Maybe the originator of such threads is the same person every time, haven't checked.

I think the short answer is that it depends. Some people like to live in an affordable / relatively cheap property and focus on building their investments. To retire early, or spend more money on holidays, or expensive cars, or whatever.

When it comes to pensions and ISAs, it very much depends on the person's financial situation. Someone who is well into higher rate tax territory should have a lot more in their pension than their Stocks & Shares ISA.

So yeah, too many variables to bother trying to have a set rule on what percentage should be where. Is someone who has 20% of their wealth in their property doing worse or better than someone who has 40% of their wealth in their property?

olb81

Age, family, salary, health, savings, pension provision?

44, no kids, partner lives elsewhere, health ok, salary 30k, i think i put 5% in pension and company matches.

current situation:

120k in savings account at 4%

40k in s&s isa

45k in pension

no property, renting an expensive place for 1300 per month

dunstonh

25% uplift on contributions due to tax relief, however may not have much choice of funds, locked away for the future, will not affect a benefits claim

Pensions have the same choice of funds as an ISA. So fan selection is not an issue unless you make it an issue by selecting a provider with a restricted range

isa:

no tax to take it out at any time, can invest in whatever funds you like, however this will be counted against you as savings if you make any sort of benefits claim

And it's worth noting that pensions beat ISA in the majority of scenarios. Same charges, same funds. The only difference is when you can take it and how you take it. But thanks to the 25% tax-free cash, it means that on a like-for-like basis, pensions will pay you more than an ISA.

any other thoughts and comments about these 3 massive things and what do you do yourself or recommend?

What you should do is going to be based on your circumstances. What other people do doesn't matter, as their circumstances could be different to yours as well as their knowledge and decision making

PropertyGuru_Wannabe

El_Torro is right. No hard and fast rule. Depends on what is your ultimate objective perhaps? Do you want to retire as early as possible to do something that you like or would you want to work longer in order to strive to enjoy a busy life?

For example, someone can be so frugal that they don't spend money on any luxuries for years on end and invests all their funds into their pension making them millions by their fifties. But would you want that? Probably not.

A good balance for you is probably to buy a property to live in where you can rent one of the rooms out to a lodger, therefore you gain £7500 allowance a year through the rent a room scheme. Then invest what you can into your work pension or if not possible then SIPP whilst keeping an emergency fund pot of £20k savings.

HedgehogRulez

https://forums.moneysavingexpert.com/discussion/comment/82031669#Comment_82031669

stop renting and put more into pension

DT2001

Definitely changes on your journey towards retirement. Rough % over time for me

At 30 - 75% in property (as savings recently pumped into first flat), 15% cash and 10% equities - small DB pension

At 40 - 20% in a business, 20% in ISAs, 50% in property and 10% cash - small DB pension deferred as made redundant at 35.

At 50 - 10% in a business, 15% in ISAs, 65% in property (2), 10% cash

At 60 - 65% property, 5% cash, 15% equities/bonds (pension), 15% equities (ISAs)

At SPA (now) 50% property, 40% equities split equally between pension and ISAs, 10% cash (high as funding property purchase).

Aim for 70 - 35% property, 30% equities in pension, 30% equities in ISAs and 5% cash.

Thoughts
We should have built up our SIPP between 35 and 55.

We have had two properties, the second a holiday home abroad, which in terms of capital growth was a poor decision however we have had to spend less on holidays. This shows it is really dependent upon the goals that you set that will affect which pots you build up.

Good luck

Newbie_John

https://forums.moneysavingexpert.com/discussion/comment/82031669#Comment_82031669

It varies, but in your case you get £4000 interests on your savings - less by £600 tax so £3400.

But you pay £15000 of rent every year, £100k every 6 years. That's probably the area Id focus the most.

olb81

Thanks I am actually feeling he security and lower payment per month to own a property again is te way to go.

For long term pension makes most sense. I won't need the money until 57 or 58 or whatever the age is.

So for me the question is why bother with an ISA? Other than as an emergency fund?

It also gives me the ability to claim if anything went wrong with my job instead of draining my savings.