Saving - Path to follow

exe76

Hi,

I am a 52 yo male - I am employed, with a basic salary of £46,500.00 - I also obtain a profit related bonus, which is paid in December each year - this year it will amount to c.£9,000.00

I have a 1/3 share in my late Mother's apartment - this is currently being leased - unfortunately it's within a complex managed by FirstPort, so with all the ongoing related problems we were unable to sell it. I would estimate the value of this is c.£70,000.00 - however, I am discounting this from any calculations.

I have a £57,000.00 private pension with Scottish Widows. My monthly contributions are low at £85.00

I have a £36,000.00 NEST pension. The total contributions to his per month are £240.00

I currently have £150,000.00 savings in the bank.

With my fiancé, I own a house - we have £140,000 equity and c.£340,000 mortgage - I appreciate this is high.

After all bills and living expenses are paid, I have around £800,00 remaining per month.

I want to understand the best way to "save" the £150,000.00. Currently it is sat in a regular bank account as I waiting to add the funds from the apartment sale to it but have now discounted this.

I have spoken to a financial advisor who suggested keeping c.£30,000 cash in my bank for any arising eventualities.

to then put £120,000.00 into a higher interest savings account and move £20,000.00 pa into a cash ISA each year. For which I would be paying him an annual fee of c.0.75%pa to "manage" this.

This seems pretty expensive for what is a very simple method so I'm looking at alternative options (if there are any).

I suppose I'm asking if anyone would have any ideas on the best method - Cash ISA, Stocks ISA or perhaps some kind of managed fund?. My risk level would be "balanced"

Many thanks in advance.

El_Torro

The first thing to do is to decide how much money you need in cash, the rest can be invested. Your cash holding, or emergency fund, would typically be somewhere between 3 and 6 months worth of expenses. Some people hold more cash, it depends on your circumstances.

The money you don't need in cash can go into Stocks & Shares ISAs, or your pension, or used to reduce the size of your mortgage, or a combination of all 3.

EthicsGradient

Also note that it's only this tax year that you'll be able to put £20k per year into a cash ISA - from April 2027, that will be £12k.

It looks like you are, just (with a 9k bonus), a higher rate tax payer. Paying enough in contributions to stay under the higher rate threshold is a good idea (you get effective 40% tax relief on the way in, but pay 15% - at 20% after taking a quart as a tax free lump sum - on the way out). It also means you get £1000 of savings interest at 0%, rather than just £500. After you know the bonus in December, pay what it would take to get you under the threshold for the tax year into a pension.

On edit: I've just realised that, of course, you have (or will have, once in decent accounts) significant interest income on top of your salary, so the margin by which you'll be a higher rate payer may be a fair bit more. You might still want to put enough into a pension to get back below the threshold, but it might be more than you'd want to lock up until you're at least 58 (and, assuming you're still working then, only the tax free lump sum comes back out with no tax - you'd pay 40% on other withdrawals while working). So maybe extra payments on the mortgage is a possibility - that depends on whether you and your fiancé are OK with that (eg whether unequal payments might cause friction), what your current mortgage rate is, if there are costs for paying extra …

There are easy access (ie money available within a day or so) savings accounts with decent interest rates above 4%, that you could keep the bulk of the £30k in - the interest rate from your bank is unlikely to match them.

It shouldn't need 0.75% pa to suggest finding a good rate of interest, and moving the ISA allowance into a cash ISA each year.

Albermarle

I have a £57,000.00 private pension with Scottish Widows. My monthly contributions are low at £85.00

I have a £36,000.00 NEST pension. The total contributions to his per month are £240.00

You should be adding a minimum £4500 per tax year to fully benefit from higher rate tax relief. Plus £100K at 52 in a pension is not bad but more would be better. Plus you should monitor how the money is invested in these pensions, if you do not do so already.

I have spoken to a financial advisor who suggested keeping c.£30,000 cash in my bank for any arising eventualities.

to then put £120,000.00 into a higher interest savings account and move £20,000.00 pa into a cash ISA each year. For which I would be paying him an annual fee of c.0.75%pa to "manage" this.

It seems odd that an advisor would only recommend cash savings and not investments, unless maybe you said you would need access to the money within the next 5 years. What sort of advisor were they ?

In any case the £30K should be in easy access savings account and your bank is unlikely to have the best rates.

LHW99

Is there a reason you are paying into both NEST and Scottish Widows? Is NEST your current autoenrollment scheme?

If not, you could look at comparing costs for both. I believe NEST has a highish fee for payments in (~1.8%) but isn't too bad for monthly fund costs. If Scottish Widows is an employment scheme, that may have a discount on the advertised fund fees so could be cheaper overall.

MEM62

We might not have all the details but from what you have posted I am not convinced that you financial advisor is offering the best advice. My 2 cents worth…. Pension: Why has your advisor not suggested putting something into your pension. Your current pension provisions are very light. The tax advantages and compounding would see this money work hard for you. Mortgage: Also, unless your mortgage has a particularly low interest rate, why has he not suggested clearing some of your mortgage? An early repayment now could take years off your term. Finally, you do not need to pay anyone to 'manage' a cash ISA for you.

If I were a betting man I would say that this 'advisor' is not an IFA.

DRS1

How time consuming is your job? People on here will say this is the sort of thing you can do yourself (and it is) but I do recall that when I was working money sat in my current account for way longer than it should because I did not have the time or energy to think about savings (and certainly not investments).

When you are a couple one partner is often more financially savvy than the other. How is your fiancee at that sort of thing?

Oh and on keeping money around for expenses who is paying for the wedding? You may want a separate account dedicated just to that.

All the other stuff about increasing your pension contributions getting money into an ISA and thinking about overpaying on the mortgage (depending on the interest rate and any early repayment charges) is definitely worth thinking about. Keeping yourself out of higher rate tax while you can is a no brainer. It is not as if you have long to wait until you can access a pension if needs be.

friolento

to then put £120,000.00 into a higher interest savings account and move £20,000.00 pa into a cash ISA each year. For which I would be paying him an annual fee of c.0.75%pa to "manage" this.

Please do not pay an IFA to mange cash savings, whether ISA or non-ISA. You can easily do this yourself, with help from the MSE Forum if you need it.

nottsphil

£20,000.00 pa into a cash ISA each year. For which I would be paying him an annual fee of c.0.75%pa to "manage" this.

OP only a mug would pay £150 per £20,000 of capital each and every year to someone who's spent a few minutes each April on a comparison site for cash ISAs. Why did you add that annoying '.00' to a dozen values, none of which were even exactly that amount?!

jaypers

For longer term gains, you need to put £20k a year into a Stocks & Shares ISA. If you’re worried about what to pick, a simple MSCI World Index Fund would be your best bet. It’s almost a certainty that you’ll reap benefits way in excess of any cash savings interest, BUT don’t look at the performance day to day. Also a decision whether you invest in bulk amounts or increase your holding month by month, utilising the £20k through the course of 12 months. This has the effect of smoothing out both negative and positive fluctuations on price.

Before this you absolutely need to increase your pension contributions. Also decisions around how much cash to keep in immediately available accounts Vs longer term fixed accounts if that floats your boat.

MrWannabe

My initial thoughts/possible suggestions:

Consolidate existing pensions & ‘top-up’ the pension (utilise unused allowance from previous 3 years)

Open a Stocks & Shares ISA with a low fee/no fee provider and invest in a global index fund (a single ETF such as VWRP, ACWI or FWRG would do the job). Deposit £20k before April to maximise allowance for this year

If your employer offers Salary Sacrifice, consider sacrificing the maximum amount allowed for a couple of years & supplement your take home salary with cash from your savings. This may seem extreme, but you would turbo charge your pension pot & take advantage of tax and NIC savings (changes are proposed from 2029 which will reduce the NIC savings from Salary Sacrifice, so now until 2029 is a good time to get the maximum benefit)