Spreading my monthly savings

Toodlepip123

Hello

After finally getting myself out of stupid debts, I have just written up a budget and come to the conclusion that I can realistically save about £1300 a month after all outgoings.

At the moment, I pay 3% of my salary (about £130 after added tax rebate) every month into my pension (my employer puts in 6% I think)

I am saving with a view to having a deposit for myself and my partner to buy a house in a year or so. having said that, I don;t want to lock away all my savings for a year in case I need to access them, so am wondering how best to spread these out.

I've got so far as coming up with the following plan:

• Increase my pension contributions slightly to 5% (very long term strategy) = £135 before added tax
• Pay into an ISA so that I fill it up in 12 months (long term strategy) = £300
• Pay maximum into a fixed one year savings account (medium term strategy) = £250
• Pay into a easy access top rate savings account (short term "rainy day" strategy) = £250

that leaves me with £365/month to play with, as much as it's tempting to spend it all on booze and videogames I guess I can spread it out again across those four bulletpoints.

1. My first question is given the sum of money I can save, should I be messing with high risk saving ie. putting some aside in very very long term shares investement, or is this not wise (i would have very little idea of what I'm doing, nor do I think I have the initial capital needed ot get involved in such funds or even in personal trading) Is it an avenue worth pursuing?
2. Should I be focussing on the short term on certain of those bulletpoints? Ie fill the ISA up within 3 months then focus on the rest? I want to make sure I have access to emergency funds though as if I lost my job tomorrow I would have nothing to fall back on right now.
3. My pension has underperformed a little (-£8 i think this year) but given that my employer puts in quite a lot of money into it that effectively supplements my income, I'm loathe to stop contributing. I do have to contribute a minimum of 3% though for them to contribute so should I stick with that, or increase as planned?
4. I have now moved into 40% taxable income - are there any ways I can maximise income/interest other than via pension and/or ISA?
5. Am I better off pumping money into a 6% saving account then drip feeding money out of it to a fixed rate account to make the most of the savings account monhtly rate?
6. Are there any other avenues I have missed?

I realise that these are all questions an IFA would be best placed to answer but I value the MSE community's opinions so thought I'd ask here first.

Thank you!

Toodlepip123

Just bumping this up for the daytime MSEers

whu

no doubt a real expert will come along soon but i would suggest increasing pension contributions (you will get tax relief as you are now a higher rate tax payer- remember to claim it each year) and as for the £250pm i dont know where you are planning to put it but Halifax will give 10% gross as long as you dont touch it for a year(just remembered that you are a higher rate tax payer so you would probably be better with NS%I index linked certificate as it is tax free but they are for 3 and 5 years although you can cash them in when you like with loss of interest)
if you are going for a cash ISA I would suggest putting the full amount of £3600 in asap in a fixed rate for the year

Toodlepip123

Thanks whu, I'll have a look at NSI and start by filling my cashISA

Calchas

Congratulations on becoming a saver rather than a spender Toodlepip 123.

You rightly place great emphasise on the importance of a pension; however you don't mention how old you are: give or take a year or two.

It is always important to maximise your earnings potential and you are doing that by paying in at least the minimum you need to in order to ensure you employer contributes as well. You should always ensure (in my humble opinion) that this is the case.

You seem to have a good plan and let's face it, if you can afford to save in excess of 1k per month, you are one of the lucky ones.

It seems to me that building up a rainy day fund and using the rest in order to secure the best mortgage rate possible should be your priority.

I am no expert! They have all been captivated by the Halifax regular savings thread, which allows £500 per month payments at a rate of 10% for a year: something you may well consider.

Good luck to you in the future. :beer:

Lokolo

Ok, well good on the pension and ISA (I know nothing about pensions though..).

Now you say you are putting money into a fixed rate 1 year. Are you doing this already or are you planning on doing it? I couldn't tell if the last 2 £250's were a one off or also monthly...? (please tell!)

40% tax rate - aw - unlucky, but least you're earning more!

Have you thought about investing? You can save yourself a few bob from tax by using your stocks and shares ISA, but obviously this is a risk and you could end up losing but could end up gaining more than a savings account. Obviously what you will invest in completely depends on your risk profile. But typically investing usually requires a minimum of 5 years. So in answer to question 1, yes, why not.

2. Yes slightly. If you think about it, putting money into ISA every month, whilst putting money into savings account also. The savings account will be taxed. You may as well put the money into an ISA before savings account as this is tax free. The interest earned putting money into an ISA before starting to save in a regular savings account will be greater, therefore not as much tax deduction (saving you money).

3. No.

4. Premium Bonds - but they are a joke. No idea about any others.

5. Not sure, which accounts are they?

6. You scraped on investing, you may as well do it sooner or later.

whu

Toodlepip123 wrote: »

Thanks whu, I'll have a look at NSI and start by filling my cashISA

Index linked savings certificates offer 0.7 % above RPI over three or five year periods and as I mentioned are tax free- if you take the money out within the first 12 months you dont get any interest but if after 12 months you get whatever has accumulated- the interest rates are tiered - have a look at the rates on the site
good luck with whatever you decide

Toodlepip123

Calchas wrote: »

Congratulations on becoming a saver rather than a spender Toodlepip 123.

You rightly place great emphasise on the importance of a pension; however you don't mention how old you are: give or take a year or two.

I'm 29 in August

It is always important to maximise your earnings potential and you are doing that by paying in at least the minimum you need to in order to ensure you employer contributes as well. You should always ensure (in my humble opinion) that this is the case.

That was my thinking, but given the current shares investement situation and the fact I know very little about it, I feel safer just investing the minimum to unlock that extra "salary" and leave it as a low risk profile investement for now.

You seem to have a good plan and let's face it, if you can afford to save in excess of 1k per month, you are one of the lucky ones.

After years of debt, I'm counting my lucky stars! :T

It seems to me that building up a rainy day fund and using the rest in order to secure the best mortgage rate possible should be your priority.

I am no expert! They have all been captivated by the Halifax regular savings thread, which allows £500 per month payments at a rate of 10% for a year: something you may well consider.

Good luck to you in the future. :beer:

I'll have a look at the Halifax account - I suppose the position I'm in right now is that I will fill my CashISA first so it might not be available then, and also due to being taxed at 40% I need to consider NSI funds as a tax efficient investement. I was also thinking about building up my basic savers account during the CashISA "period" then dripping funds into the Halifax one from there to bump up the average interest % so that is another option that might be better than NSI.

Thanks for your encouragement Calchas! :beer:

Toodlepip123

Lokolo wrote: »

Ok, well good on the pension and ISA (I know nothing about pensions though..).

Now you say you are putting money into a fixed rate 1 year. Are you doing this already or are you planning on doing it? I couldn't tell if the last 2 £250's were a one off or also monthly...? (please tell!)

Hi Lokolo!

I haven't opened a regular saver yet - so far have paid £250 into my basic saver and starting this whole process from July 1st paycheck.

40% tax rate - aw - unlucky, but least you're earning more!

I'm trying to see it that way

Have you thought about investing? You can save yourself a few bob from tax by using your stocks and shares ISA, but obviously this is a risk and you could end up losing but could end up gaining more than a savings account. Obviously what you will invest in completely depends on your risk profile. But typically investing usually requires a minimum of 5 years. So in answer to question 1, yes, why not.

I'll look into this - I think it's something I should at least start to educate myself about, but given that I need the majority of my savings to be accessible for a mortgage within the next 1yr+, it might be something for later.

2. Yes slightly. If you think about it, putting money into ISA every month, whilst putting money into savings account also. The savings account will be taxed. You may as well put the money into an ISA before savings account as this is tax free. The interest earned putting money into an ISA before starting to save in a regular savings account will be greater, therefore not as much tax deduction (saving you money).

Thanks, you've confirmed my current thinking on this. :T

3. No.

I assume that's in answer to increase percentage, in which case I think I agree now having had time to ponder.

4. Premium Bonds - but they are a joke. No idea about any others.

Thanks

5. Not sure, which accounts are they?

I think my assumption was say an ICICIsaver account @ roughly 6% drip feeding into a Halifax 10% regular saver for example.

6. You scraped on investing, you may as well do it sooner or later.

OK - I'll get investigating thsi avenue.

Thanks for your advice - you're a star!

Toodlepip123

whu wrote: »

Index linked savings certificates offer 0.7 % above RPI over three or five year periods and as I mentioned are tax free- if you take the money out within the first 12 months you dont get any interest but if after 12 months you get whatever has accumulated- the interest rates are tiered - have a look at the rates on the site
good luck with whatever you decide

Hi again whu! I think 3-5 years might be locking this current batch of savings for too long as I need ot save for a deposit first, but it might be a supplementary option to replace the CashISA mid to long term saving once I've filled that in. Thanks for your advice, it's really appreciated!

Lokolo

In question 3 I said No. I actually meant No Idea :P I am not sure about pensions to be honest, haven't started my career yet so haven't considered them!

But yeh you may as wel drip feed, you then get interest from 2 accounts. However just try and put the maximum in the regular saver. For instance you say £250 £250 (between rainy day and regular saver). What you need to consider is what is a rainy day? Is it being redudant? Is it having a child?

You must think about how much money you want for this rainy day, if you can put some more in halifax saver rather than easy access then cool, go for it.