Some general pension/savings pointers please

Aylesbury_Duck · 14 May 2018 at 3:04PM

Hi everyone
I would be grateful for some advice – some general pointers as to how to balance my finances more effectively, make best use of pension opportunities and where to go to get any professional advice you think I need. Here’s my situation:

Me: 46 years old, Wife: 46 years old. Both in good health.

No mortgage and no plans to move house or undertake any large building projects. No personal loans, credit card debts, car debts or any other borrowings. Run two fairly old cars that we typically replace every 5-7 years so it’s possible that one or both of those will need replacing in the next year or two but we would only spend £4-7k on a car. Two children heading to university in the next three years.

My salary is c.£80k, wife’s is £25k. Jobs seem as stable as any jobs are nowadays. We are currently saving c.£2,000 per month.

£142k in savings (and growing by £2k per month), £32k of that in S&S ISAs (no longer adding to), the rest in cash accounts earning 1.4% - 3.0%. £58k in cash ISAs and the rest spread around in small pots with as much in my wife’s name as possible.

Wife has public sector pensions projected to generate £15-20k p.a. on retirement. She also has a personal scheme currently valued at £50k and is adding £400 a month into via salary sacrifice (on top of the continuing LGPS contribution).

I have company schemes currently valued at £165k and am paying in 11% of my salary (employer adding 6%) each year via salary sacrifice.

To my untrained eye, we have too much in cash that although I am managing well and making sure to maximise interest on, still seems too high. I am conscious that we will need to provide some cash support to our son and daughter soon (they will only attract half of the maximum student loan) and in, say, five to ten years we might want to help them get on the housing ladder.
Would a good first step be to increase our pension contributions, particularly mine as higher-rate taxpayer? At our age and health, is that a better bet than starting another S&S ISA with monthly contributions?

Brynsam · 14 May 2018 at 3:49PM

Tax efficient savings are always attractive, but don't get carried away by that alone! If you are happy to tie up cash in the longer term in readiness for your old age, increasing your pension contributions makes a great deal of sense.

Do you need advice? You seem to be managing extremely well and have a very sensible outlook, so it's tempting to say no - but a preliminary discussion with an independent financial adviser (for which you aren't normally required to pay) would be no bad idea. Do remember the discussion is to establish if it's worthwhile going into things in more depth/whether you get on in personal terms.

Aylesbury_Duck · 14 May 2018 at 3:55PM

Thanks Brynsam. I'll look into the preliminary IFA discussion.

cloud_dog · 14 May 2018 at 4:05PM

I don't know what outgoings you are likely to need in the coming years but....

Way too much cash
Why are you no longer contributing to the S&S ISA?
Why are you not maximising your OH pension contributions via SS; gaining an additional 12% NI savings?
Why aren't you maximising your pension contributions (tax savings)?
Are you self employed; specifically a director of a/your own company?

kidmugsy · 14 May 2018 at 4:34PM

Aylesbury_Duck wrote: »

Me: 46 years old, Wife: 46 years old. Both in good health. ... My salary is c.£80k .... I have company scheme ... and am paying in 11% of my salary ... each year via salary sacrifice.I have company schemes currently valued at £165k and am paying in 11% of my salary (employer adding 6%) each year via salary sacrifice. ... We are currently saving c.£2,000 per month.

Do you positively enjoy paying 40% income tax? Why not contribute enough to a pension (by sal sac) to avoid it altogether? That £2k per month is far more than enough to achieve that. Look around the threads and you'll even find a stunt for paying the sal sac in unequal monthly amounts so that you save more than just 2% in NICs. Anyway your pension provision isn't particularly good for a high earner of 46 - upping your pension contribution is a good idea on those grounds alone.

Aylesbury_Duck wrote: »

wife’s is £25k. ... Wife has public sector pensions projected to generate £15-20k p.a. on retirement. She also has a personal scheme currently valued at £50k and is adding £400 a month into via salary sacrifice (on top of the continuing LGPS contribution).

If your wife hasn't maximised her sal sac there's room in your budget for her to do so, using a little capital if needs be: she'll eventually be limited by her employer's need to pay her at above minimum wage. Note that it makes no sense to do sal sac so much that she ceases to be a 20% tax payer. If she wants to save even more in pensions than that then she could make conventional contributions to her personal pension as a tax-efficient route. Perhaps that would be a bit obsessive, but it might be rational if she hopes to retire before her occupational scheme retirement ages.

Cash: there are two ways to protect yourselves from the slings and arrows: (i) hold lots of cash (and even gold); (ii) buy some insurance. If you already have ample life insurance consider income protection insurance and so forth.
http://monevator.com/do-you-need-income-protection-insurance/

http://monevator.com/family-income-benefit-the-forgotten-policy/

Moving surplus income from cash savings to pensions gives a natural opportunity to rebalance away from cash towards equities and so on.

Aylesbury_Duck · 14 May 2018 at 4:47PM

Thanks for the input. I'll answer your questions below:

cloud_dog wrote: »

I don't know what outgoings you are likely to need in the coming years but....
Way too much cash

Why are you no longer contributing to the S&S ISA? We stopped years ago because at the time they were a high proportion of our savings. We didn't restart them because we are naturally cautious and wanted to pay off the mortgage and build savings. We did both of those much faster than expected and we're now where we are.

Why are you not maximising your OH pension contributions via SS; gaining an additional 12% NI savings? What's OH?

Why aren't you maximising your pension contributions (tax savings)? As above - caution to date but recognise the chance to look at it now

Are you self employed; specifically a director of a/your own company? No. A regular salaried employee.

kidmugsy · 14 May 2018 at 4:57PM

Ha! "OH" is an allusion to that rather twee expression "other half".

atush · 14 May 2018 at 6:49PM

So too much cash.

Pay more into AVCs with OH's pension, and pay more into yours- maybe even enough to take you out of HRT alltogether.

Get back to paying into S&S isas. Pick a multi asset fund, or a global tracker for diversity- less volatility.

Consider using some of your cash pile to put into the S&S isas. Esp for yoru longer term goals like helping the kids with Uni. You have mroe than enough for that, plus replacing 2 cars, amnd still have a lot left over.

Brynsam · 14 May 2018 at 6:51PM

Aylesbury_Duck wrote: »

Thanks for the input. I'll answer your questions below:

You don't have to justify what you are or aren't doing...most of the questions posed (some rather abruptly!) are rhetorical.

Aylesbury_Duck · 14 May 2018 at 7:02PM

Thanks Brynsam, and all who have responded. I don't mind abrupt questioning. It's an anonymous forum so I don't take anything personally. You've all given me some confirmation of the way I was thinking, so that's been useful, and I'll look into the various options you've suggested.

As an immediate step I've contacted my HR department to raise my pension contributions from 11% to 15%. I appreciate that it could (and probably should) go higher still, but I'll also speak to the OH (thanks kidmugsy!) about increasing her contributions and both of us restarting regular investments in our S&S ISAs. Then we can reassess and I will consider a further increase in my pension contributions.

AlanP_2 · 16 May 2018 at 9:57AM

Just checking - are you sure your wife's contributions are under Salary Sacrifice terms as that would be unusual for a LGPS aligned scheme?

Is it a standard LGPS AVC pot which can be taken entirely tax free at the same time as the main LGPS scheme subject to 25% overall limit?

Have you worked out what income level you need (floor level) and would like (nice to have level) in retirement? A useful exercise as you can start to get an idea of how much you need to be putting aside for retirement.

Some general pension/savings pointers please

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