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  • FIRST POST
    • LXV
    • By LXV 13th Jan 20, 10:01 PM
    • 13Posts
    • 2Thanks
    LXV
    Planning for 40 and beyond.
    • #1
    • 13th Jan 20, 10:01 PM
    Planning for 40 and beyond. 13th Jan 20 at 10:01 PM
    Hi All,

    I have recently signed up to the forum, despite the fact I have been reading posts for many months with intrigue.

    I am putting together a plan for our future and wanted to share my journey so far and what I am thinking as to our savings. At present my investments are a bit all over the place and I hadnít any real direction or goal until recently.

    Both me and my wife are 31 and we have a daughter born in 2017. My first investment was over 4 years ago into Royal Dutch Shell in a HL account. A bit of research went into the company itself but it was more attributed to luck than knowledge that I made a healthy return. At the time Ė just married no kids and 27yo and the first time (after saving for wedding and house) of having larger disposable income. I stumbled across the AIM market (I know, please feel free to slap me). As of today I am sitting just in profit I believe after charges, again more luck than judgement and rather than fully understanding the shares, my research was more amongst people who I felt were trustworthy on social media to pick winners, cross referenced and if all the ones I trusted were invested into a certain share and then set upon researching more into that stock to buy. A very risky strategy, at times I was up by a way and others way down. As our little one has come along I recognise our family future canít be relied upon in such a risky market with limited knowledge. As it stands I still hold around 12 stocks, there are some that were from very early days that are so down that they arenít hurting me (circa £50 value) and I am happy to keep in the bottom drawer should they come good again. There are some that after more and more research I am happy to hold as I feel they will bear fruits this year and prepared to take the risk. I have set sell limits to get out as soon as they do. Then of course there are some that are in profit, which I am considering where to position my sell in order to reinvest into funds instead. To note I have barely traded these in the past 24 months. I recognise I have been very lucky and despite my profit being minimal over 4 years I have attributed it to a learning curve that I shall move on from that being a novice it could have been much worse.

    Around 12 months ago I did some reading and research on here and I opened a Vanguard ISA where I decided upon some LS80. More recently as I had planned this financial year to top up a couple of the shares that were down, so I opened the ISA in HL. I only made one trade (which I was happy with) and then have since further invested into more LS80 on here and also Vanguard Global All Cap.

    In addition for context I invested £1000 into Ratesetter last year through MSE link and now the bonus is in the account I will withdraw for what will effectively have been a 15% profit in 13 months. Finally I also bought into my company share save scheme which I canít touch for around 2 Ĺ years. With a good number bonus shares and the share price being some 25% above the offer price it was too tempting to not buy (company has multi billion turnover).

    In total at present my investments are worth a total of 30k with an additional 10k in the bank and a large bonus due this month. I believe I can save around 6-8k p/a, this allowing us to live our lives with holidays etc. I plan to drip feed £500 per month (leaving around 5-10k in our Santander 123 Ė again other easy access account recommendations welcome) and then assess each quarter to add as and when I have had bonuses. For the past 12 months or so I have overpaid on the mortgage 2.01% by around £170pm. After looking at many posts on here I may stop this and put the additional £170 pm straight into the Vanguard funds too, thoughts appreciated.

    What do you think about holding 2 platforms? I recognise it is more expensive to buy Vanguard on HL, is there cheaper platforms than HL that are recommended that would bring a happy medium should I wish to invest anything other than Vanguard in the future? I donít believe there is any extuastionate penalties from HL. I assume just the cost of the trade for as and when I am ready to sell said share?

    We currently are putting away £250 per month for our little one at present (to be split if we are fortunate enough to have a second). Would you recommend my wife investing in Vanguard funds in her name and then when the time is right we can gift it? The ideal would for it to go towards a wedding / first house / first car rather than just to have access at 18 to spend as she likes (so I am unsure on a JISA). My thinking is 15 years minimum into Lifestrategy 40 or 60.

    I currently pay 8% into my company pension (company matches 6%). I joined a company pension late, currently just over 30k across 2 pensions. I am a 40% tax payer. I see the general consensus here is pay what you can, I am relunctant to put every penny away so it is untouchable for a penny until 55 at the earliest as I believe life is still for living and I hear too many stories of people foregoing things only to have something tragic happen shortly after retiring. My daughter also has CF and despite us having a positive outlook on this for her future, I want us to have a degree of access should we need to.

    At present our mortgage is 254k. With the current 170pm over payment we are paying off around 620pm of capital. My end goal to summarise is to reach a point where I can get a crossover point between investment and mortgage as close to age 40 as possible (say 10 years). From there it will be to make decision of paying off the mortgage or continuing to retire early. Based on the knowledge above (phase out AIM, increase Vanguard funds) and plan to invest a target of 9k per annum if I use the 2k overpayment to go straight into Vanguard Ė is this realistic?

    At the moment I havenít really considered Capital gains taxes and whether things like Bed and ISA are applicable, at what stage should I really focus on whether this will affect me?

    Sorry for the long message, I am sure I will have missed something, I look forward to your thoughts and if anyone can let me know if they would be focusing their efforts elsewhere and why (eg pension).
Page 2
    • atush
    • By atush 15th Jan 20, 8:18 PM
    • 18,105 Posts
    • 11,516 Thanks
    atush
    If you're a 40% tax payer and not sacrificing every bit of that to get you under the limit then I would have a re-think of your strategy.

    Remember you can take 25% tax free lump sum at what is likely to be 58, and then you can use the remainder over what may be the course of 40 odd years for you, plus potential inheritance for your children.

    Overpaying the mortgage makes little sense with interest rates as they are. You may as well carry the debt in order to sacrifice more into pension, then extend the mortgage into your later years and use the additional pension to pay it off. 37% bonus doing it this way currently, every year.
    Originally posted by MaxiRobriguez
    This,

    make sure you arent paying any 40% tax if you dont have to. Your pension provision is low and you need to catch up
    • atush
    • By atush 15th Jan 20, 8:19 PM
    • 18,105 Posts
    • 11,516 Thanks
    atush
    Hi Kangorra

    Thanks for the reply, apologies the wife is working too and earns over 20k pa and is in government pension through work.

    I also earn over the child benefit allowance (over 60k). I am salary plus bonus but if expectations are my salary will remain over this (else I'd be grossly underperforming in my role!)

    Is this the same for NI credits?

    With my pension I can put in as much as I like but the company will match 6%. Can I also open a SIPP if I have a work pension too and pay into that (as I suspect the Standard life And Aviva pensions will be mainly bonds?) as well as a S&S ISA? Completely understand your point on tax relief, in my head my plan was to get the equivalent savings in ISAs to equal/surpass my mortgage in the next 10years and then the remaining 15 years before I am 55 I could really pump into a pension as I will be closer to that age and it not tied up for what is probably going to be 40 or so years by the time I get to retirement age.
    Originally posted by LXV
    What is your lifestyle creep like?

    Can you afford to pay in enough to take you out of HRTax, esp as the wife is earning 20K?
    • LXV
    • By LXV 15th Jan 20, 9:41 PM
    • 13 Posts
    • 2 Thanks
    LXV
    Wow thanks Maxi. I now understand the workings.
    Definitely some reading into compounding needed. Thank you so much for taking the time out to help and explain.
    • MaxiRobriguez
    • By MaxiRobriguez 15th Jan 20, 9:58 PM
    • 794 Posts
    • 654 Thanks
    MaxiRobriguez
    You're welcome. Best of luck in your process.
    • LXV
    • By LXV 15th Jan 20, 10:00 PM
    • 13 Posts
    • 2 Thanks
    LXV
    Hi Atush.
    Thanks for your message.

    Our lifestyle isn't relative to my wage (we aren't careless with money) but we do like to go for meals out from time to time, and enjoy nice holidays...having a nearly 3 year old this also brings about it's own costs! We aren't money wasters, if we can find the same thing for a cheaper price we will & dont really spend money on very expensive designer items or clothes. House is now pretty much where we want it, new kitchen, fully re decorated, new boiler etc etc so that's sorted for a few years!

    I would have to do the numbers, this year I will be very close to 6 figures (very very good year) so maybe it's a mindset thing but that would feel like a huge amount when in essence I guess it's only 60% of it.

    This thread so far has certainly given me perspective on pensions. I'd be interested if anyone can link me to recommendations on platforms for S&S ISA etc as I think I am going to be wasting holding both vanguard and HL. But naturally that money is there and I wont completely neglect the S&S ISA so would continue to pay some money in there a) incase interest rates rocket I can pay off a chunk of the mortgage b) if I did want to early retire I would need access to some money earlier and then c)family situation further up the thread, I would want to be in a position if I needed to take time out of work etc.

    That said before the thread is was tunnelled into a goal of getting parallel to my mortgage as my S&S ISA, where as now my gut feel is I will increase my Pension to probably 15% minimum and then scale up depending on if I feel we still have excess disposable at month end after putting in a much smaller portion than planned into my ISA.
    • recruit18
    • By recruit18 16th Jan 20, 7:36 AM
    • 40 Posts
    • 8 Thanks
    recruit18
    I currently put extra contributions into my company pension so that I don't pay any 40% tax and also get to keep my child benefit. The marginal tax rate between £50-£60k is very high (something like 58% IIRC). So I think its something like every £1 extra that goes into my pension only costs me about 42p less in my bank each month....It's an absolute no brainer if you can afford to get your adjusted net income below the £50k mark. Where else can you get that sort of return?

    https://www.theguardian.com/society/2018/sep/01/high-earner-tax-penalty-child-benefit-50000-salary-pension


    https://www.theguardian.com/uk-news/2018/nov/03/tax-trap-budget-children

    As others have said I also have a pot of money in ISA's as we don't know when I'll be able to get at my pension money. 55 now but could rise to 57 by the time I get there. This gives me a bit more flexibility.

    The most you can put in a pension in one year is £40k (although you can use the last few years 'unused allowance' using pension carry forward rules.

    The good thing is you're saving and asking the right questions. Good luck!
    Last edited by recruit18; 16-01-2020 at 7:44 AM.
    • MaxiRobriguez
    • By MaxiRobriguez 16th Jan 20, 9:44 AM
    • 794 Posts
    • 654 Thanks
    MaxiRobriguez
    Hi Atush.
    Thanks for your message.

    Our lifestyle isn't relative to my wage (we aren't careless with money) but we do like to go for meals out from time to time, and enjoy nice holidays...having a nearly 3 year old this also brings about it's own costs! We aren't money wasters, if we can find the same thing for a cheaper price we will & dont really spend money on very expensive designer items or clothes. House is now pretty much where we want it, new kitchen, fully re decorated, new boiler etc etc so that's sorted for a few years!

    I would have to do the numbers, this year I will be very close to 6 figures (very very good year) so maybe it's a mindset thing but that would feel like a huge amount when in essence I guess it's only 60% of it.

    This thread so far has certainly given me perspective on pensions. I'd be interested if anyone can link me to recommendations on platforms for S&S ISA etc as I think I am going to be wasting holding both vanguard and HL. But naturally that money is there and I wont completely neglect the S&S ISA so would continue to pay some money in there a) incase interest rates rocket I can pay off a chunk of the mortgage b) if I did want to early retire I would need access to some money earlier and then c)family situation further up the thread, I would want to be in a position if I needed to take time out of work etc.

    That said before the thread is was tunnelled into a goal of getting parallel to my mortgage as my S&S ISA, where as now my gut feel is I will increase my Pension to probably 15% minimum and then scale up depending on if I feel we still have excess disposable at month end after putting in a much smaller portion than planned into my ISA.
    Originally posted by LXV
    Couple of (good) options with the S+S ISA. You can go down the 'passive only' route, not getting involved with complex decisions and just buying a cheap VLS passive fund in Vanguard's ISA offering and forgetting about both it and doing anything else. Come back annually to top it up, but do nothing else. Perfectly fine option.

    Other option if you want to get a bit more involved is a platform with low transaction fees. iWeb which I use is pretty good for this, X-O is another option. You can then use this to buy not just funds like VLS but also any other security across global markets, including single stocks. If you go down this route it'll be more work and bigger risk, but potentially bigger pay-off.

    Avoid expensive platforms that come with advice and 1%+ AMCs and fund charges. It'll just sap any gains you make with very little benefit. Most of these experts can predict market shifts no better than you or I, you're just paying them for nothing.
    Last edited by MaxiRobriguez; 16-01-2020 at 1:53 PM. Reason: a passive VLS fund... in a Vanguard ISA.
    • Eco Miser
    • By Eco Miser 16th Jan 20, 1:24 PM
    • 3,664 Posts
    • 3,438 Thanks
    Eco Miser
    Other option if you want to get a bit more involved is a platform with low transaction fees. iWeb which I use is pretty good for this, X-O is another option. You can then use this to buy not just funds like VLS but also any other security across global markets, including single stocks.
    Originally posted by MaxiRobriguez
    Note that iWeb (which I also use) and X-O have low transaction fees (around a fiver) which is great for topping up your ISA occasionally , but if you want to tweak your holdings regularly, a percentage fee/no transaction fee platform could be cheaper.
    Eco Miser
    Saving money for well over half a century
    • AlanP
    • By AlanP 16th Jan 20, 2:31 PM
    • 1,846 Posts
    • 1,524 Thanks
    AlanP
    Hi Alan, would that need to be salary sacrifice or is it as simple as if for an example in a given year I earn say 75k, if I put in more than 15k into my pension (to be below 60k) then I would be eligible for some child benefit? This will be useful to know as whilst I "should" earn above 60k - if have a quiet year this could certainly end up being the case where with an increased pension my earning after pension could be 50-60k bracket.
    Thanks
    Originally posted by LXV
    I'm no expert on this and have never been in the situation of doing it but my understanding is that the "salary - pension contributions" value is the key number.

    Others may be able to comment as it is a strategy that comes up on a fairly regular basis.
    • LXV
    • By LXV 16th Jan 20, 8:21 PM
    • 13 Posts
    • 2 Thanks
    LXV
    Thanks again Maxi. As per the original post, at present I hold a HL account and a Vanguard (different years). I have around 12 AIM stocks as mentioned and then 2-3 FTSE100 companies and then my Vanguard LS80 and Vanguard Global all cap... question is what's the cheapest way to get either all value or as much value onto a new platform - can you transfer or would I have to sell each stock? I assume I can sell from my Vanguard easy enough and then re buy via another platform like I-Web?
    • LXV
    • By LXV 16th Jan 20, 8:23 PM
    • 13 Posts
    • 2 Thanks
    LXV
    I will take another look in the forums Alan.. very useful to know.
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