Your thoughts on how to structure my savings?

Your thoughts on how to structure my savings?

Author
Discussion

Z064life

Original Poster:

1,926 posts

247 months

Sunday 23rd October 2016
quotequote all
Hi,

I am 30 and earn 52k a year (vital information for this thread) and have 65k in savings split across easy-access isa and a stocks and shares isa. I invest the bare minimum in my pension, have a mortgage for a BTL property (repayment) and just spent just less than 20k doing up my house this year (only got to do stairs carpet and blinds!). Also, no student loan debt (paid off) and no credit card debts etc.

So a good situation.


Question is, how should I now invest/structure my incomings? I usually have 2k left a month after all bills are paid. As some of you may know, I plan to buy a GT-R in about 6-9 months, with the aim to have 25k left in savings (so I need to wait for a bit). Or should I start investing in my pension? I am young so my logic is to enjoy life now and wait a few years (if I get the car it's second hand and in cash to own it outright) and then sell it (they're holding their value really well) after 2-3 years and then start paying off my mortgage or saving into my pension - so there's plenty of time - I think! I doubt I'd retire at 55, atm I would prefer to work longer!


Your thoughts appreciated!

33q

1,550 posts

122 months

Sunday 23rd October 2016
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Regular savings accounts still pay the best rates so would be good for saving for the GTR. Even at your tax rate £500 is tax free

I would look to getting some advice to put your spare cash into your pension....40% tax is so painful

Cash ISAs seem to be very poor rates and I have not bothered this year. I am looking at S and S ISAs. In your case they may be more tax efficient than in mine.

bogie

16,342 posts

271 months

Sunday 23rd October 2016
quotequote all
As soon as you start upping your earning potential and get into that 40%+ tax bracket, then tax is the real enemy and you should use all the tax efficient allowances you get.

So try to max out a stocks n shares ISA, take some advice, choose low cost funds etc, no need to hold individual shares unless you want to research. Otherwise do the same inside your pension wrapper, particularly if you get an employer contribution.

You can get the tax back on up to £40k a year in your pension and £15k in an ISA ...more than enough investment potential for the majority of earners...


Ozzie Osmond

21,189 posts

245 months

Sunday 23rd October 2016
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Consider selling the BTL. You're getting nailed for 40% tax on your rental income and you'll be nailed with 28% CGT when you sell the property.

  • Pension. 40% tax relief going in; 25% tax free lump sum; perhaps only 20% tax on your eventual pension income.
  • ISA. Stocks & Shares long term growth 8-10% p.a. completely tax free. Income tax free when you decide to draw it.

Classy6

419 posts

176 months

Monday 24th October 2016
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I'm in a fairly similar position. Hardest thing I find is the mental battle between trying to enjoy my money whilst trying not to deem myself irresponsible when I don't invest/save every penny I earn.

You sound like you're in a very good position anyway, and with 2K net left over after bills etc I don't think you'll miss the extra money after making additional pensions contributions.

Currently talking with my FA about increasing pension contributions to make most of the tax relief and it seems to be best option to avoid paying large amounts of tax at 40%. I don't fully understand how it works yet but I essentially want to increase my contributions so that I meet threshold and anything above that is put into a personal pension fund. As much as it's nice to take the money home, 40% is a big old chunk. I'm also going to increase my maximum contribution into my work final salary pension again to reduce tax.

The main point I've picked up is that he stresses it's important to have savings in both camps which stated as flexible and unflexible, tax and untaxed to entitle you to a decent retirement. Essentially putting as much as you can afford into an Stock ISA after net pay and contributing as anything above threshold into your pension, as other posters have already said.

davepoth

29,395 posts

198 months

Monday 24th October 2016
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Single/married/other? Children planned?

Maxf

8,402 posts

240 months

Tuesday 25th October 2016
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I don't have much to add other than to say well done for getting yourself into a pretty decent position. I earn more, but have far less in savings - I put a lot of that down to having to sell my soul to buy and renovate a nice flat, but in terms of savings you are doing far better than me, so well done!

megaphone

10,694 posts

250 months

Tuesday 25th October 2016
quotequote all
bogie said:
As soon as you start upping your earning potential and get into that 40%+ tax bracket, then tax is the real enemy and you should use all the tax efficient allowances you get.

So try to max out a stocks n shares ISA, take some advice, choose low cost funds etc, no need to hold individual shares unless you want to research. Otherwise do the same inside your pension wrapper, particularly if you get an employer contribution.

You can get the tax back on up to £40k a year in your pension and £15k in an ISA ...more than enough investment potential for the majority of earners...
There is no tax relief on ISA contributions.