£500 a month to save & invest - best way to split
Discussion
Trying to decided how best to divide c. £500 a month.
Currently paying around 10% pa into a pension.
Thinking maybe overpay mortgage by £150 a month and investing £350 into stocks and shares isa (pick my own via 212).
Could maybe lift the pension by 1% a month too?
Read a lot about pensions and investments being more profitable long term than paying off the mortgage but would like to see that getting chipped away at too.
Currently paying around 10% pa into a pension.
Thinking maybe overpay mortgage by £150 a month and investing £350 into stocks and shares isa (pick my own via 212).
Could maybe lift the pension by 1% a month too?
Read a lot about pensions and investments being more profitable long term than paying off the mortgage but would like to see that getting chipped away at too.
torqueofthedevil said:
Trying to decided how best to divide c. £500 a month.
Currently paying around 10% pa into a pension.
Thinking maybe overpay mortgage by £150 a month and investing £350 into stocks and shares isa (pick my own via 212).
Could maybe lift the pension by 1% a month too?
Read a lot about pensions and investments being more profitable long term than paying off the mortgage but would like to see that getting chipped away at too.
i'd say depends on time horizon and general attitude towards debt ( mortgage). It seems to be a debatable topic but to me:Currently paying around 10% pa into a pension.
Thinking maybe overpay mortgage by £150 a month and investing £350 into stocks and shares isa (pick my own via 212).
Could maybe lift the pension by 1% a month too?
Read a lot about pensions and investments being more profitable long term than paying off the mortgage but would like to see that getting chipped away at too.
the money you borrowed on your mortage is losing its original value/cost every year that goes by, inflation,money printing etc.
pensions are undeniably great, but few (me included) work out that depending on the final pot and how much you draw, there'll be 2 poss issues:
1/ tax on pension, sure 25% is tax free, but the rest is taxed.
2/ if you're married - then perhaps your parner will have a lower value pot - so the emphasis is on your pension income to support.
means that (perhaps) you'll have more tax burden on what comes out of your pension; whereas obvs with an isa its wholly tax free (currently) and can be used to top up what you take from pension.
each to their own, but i'd rather owe money borrowed at 'x' % and invest to get a return over and above that. if you are confident in doing that, then the argument to pay down the mortgage isn't that strong?
Jackals said:
Can't go wrong with this option at £350 a month
Global Tracker (Something like VWRL) but look at the fees & decide whether you want an accumulator or dividends.If you want to do something a bit more speculative then something like a Cyber Security fund (but DYOR)
All in an ISA or a SIPP obvs.& use a cheap platform (212 ./ AJ Bell etc)
Thanks for advice so far - I am buying EFTs such as S&P 500 and this is probably where the majority of my money will be going.
I’ve picked a few others e.g Vanguard worldwide etc and some more specific / niche ones and copied some pies.
Most of the EFTs and pies are made up of the companies I have bought some shares of - they tend to be large stable companies which I plan to own for years / decades etc. not going for quick trades so hopefully this is a safer policy.
Aiming for dividend payments but with some selected for growth in there too.
Aiming for a diverse spread and only investing a moderate amount which I can afford.
I won’t be engaged or learn anything unless I have a half decent amount invested.
I’ve picked a few others e.g Vanguard worldwide etc and some more specific / niche ones and copied some pies.
Most of the EFTs and pies are made up of the companies I have bought some shares of - they tend to be large stable companies which I plan to own for years / decades etc. not going for quick trades so hopefully this is a safer policy.
Aiming for dividend payments but with some selected for growth in there too.
Aiming for a diverse spread and only investing a moderate amount which I can afford.
I won’t be engaged or learn anything unless I have a half decent amount invested.
greengreenwood7 said:
..
pensions are undeniably great, but few (me included) work out that depending on the final pot and how much you draw, there'll be 2 poss issues:
1/ tax on pension, sure 25% is tax free, but the rest is taxed.
2/ if you're married - then perhaps your parner will have a lower value pot - so the emphasis is on your pension income to support.
means that (perhaps) you'll have more tax burden on what comes out of your pension; whereas obvs with an isa its wholly tax free (currently) and can be used to top up what you take from pension.
I'm not sure what you are getting at with these points.pensions are undeniably great, but few (me included) work out that depending on the final pot and how much you draw, there'll be 2 poss issues:
1/ tax on pension, sure 25% is tax free, but the rest is taxed.
2/ if you're married - then perhaps your parner will have a lower value pot - so the emphasis is on your pension income to support.
means that (perhaps) you'll have more tax burden on what comes out of your pension; whereas obvs with an isa its wholly tax free (currently) and can be used to top up what you take from pension.
The rest is taxed after the 25% lump, yes. But for a lot of people they will have contributed and got 40% tax relief, and unlikely to build up a pension that they would be within 40% tax bracket, therefore avoiding 20% income tax.
If you are married just divide the pension contributions up better between the two allowances to ensure you stay within 20% tax at point of drawing.
In the above scenario vs. an ISA you are already 20% down at the point of entry due to income tax.
You don't pay the tax when you withdraw it because you paid it before you put it into an ISA.
Jakey123 said:
greengreenwood7 said:
..
pensions are undeniably great, but few (me included) work out that depending on the final pot and how much you draw, there'll be 2 poss issues:
1/ tax on pension, sure 25% is tax free, but the rest is taxed.
2/ if you're married - then perhaps your parner will have a lower value pot - so the emphasis is on your pension income to support.
means that (perhaps) you'll have more tax burden on what comes out of your pension; whereas obvs with an isa its wholly tax free (currently) and can be used to top up what you take from pension.
I'm not sure what you are getting at with these points.pensions are undeniably great, but few (me included) work out that depending on the final pot and how much you draw, there'll be 2 poss issues:
1/ tax on pension, sure 25% is tax free, but the rest is taxed.
2/ if you're married - then perhaps your parner will have a lower value pot - so the emphasis is on your pension income to support.
means that (perhaps) you'll have more tax burden on what comes out of your pension; whereas obvs with an isa its wholly tax free (currently) and can be used to top up what you take from pension.
The rest is taxed after the 25% lump, yes. But for a lot of people they will have contributed and got 40% tax relief, and unlikely to build up a pension that they would be within 40% tax bracket, therefore avoiding 20% income tax.
If you are married just divide the pension contributions up better between the two allowances to ensure you stay within 20% tax at point of drawing.
In the above scenario vs. an ISA you are already 20% down at the point of entry due to income tax.
You don't pay the tax when you withdraw it because you paid it before you put it into an ISA.
Pension contributions are tax free on the way in & 25% tax free on the way out.
ISAs are built on taxed income, everything thereafter is tax free.
Pensions are also outside your estate for IHT purposes.
As long as you earn more than £20K a year you can currently put a lot more into a pension than you can into an ISA.
You also can't get it back/draw on it till you are well into your 50s.
Ideally you do a bit of both.
torqueofthedevil said:
Currently paying around 10% pa into a pension.
10% isn't enough unless you have an employer who's putting in a good wedge as well. You probably need to be above 15% overall and preferably 20% or more.If you don't want everything out of reach until retirement age I'd suggest you put half into pension and half into ISA. ISA is another good route to long term growth with the potential benefit of allowing access at any age.
What is the current interest rate of your mortgage? Having greater liquidity (cash to hand), may be more beneficial than locking it into equity in your house. Or if you need a new car, you can't just pull the cash out of your house, but you could premium bonds or other accounts.
There are many variables, ie are you a higher rate earner. If so you'll be taxed on interest over and above £500, unless it's in some sort of wrapper.
Your pension is probably the most tax efficient way of saving money, however remember you may not be able to access that until later in life.
I do the following:
Circa 2k in an instant access account earning around 4.5%
Around 25k in premium bonds, see it as my rainy day fund/possible lump off the mortgage at a suitable time. I also top this up if I have any left over funds. It maybe not the most efficient in earning, however it mitigates taxable income from the 'interest'.
£400/ month into S&S ISA.
I do also contribute a bit more into my pension.
There are many variables, ie are you a higher rate earner. If so you'll be taxed on interest over and above £500, unless it's in some sort of wrapper.
Your pension is probably the most tax efficient way of saving money, however remember you may not be able to access that until later in life.
I do the following:
Circa 2k in an instant access account earning around 4.5%
Around 25k in premium bonds, see it as my rainy day fund/possible lump off the mortgage at a suitable time. I also top this up if I have any left over funds. It maybe not the most efficient in earning, however it mitigates taxable income from the 'interest'.
£400/ month into S&S ISA.
I do also contribute a bit more into my pension.
Wombat3 said:
Global Tracker (Something like VWRL) but look at the fees & decide whether you want an accumulator or dividends.
If you want to do something a bit more speculative then something like a Cyber Security fund (but DYOR)
All in an ISA or a SIPP obvs.& use a cheap platform (212 ./ AJ Bell etc)
Similar thoughts, I would probably split 3 ways between pension, VHVG or VWRP (tracker) and VUAG (SP500). If you can I would get a product with dividends reinvested so you don't need to manually have that admin. Agreed re putting these in a S&S ISA.If you want to do something a bit more speculative then something like a Cyber Security fund (but DYOR)
All in an ISA or a SIPP obvs.& use a cheap platform (212 ./ AJ Bell etc)
mark seeker said:
Wombat3 said:
Global Tracker (Something like VWRL) but look at the fees & decide whether you want an accumulator or dividends.
If you want to do something a bit more speculative then something like a Cyber Security fund (but DYOR)
All in an ISA or a SIPP obvs.& use a cheap platform (212 ./ AJ Bell etc)
Similar thoughts, I would probably split 3 ways between pension, VHVG or VWRP (tracker) and VUAG (SP500). If you can I would get a product with dividends reinvested so you don't need to manually have that admin. Agreed re putting these in a S&S ISA.If you want to do something a bit more speculative then something like a Cyber Security fund (but DYOR)
All in an ISA or a SIPP obvs.& use a cheap platform (212 ./ AJ Bell etc)
Yes this is exactly what my plan is
Cats_pyjamas said:
What is the current interest rate of your mortgage? Having greater liquidity (cash to hand), may be more beneficial than locking it into equity in your house. Or if you need a new car, you can't just pull the cash out of your house, but you could premium bonds or other accounts.
There are many variables, ie are you a higher rate earner. If so you'll be taxed on interest over and above £500, unless it's in some sort of wrapper.
Your pension is probably the most tax efficient way of saving money, however remember you may not be able to access that until later in life.
I do the following:
Circa 2k in an instant access account earning around 4.5%
Around 25k in premium bonds, see it as my rainy day fund/possible lump off the mortgage at a suitable time. I also top this up if I have any left over funds. It maybe not the most efficient in earning, however it mitigates taxable income from the 'interest'.
£400/ month into S&S ISA.
I do also contribute a bit more into my pension.
Sounds good. Did you know the cash held in the account on 212 earns something like 5.2%?There are many variables, ie are you a higher rate earner. If so you'll be taxed on interest over and above £500, unless it's in some sort of wrapper.
Your pension is probably the most tax efficient way of saving money, however remember you may not be able to access that until later in life.
I do the following:
Circa 2k in an instant access account earning around 4.5%
Around 25k in premium bonds, see it as my rainy day fund/possible lump off the mortgage at a suitable time. I also top this up if I have any left over funds. It maybe not the most efficient in earning, however it mitigates taxable income from the 'interest'.
£400/ month into S&S ISA.
I do also contribute a bit more into my pension.
The s&s isa - are you selecting your own shares or paying into a banks isa? I was following some guides on investing in shares etc but generally they are just picking the major companies which make up FTSE 100 or S&P ETFs - nothing wrong with that but it seems the easier option is to just buy into these ready-made portfolios rather than doing it yourself?
Obviously lots of variables and pros/cons but I wonder if that’s what most ppl are doing? Lower risk?
Thanks
torqueofthedevil said:
Cats_pyjamas said:
What is the current interest rate of your mortgage? Having greater liquidity (cash to hand), may be more beneficial than locking it into equity in your house. Or if you need a new car, you can't just pull the cash out of your house, but you could premium bonds or other accounts.
There are many variables, ie are you a higher rate earner. If so you'll be taxed on interest over and above £500, unless it's in some sort of wrapper.
Your pension is probably the most tax efficient way of saving money, however remember you may not be able to access that until later in life.
I do the following:
Circa 2k in an instant access account earning around 4.5%
Around 25k in premium bonds, see it as my rainy day fund/possible lump off the mortgage at a suitable time. I also top this up if I have any left over funds. It maybe not the most efficient in earning, however it mitigates taxable income from the 'interest'.
£400/ month into S&S ISA.
I do also contribute a bit more into my pension.
Sounds good. Did you know the cash held in the account on 212 earns something like 5.2%?There are many variables, ie are you a higher rate earner. If so you'll be taxed on interest over and above £500, unless it's in some sort of wrapper.
Your pension is probably the most tax efficient way of saving money, however remember you may not be able to access that until later in life.
I do the following:
Circa 2k in an instant access account earning around 4.5%
Around 25k in premium bonds, see it as my rainy day fund/possible lump off the mortgage at a suitable time. I also top this up if I have any left over funds. It maybe not the most efficient in earning, however it mitigates taxable income from the 'interest'.
£400/ month into S&S ISA.
I do also contribute a bit more into my pension.
The s&s isa - are you selecting your own shares or paying into a banks isa? I was following some guides on investing in shares etc but generally they are just picking the major companies which make up FTSE 100 or S&P ETFs - nothing wrong with that but it seems the easier option is to just buy into these ready-made portfolios rather than doing it yourself?
Obviously lots of variables and pros/cons but I wonder if that’s what most ppl are doing? Lower risk?
Thanks
If you look around very few fund managers of actively managed funds ever beat the market on a regular basis.
As with things like pension funds, fees should be front & centre in what you are looking at.
By all means take a few speculative punts if you want but view these as more of a flutter on the side. The backbone of your funds and your future wealth just wants to go in a very low cost Global trackers IMO.
These days I look at the idea of buying single shares (or even single markets) as much more of a gamble & at this point in your investing career it also points towards impatience & a desire to make a lot quickly. If you are lucky you might, but most people aren't that lucky. I'm still sitting on some CGT losses from years ago (around the dot com bubble). Painful lessons learned.
In more recent times I have ISA'd & SIPP'd everything into Global Trackers & done very nicely thank you. I wish I had done it sooner because I've made far more & spent far, far less time on it.
The CGT losses might come in handy later this year though.
Just picking up on this, I have been reading about SIPPS and just wanted to get my head around a few points….
Guide I read said that there will be tax relief so if I put in 80% the govt top up 20%. They said if I’m a higher rate tax payer I can then claim another 20% back through SA so the effective payment by me is only 60%.
- just wondering if the pension I pay in to at work, which is paid into before tax, will already be getting the 40% tax benefit or just the 20% (I don’t currently complete a SA). I.e I’m trying to establish if a SIPP would work better for me from a tax perspective (when compared to the existing mortgage).
- I presume both are much better from a tax point of view than an ISA?
I would still keep my work pension but maybe pay the £150 month into a sipp and ask it’s invested in ETFs and then the remaining £350 into the ISA so it’s readily available.
Thanks
Guide I read said that there will be tax relief so if I put in 80% the govt top up 20%. They said if I’m a higher rate tax payer I can then claim another 20% back through SA so the effective payment by me is only 60%.
- just wondering if the pension I pay in to at work, which is paid into before tax, will already be getting the 40% tax benefit or just the 20% (I don’t currently complete a SA). I.e I’m trying to establish if a SIPP would work better for me from a tax perspective (when compared to the existing mortgage).
- I presume both are much better from a tax point of view than an ISA?
I would still keep my work pension but maybe pay the £150 month into a sipp and ask it’s invested in ETFs and then the remaining £350 into the ISA so it’s readily available.
Thanks
torqueofthedevil said:
I’ve done a lot of research and happy to take the risk that stocks may go down as well as up!
212 is a Bulgarian bookies whose customers are in regular contact with the FCA. They are also the pioneers of the rented gold car to induce the thickest gamblers. Good luck. The fact that you want to do do your own stock picking, think you understand the risks and then pick a spanker's choice broker is information heavily at odds with itself.
Go gambling or go investing but don't be so stupid as to go gambling and hoodwink yourself that you are investing and somehow superior to the losers who stumble in and out of bookies.
And don't forget, the worse the firm the higher the interest they have to pay on client cash to convince them to hand it over.
Not that opting in to receive a payment from 212 is actually interest in cash though. And why do you need to opt in? What is it about the terms one has to agree to in order to take protected cash and hand it to some Bulgarians to go gambling in the money markets with? What are they buying with your cash? What leverage is being run?
We have had been her largest financial crisis in living memory, we live in an era of the greatest access to knowledge and education of all time. We have watched every high yielding trick over the last 20 years implode and yet for some utterly baffling reason blokes who are smart enough to have an excess £500/month remain some of the dumbest punters to easily tap.
You're a smart guy. You don't know a single thing at all about investing. Not one thing. You are destined to lose all your savings but you can just stop and think while you're at the outset of your journey.
The secret is to apply the brains and educations that has got you this excess income and use it to not then piss it away like all the other idiot gamblers.
Edited by DonkeyApple on Saturday 23 March 08:41
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