Investment & Investing

Yeah, the low cost was what got me into ii in the first place. Because I'm not an active investor I just wanted to throw pension coins at tracker funds and not get robbed while it sat there doing feck all.

If the S&S ISA is actually 'free' with what I'm paying now for the SIPP I reckon I'll probably stick some coin in that and let it sit for a few years and then smash a mortgage overpayment or something.

If you ever save money for long term, like 5 years or more, it makes sense to do it in an isa

Here's the reasoning behind investing in an all-world fund instead of just one area or geography i.e. FTSE or S&P or tech: I believe I have no edge over the financial markets.

https://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/

If it is an HMRC approved employee share ownership scheme ‘save as you earn’ and the current share price is below the schemes share purchase price there is no tax disadvantage to taking the cash - if you have saved for the full qualifying period of 3 or 5 years then in this scenario you get your cash returned to you tax free and any interest earned on it during the period also tax free, also no requirement to repay any of the NIC savings made on the payments. I had a similar situation when I was in the cadburys scheme 25 years ago and remember discussing at the time that there was zero incentive or advantage to buying the shares in the scheme with the saved money and the only realistic / sane option was to take the cash and do whatever with it.

Also - I have both SIPP and ISA with ii and is all covered by the single monthly fee of £19.99 which acts as a free trading credit for the month I believe. Expect that there might have been / will be changes to their pricing following their acquisition by ABRDN.

Thanks, went for this!

It's a fairly convincing argument.

Arguments for a UK find would mainly be lower fees, eliminating currency risk by keeping investments and likely future costs in the same currency.

I wouldn't say either was right or wrong.

Personally I have a mix of UK, developed world ex UK and emerging markets, so three funds that I alternate in. Over the time I've done it (about 12 years) the UK bit has lagged the other two, but I'll carry on doing the same split because the usual reasons.

It's a SAYE scheme, yes and I presume it's HMRC kosher given who I work for. Thanks for the ii comment - that's what I gathered from skimming their site.

Sounds like I'll take the cash and then maybe open an ii SIPP and buy into a global tracker.

Opinions please, qualified or otherwise.

I probably have about fifteen years of paid work left in me

We owe a good chunk on the house that probably won't get paid off before I/we retire

We have children

I could overpay more in to the mortgage, or I could crank up my pension contributions. Or do something else.

In the past I have not focussed on Pension, as the benefit felt a long way off and because the rules can change for the worst. I feel less certain of that now.

With that in mind, it feels like it would be more sensible to crank up pension contributions for the tax benefit and that sweet tax free lump sum with which you then pay off the mortgage, rather than paying down the mortgage gradually with money that's been taxed.

What say you?

I smashed overpayments so I don't owe anything. It's a nice feeling, but if I could predict the future what I should've done was simply bought a bigger place and then not bothered with such high overpayments and stuck the extra money in pension or some kind of investment.

But then I'd have lost a bunch of that with the last economy tanking and would still be paying off the mortgage so maybe I was right all along :)

Conclusion: I'd do a bit of both - chip in more to the mortgage and the pension. Or if you're really sick in the head, calculate how much you could save with mortgage overpayments versus what you might earn with an investment of the same amount.

Will the children move out in 15 years? Would you then downsize?

I had an interest only mortgage for ever, and didn't think of paying any of it off when I was in a position to after interest rates went down in 2009. I focused on pension / isa as it was clear (I mean I believed) I could get a better long term return without major risk than the cost of my mortgage.

That changed when interest rates went up, and we changed focus to paying off the mortgage. I'm no longer confident I could get a better return than my mortgage now.

Obviously everyone's view of risk, investment skill, and likely future interest rates is different. And calc might be different if you have a sweet long term fix. My mortgage was a tracker at not much above base rate, so great when rates were low but not now.

My wife is less risk tolerant than me and wanted to pay down the mortgage sooner, but it was in my name so we did it my way, ie it was my risk.

Summary, if I were you I'd pay down the mortgage as main priority.

I kind of view it as the bank taking money from me that I could use elsewhere so another argument for paying off the mortgage sooner 'might be' that you end up paying less interest to the bank in total so if you're not clued up on investing, you're still in a better position than if you just held the extra cash in the bank. Pension means you can't touch it too, so if you wanna do something radical one day, you might be too late if you've locked it all in a pension.

Live fast, die young(ish)

simply bought a bigger place

I've got the opposite problem, too much house (relatively), too much debt for where I want to be at this time in life.

Hence (maybe) moving to Leyton.

My plan here is to move up north. Just need to convince everybody else now.

I viewed it as being my life's savings about to be stuck into a flat and, although the interest rates were low at the time, there's only one way they can go from low and that's upwards so I very much did not want to overextend myself just to get my "dream house" or whatever. With hindsight, that 'upwards' didn't happen for years and if I'd known that I'd have bought a 2BR flat instead of this one but this has been pretty good to us and I've been mortgage free for a few years so all that mortgage money has been single-handedly supporting craft brewing across the planet. :D

How are you earning at the moment? If you're through a limited, pension contributions have the additional benefit of reducing corporation tax and NI contributions.

Other than that, it's all about what realistic but unknown returns you can make on a pension fund (less costs), versus how much you can reduce a (known-ish) mortgage, and your relative risk appetite.

Any reason why you can't do both to some extent?

Any reason why you can't do both to some extent?

This is what I'm doing. I increase how much I pay into the pension every year by 1% and anything left over at the end of each month goes into paying off the mortgage. The hope is that the mortgage will be paid off by the time I retire, but if it isn't, I can use the tax free lump sum to pay off what's left.

I increase how much I pay into the pension every year by 1%

That's not a bad idea. I'm still on the bare minimum employer contributions and really need to look at bumping it. Especially as one of my other regular saving plan things is maturing next month.

that's mental, you could save so much tax, I am on 36% going to 40% soon.

I assume you earn quite a bit if you can put 40% into your pension and still pay the bills!

I don't eat avocado toast.

My assumption is I'll be dead before I get to my pension and if I'm not, I'm going on the rob.

I presume you're in a high tax bracket and don't have kids or whatever?

I could probably do similar but I like having cash now so I can do stuff now (without burning it all). Plus I'm hoping rental income or sale of property will get me some cash if I can't steal it all back from mansions of Tories when I'm a pensioner.

You have to think about the money you don't spend on the mortgage or rent as extra income, as if you were a landlord. So if you just sacrifice something like 15k a year you get the full
amount instead of just 9k after tax.
(Edit, badly explained before)

You can access your pension from 55.

At 55 without any penalty?

I'm going to 'make the calculation' and then probably see if I can stick half my income in the pension. I think I'm paying #fuckloads of my income in tax and I could still live off fuck all if I cut down on the midgets a bit.

I don't eat avocado toast.

This is why I don't have a pension.