Money / Mortgages / Investments / Pensions

dw300

I know extra money isn't easy to come by these days, but if any of you invest any money, can you recommend something that gives a good ROI?

Alternatively, is it better to pay off your mortgage off sooner to save on the interest charged? Or perhaps pay more into a pension plan to double up on that via employer contributions?

I've just accepted a new job after a period of unemployment and want to be sensible with my money while I have little in the way of bills .. I know it might not be long before I'm joining gyms or golf clubs that I never get my moneys worth from ..

I'll probably run some numbers, but I'm sure there's plenty of people with great advice on here.

Frank the tank

I'm by no means a money expert. I know interest rates are low but if you were to pay off your mortgage you're guaranteed a roof over your head come what may. The experts generally say clear debt as a first priority. I'd say the interest you're paying will still be more than you'll recieve from an investment unles it's very long term or you're lucky/shrewd with stocks and shares.

Once you've cleared your mortgage look towards the pension issue.

daviesee

^^^^^^^

That's what I did but what do I know.......

verylonglegs

These questions can be a bit tricky to answer as it will be different for each person. Everyone has different attitudes to things like risk and debt. For example, owing any money aside from my mortgage drives me crackers, I just wouldn't feel comfortable with it where as I know people with loans and credit card bills for thousands and it doesn't bother them at all.

The general advice often given is to save up some cash first for emergencies before looking to anything else. There is no such thing as a guaranteed investment, even cash has been losing value in the last few years due to poor interest rates and inflation. Several blue-chip companies return over 5% with dividends but again it comes back to what level of risk you are happy with. Definitely stay away from financial experts who want you pay them any annual fees or for advice given, they actually don't know anything more than you would after you've read a couple a decent books on finance.

mamba80

Pay off your mortage (if you can without incurring penalties?) then look at some tax free options ISA?
A work place pension? like i did, only to find out that what it will buy is so small that i may as well have left it under the bed! and it ll only be that good IF the scheme keeps going:(

Withhind sight i should have bought a cheap flat/house and rented it out instead of wasting money on a pension.

But if you really want to maximise your investment then surely a new C59 with SR is the best way forward?

team47b

As mamba80 suggests, by all means donate your money to the financial services industry BUT don't rely on them.

I stopped going out to work (can't bring myself to use the word 'retired') at age 51 not with the help of the 'bankers'. These products are not there to help you and you have no control over the outcome.

I will get a pension one day when I reach retirement age and I know it will be less than expected but I don't need it to live and I will only spend it on bike bling!

Tom Butcher

How about a watch ?

Mccaria

If you have cash available its certainly worth keeping some set aside to cover several months of bills in case or redundancy etc.

Paying off the mortgage. Generally is regarded as a better route than putting money into long term savings. The only caveat is whether you have a very good mortgage deal. Quite a number of people still have very good mortgage deals from 2004-6 and it would be imprudent to pay these off as such terms will not be on offer for a long time.

Long term savings. If you are a tax payer, then make sure you make use of tax favourable products such as ISAs. At the very least the cash ISAs if you don't want to take the risk on equities. At present with very low interest rates, saving rates are pretty pxss poor and look to be for quite some time (see Japan).

Pensions - Generally very tax favourable but obviously locked up to the point of retirement. If you get employer matched contributions, plus the tax saving on your own pension contributions, then this is an effective long term way of saving, even allowing for fees etc paid out.

Or get a C59.......

CiB

You want a mix. Pay down any debts if you can but retain enough accessible cash to cover a few months of unemployment or sickness.

Once your debts are slimmed down there are a few options for getting a decent ROI. Cash ISAs are a bit crap tbh; if you get 2-3% you're doing well and that barely covers inflation. Nationwide were doing one for qualifying customers that pays 4.5% but again, it's not much and won't change your life even on the max of £5640 a year going into it. What's that? £250 in interest?

Investment ISAs are better and now is actually a good time, if you're happy with a bit of risk. The logic is that with share prices not doing well compared with historical performance, you can buy more for your buck. With stocks & shares it's always a long game so in theory you lob a bit of cash (how much? a couple of hundred quid a month? up to you subject to max of £11280 minus whatever you pay into your cash ISA) into an Investment ISA and sweat on the apparent failure of the markets to provide you much in the way of a return in the short term, but hope that in a few years time it all picks up and all these shares your fund manager has been buying at five quid a pop are now worth £13.72 or whatever, and you're showing a tidy tax-free profit. Your ISA provider will offer a range of products from pretty safe but lower chance of decent returns to high risk / potential high return.

Or you can go direct to the stock market via a broker. Expensive, risky but liable to provide rich pickings if you get it right. Risk & reward. No-one gives money away.

The above is opinion, not financial advice. Speak to a financial advisor or a financial services provider before committing funds to an investment.

GiantMike

My mortgage rate is lower than my ISA and savings rates so I'm saving money rather than paying off my mortgage. If this changes I'll take the savings and pay off the mortgage. I like to stay liquid and I know that if I want to get another mortgage it will incur fees and I won't get such a good deal so I want to keep the good one as it is for as long as possible (and have money saved elsewhere instead).

pedrojake

verylonglegs wrote:

These questions can be a bit tricky to answer as it will be different for each person. Everyone has different attitudes to things like risk and debt. For example, owing any money aside from my mortgage drives me crackers, I just wouldn't feel comfortable with it where as I know people with loans and credit card bills for thousands and it doesn't bother them at all.

The general advice often given is to save up some cash first for emergencies before looking to anything else. There is no such thing as a guaranteed investment, even cash has been losing value in the last few years due to poor interest rates and inflation. Several blue-chip companies return over 5% with dividends but again it comes back to what level of risk you are happy with. Definitely stay away from financial experts who want you pay them any annual fees or for advice given, they actually don't know anything more than you would after you've read a couple a decent books on finance.

Yeah, sound advice there. Stay away from Financial Advisers who have years of experience and the relevant qualifications to guide you through the minefield of financial planning. Likewise, when something goes wrong with the car, dont take it to the mechanic, prob best to buy a book and sort it yourself. Heaven forbid you need legal advice, use google rather than a solicitor, thatll work out well in the end for you.......

pedrojake

Speak to an INDEPENDENT Financial Planner. They will offer you the choice of paying for their expert advice either by an agreed fee or by commission from any plans you put in place. The first meeting with any IFA worth their salt will be free and you can decide if you want to work for them. Also, they can decide at this stage if they want you as a client. At this meeting they will find out what’s important to you, what are your goals, what is your attitude to risk. If you decide to work together, they will carry out research and analysis and make recommendations which will hinge on your ambitions. They will tailor a ‘financial plan’ for you, looking at how various scenarios would impact at yours or your family’s life. If you decide to go ahead they will offer regular reviews to ensure it all stays on course.

Rule 1: for financial or medical advice, probably best to speak to an expert, not from folks on a forum or the pub.

Rule 2: Don’t deal with Financial ‘Advisers’ from a bank – they’re employed to sell you something.

Rule3: see rules 1 & 2

team47b

INDEPENDENT

mamba80

PedroJake wrote:

Speak to an INDEPENDENT Financial Planner. They will offer you the choice of paying for their expert advice either by an agreed fee or by commission from any plans you put in place. The first meeting with any IFA worth their salt will be free and you can decide if you want to work for them. Also, they can decide at this stage if they want you as a client. At this meeting they will find out what’s important to you, what are your goals, what is your attitude to risk. If you decide to work together, they will carry out research and analysis and make recommendations which will hinge on your ambitions. They will tailor a ‘financial plan’ for you, looking at how various scenarios would impact at yours or your family’s life. If you decide to go ahead they will offer regular reviews to ensure it all stays on course.

Rule 1: for financial or medical advice, probably best to speak to an expert, not from folks on a forum or the pub.

Rule 2: Don’t deal with Financial ‘Advisers’ from a bank – they’re employed to sell you something.

Rule3: see rules 1 & 2

Based on that lot, i wont be listening to anything you ve got to say on the matter

IFA s are just a bunch of get rich quick barrow boys - virtually unregulated, to any meaningful level.
At least on a forum, the opinions u get are generally based on experiences.. good and bad.

If you pay off some or all of your mortgage (when i did this, i kept the monthly mortgage payment the same - reduced term), then leave £1 or whatever in the acc, the BS/Bank then have to look after the deeds and you should stil have the mortgage with them - saves having to pay a bank to do it (at least that was the case a few years ago)

freddiegrubb

Beware of pension AVC.s you may end up with a bigger pension but you won't get a penny of assistance from No.10. or next door. Look at all the "dead beats" in modern society that get everything provided & have contributed next to nothing. In modern UK. it appears you have to be quite well off or have nothing, if you are Mr. average it's your hard luck . Who said I'm bitter? twisted perhaps!!!!!

verylonglegs

PedroJake wrote:

verylonglegs wrote:

These questions can be a bit tricky to answer as it will be different for each person. Everyone has different attitudes to things like risk and debt. For example, owing any money aside from my mortgage drives me crackers, I just wouldn't feel comfortable with it where as I know people with loans and credit card bills for thousands and it doesn't bother them at all.

The general advice often given is to save up some cash first for emergencies before looking to anything else. There is no such thing as a guaranteed investment, even cash has been losing value in the last few years due to poor interest rates and inflation. Several blue-chip companies return over 5% with dividends but again it comes back to what level of risk you are happy with. Definitely stay away from financial experts who want you pay them any annual fees or for advice given, they actually don't know anything more than you would after you've read a couple a decent books on finance.

Yeah, sound advice there. Stay away from Financial Advisers who have years of experience and the relevant qualifications to guide you through the minefield of financial planning. Likewise, when something goes wrong with the car, dont take it to the mechanic, prob best to buy a book and sort it yourself. Heaven forbid you need legal advice, use google rather than a solicitor, thatll work out well in the end for you.......

What minefield? Someone looking to stick a few quid away each month can easily get themselves started by reading the financial pages of a few broadsheets and a bit of online research, it's not anything like fixing a car or comlex legal advice. I would have hoped that if the last few years had taught the general population anything it's that there is no such thing as a financial expert...but it seems not. Only laziness should see you in front of an IFA, they can't see into the future anymore than you.

craprider

I got an email from a Nigerian prince offering me $10million to help him move a load of cash.
i'm sorted.

dw300

Ok, thanks for all the advise so far chaps .. regarding pensions ..

I'm probably over simplifying this, but would I be close to the mark in saying that employers will generally match your contributions (possibly adding a percent or two) .. you'll save on the tax as it lowers your taxable income, and then the pension is taxed when it is paid (im assuming its similar to income tax in that the first £xxxx are a tax free amount)?

pedrojake

Sure according to some its just a case of a quick flick through the financials, maybe a glance at Martin Lewis website to answer any financial queries……..

Anyway, no, that’s not the case DW. What employers put in is up to them, and it’s all changing over the next 5 years - starting this month.

Usually your employer takes the pension contributions from your pay before deducting tax (but not National Insurance contributions). You only pay tax on what's left.

However, some employers use the same method of paying pension contributions that personal pension scheme payers use - You pay Income Tax on your earnings before any pension contribution, but the pension provider claims tax back from the government at the basic rate of 20 per cent.

But yes, when you take income from the pension its taxable.

confused@BR

It all depends........

Your age makes a huge difference to your view of Pensions.

Your employment status and prospects affects savings, tax benefits only work if you are paying tax.

Your social condition distorts your view of risk, with many dependents you cannot afford to be careless.

Independent Financial Advice is valuable but make sure you understand the advice you are receiving.

Paying down debt has a liberating feeling and having a cash lode of six weeks to six months income, depending on your circumstances, gives you resilience should you encounter a period of financial turbulence.

Definitely a "three pipe problem" and worth long, careful consideration.

Mccaria

Also you can take up to 25% of your pension pot as a lump sum tax free at the point of retirement.

NickintheLakes

Private pensions are a bit like gambling - and like the Bookmakers there is only one winner.

Male retires at 65/6 gets 25% of the pot and some derisory low rate annuity payment then dies at 74. Pension company laughing all the way to the bank with their 75% + what they have made on it in the intervening 8 years (less what they have paid to you of course).

pedrojake

NickintheLakes wrote:

Private pensions are a bit like gambling - and like the Bookmakers there is only one winner.

Male retires at 65/6 gets 25% of the pot and some derisory low rate annuity payment then dies at 74. Pension company laughing all the way to the bank with their 75% + what they have made on it in the intervening 8 years (less what they have paid to you of course).

Jesus Christ, what a load of bull. how's it like gambling?

Never mind the tax relief, the growth on investment, the fact that with us living longer we may last 20,30, 40 years, add to this that you don't have to buy a crap annuity, there are alternatives, but here, why let some facts get in the way of your post

rick_chasey

Depends how much you have, what your ideal time period is for the investment, and how much of that cash you might need access to over various time periods.

rick_chasey

Unfortunately pensions aren't as advantageous as they used to be, but the advantage is that it's tax free saving at the front end (you pay tax on the money you draw out as a pensioner) and you'll have a pretty long term view so you can ride out the week-to-week through to year-to-year fluctuations as long as the long term trend is upwards.

Most pension managers will say to you that the main thing is that you have a good relationship with them and you trust them.

That's certainly true, you need that element, but it's all pointless if they invest your money badly.

Depending on how much time you have and how much control you want, my advice would be to look at fund manager's performance over the past 5-10 years, considering the market conditions at each year to evaluate how well they do, and in what markets they do best in.

I'd then suggest making sure your money follows your preferred fund manager as he moves around the different firms rather than sticking with the firm.

Some pensions will do that process for you at a cost. It's up to you to evaluate how much that cost is worth it.

And don't be swayed by fancy offices and being treated with champagne (though do be put off by skanky offices..). You're paying for that.

daviesee

Self contradictory.
For a fund manager to have loads of experience and a good track record, you have to ponder why he hasn't accumulated enough to retire himself.

Pross

dw300 wrote:

Ok, thanks for all the advise so far chaps .. regarding pensions ..

I'm probably over simplifying this, but would I be close to the mark in saying that employers will generally match your contributions (possibly adding a percent or two) .. you'll save on the tax as it lowers your taxable income, and then the pension is taxed when it is paid (im assuming its similar to income tax in that the first £xxxx are a tax free amount)?

You can salary sacrifice into your pension for example if you earn £30k per year you could opt to salary sacrifice (say) £2k of that so it goes into your pension directly. Your salary becomes £28k and neither you or the employer pay any NI contributions on the £2k. If you have a reasonable employer they should let you have the whole of their NI savings paid into your pension on top of the £2k (the employer may not put the full amount in or may not put any of it in). If you are making your own pension contributions this should be the most efficient way to do it and your employer should be agreeable to it as it costs them nothing and potentially saves them money.

mamba80

PedroJake wrote:

NickintheLakes wrote:

Private pensions are a bit like gambling - and like the Bookmakers there is only one winner.

Male retires at 65/6 gets 25% of the pot and some derisory low rate annuity payment then dies at 74. Pension company laughing all the way to the bank with their 75% + what they have made on it in the intervening 8 years (less what they have paid to you of course).

Never mind the tax relief, the growth on investment, the fact that with us living longer we may last 20,30, 40 years, add to this that you don't have to buy a crap annuity, there are alternatives, but here, why let some facts get in the way of your post

what alternatives to an annuity are there? Pension drawdown is full of risk and it would be easy to end up far worse off than buying an annuity - as annuity and investment rates fall even further!
at the end of the day, rates are at historic lows, due to... we are living longer! and seriously, are you suggesting that i may live to 108 ???
Phased Annuity is a possibilty but then i get even less to live on.

Pensions are a legalised con, the only winners are the fund managers themselves, have you ever looked round the u/g carparks in the city of london? If your on final salary and work in the public sector then they r excellent but in the private sector...as the duck would say... NO!

confused@BR

Another reason for the poor rates of annuities is the Government's policy of Quantitative Easing (AKA Printing Money) in buying up Gilts they are destroying the market on which annuity rates are based.

There are three basic stages in ones view of pensions:

a) twenties and thirties, too far away to be interesting, do nothing.

b) forties and fifties, to late to rectify the damage caused by Stage A, panic.

c) sixties plus, now you find that it did not matter what you did in A & B you are shafted anyway!

Yes, you are right, I have reached Stage C.

BTW Annuity rates may be rubbish but have you seen savings rates?

My (Late) father-in-law, who was a Finance Director of a Listed Company, reckoned that this Pension lark was easy if you knew when you were going to die.

NickintheLakes

PedroJake wrote:

NickintheLakes wrote:

Private pensions are a bit like gambling - and like the Bookmakers there is only one winner.

Male retires at 65/6 gets 25% of the pot and some derisory low rate annuity payment then dies at 74. Pension company laughing all the way to the bank with their 75% + what they have made on it in the intervening 8 years (less what they have paid to you of course).

Jesus Christ, what a load of bull. how's it like gambling?

Never mind the tax relief, the growth on investment, the fact that with us living longer we may last 20,30, 40 years, add to this that you don't have to buy a crap annuity, there are alternatives, but here, why let some facts get in the way of your post

Firstly; no need to be sarcastic when replying to posts.

Secondly; this is why it's like gambling. You pay money into a pension fund and you are gambling on getting a better final return than eg investing in property or a self-selected portfolio of shares.

daviesee

NickintheLakes wrote:

Secondly; this is why it's like gambling. You pay money into a pension fund and you are gambling on getting a better final return than eg investing in property or a self-selected portfolio of shares.

I have a pension. I select the portfolio and this can include trusts based on property.
Next objection........
That said. Shares are just like gambling. You make an educated guess but guys that bet on horses would say the same.