Investing for a novice

MidlandsGrimpeur2

Right, I know this could generate lots of opinions and insights but I know there are plenty of forum members with lots of professional and personal experience in this area, so I thought it would be handy to take on some advice.

Planning for the future I am thinking about increasing my investments beyond a basic work place pension and Fixed rate bonds (this is about the current extent of my savings knowledge/experience).

I have some FRB maturing next year and am wondering whether to renew or look at other options.

Essentially, looking at both pensions and general fund investments:

- What are my options?
- Is it best to try and find a good Fund Manager and let them handle it?

I am happy to look at this long term and am not opposed to a bit of risk but really do not know where to begin with it all.

Any advice appreciated.

orraloon

Have a browse on the Lemon Fool website forums

https://www.lemonfool.co.uk/

Found it useful for basic understandings of things various, based on opinions and experiences of others, not pro advice obvs.

surrey_commuter

You may or may not be comfrtable sharing details but the more you do the better the advice.
How old are you, what debts do you have, how much do you have to invest?

As a general rule firstly max out the tax wrappers so pension first, then ISA.

Rtaher than a fund manager I use Vanguard as it is a very cheap provider of tracker funds

shirley_basso

I work in financial services, but not that helpful with investing, but would echo SC advice.

Even easy-access savings accounts are paying 5% at the moment which isn't horrendous compared to what the stock market is doing (although it is below inflation which is obviously useless!)

surrey_commuter

shirley_basso said:

I work in financial services, but not that helpful with investing, but would echo SC advice.

Even easy-access savings accounts are paying 5% at the moment which isn't horrendous compared to what the stock market is doing (although it is below inflation which is obviously useless!)

3 year bonds available at 5.7%

pangolin

surrey_commuter said:

shirley_basso said:

I work in financial services, but not that helpful with investing, but would echo SC advice.

Even easy-access savings accounts are paying 5% at the moment which isn't horrendous compared to what the stock market is doing (although it is below inflation which is obviously useless!)

3 year bonds available at 5.7%

My instant access savings are 4.84%. I'd have to feel pretty sure rates were going to drop to commit to 3 years.

shirley_basso

I think there's a good liklhood they will come down, it's a question of whether they go up first.

The recent hold was promising but BoE threatening to increase before they come down doesn't bode well for mortgageholders like me who expire in Feb-24 (gulp)

surrey_commuter

pangolin said:

surrey_commuter said:

shirley_basso said:

I work in financial services, but not that helpful with investing, but would echo SC advice.

Even easy-access savings accounts are paying 5% at the moment which isn't horrendous compared to what the stock market is doing (although it is below inflation which is obviously useless!)

3 year bonds available at 5.7%

My instant access savings are 4.84%. I'd have to feel pretty sure rates were going to drop to commit to 3 years.

Sorting out my Mum's investments we split the "cash" between instant, 1, 2, 3 year bonds.

Personally I don't hold enough in cash for the odd 1% to make any difference

rick_chasey

surrey_commuter said:

Personally I don't hold enough in cash for the odd 1% to make any difference

ladladlad.

shirley_basso

Not spending enough. What's the point otherwise.

Stevo_666

Depending on your tax position and whether you can lock up the cash long term, making AVC's into your pension fund could be a pretty good investment and tax effective.

surrey_commuter

rick_chasey said:

surrey_commuter said:

Personally I don't hold enough in cash for the odd 1% to make any difference

ladladlad.

sorry that is another cultural reference that passes me by

surrey_commuter

Stevo_666 said:

Depending on your tax position and whether you can lock up the cash long term, making AVC's into your pension fund could be a pretty good investment and tax effective.

I would be very wary of doing this in a DB scheme.

What are the benefits of AVCs in DC scheme rather than SIPP?

Stevo_666

surrey_commuter said:

Stevo_666 said:

Depending on your tax position and whether you can lock up the cash long term, making AVC's into your pension fund could be a pretty good investment and tax effective.

I would be very wary of doing this in a DB scheme.

What are the benefits of AVCs in DC scheme rather than SIPP?

Agreed on the first point, I was assuming he was in a DC scheme.

On these second point he could do either, it's more whether you want to manage your investments or have them managed. From what the OP wrote it sounded more like the the latter.

MidlandsGrimpeur2

Thanks for all the comments so far, a fair few bits to start getting my head around.

Yes, I am in a DC scheme @Stevo_666 and would probably err on the side of having any investments managed for me as I have little experience of this.

I can lock up cash longer term. My new mortgage is a 5 year fixed, one idea was to lock up a chunk of money in a 5 year fixed rate bond (currently around 5-5.80% on offer) and use that to pay off a chunk of the mortgage at the end of year 5.

I would also be open to a SIPP or a managed fund thinking of retirement pots (am currently about 20+ years away from that milestone!)

MidlandsGrimpeur2

Cheers @orraloon that looks like a handy resource to start to get my head around.

pangolin

MidlandsGrimpeur2 said:

Thanks for all the comments so far, a fair few bits to start getting my head around.

Yes, I am in a DC scheme @Stevo_666 and would probably err on the side of having any investments managed for me as I have little experience of this.

I can lock up cash longer term. My new mortgage is a 5 year fixed, one idea was to lock up a chunk of money in a 5 year fixed rate bond (currently around 5-5.80% on offer) and use that to pay off a chunk of the mortgage at the end of year 5.

I would also be open to a SIPP or a managed fund thinking of retirement pots (am currently about 20+ years away from that milestone!)

Sorry this isn't helping your question but if you already have the cash and are happy to lock it up why didn't you pay that much off the mortgage at the start of this 5yr fix? (unless you got a new 5 yr fix at a rate much lower than 5%)

shirley_basso

^ agreed.

You may be better off paying a chunk off today (up to the penalty amount) as you'll save more than that on your mortgage, depending on what you're paying if you recently fixed.

MidlandsGrimpeur2

it was already tied up in an existing bond when I took the Mortgage out.

surrey_commuter

MidlandsGrimpeur2 said:

it was already tied up in an existing bond when I took the Mortgage out.

After tax I would be surprised if you could get a better rate than your mortgage.

shirley_basso

You can make £1k tax free interest income

surrey_commuter

MidlandsGrimpeur2 said:

Thanks for all the comments so far, a fair few bits to start getting my head around.

Yes, I am in a DC scheme @Stevo_666 and would probably err on the side of having any investments managed for me as I have little experience of this.

I can lock up cash longer term. My new mortgage is a 5 year fixed, one idea was to lock up a chunk of money in a 5 year fixed rate bond (currently around 5-5.80% on offer) and use that to pay off a chunk of the mortgage at the end of year 5.

I would also be open to a SIPP or a managed fund thinking of retirement pots (am currently about 20+ years away from that milestone!)

SIPPs are very simple and will derisk your portfolio as you approach your target retirement age.

If you are a higher rate taxpayer then pensions are the way to go but you will not be able to access the money until your are 57/58.

As an example if you put £6k into a SIPP the Govt would put in another £4k.

joeyhalloran

shirley_basso said:

You can make £1k tax free interest income

Depends on what tax bracket the OP is on, higher rate (40%) can only earn £500?

A significant chunk of savings outside an isa could reasonably get to £500.

My inexperienced advice would be:

Contribute to pension
Save in an ISA
Overpay mortgage

surrey_commuter said:

SIPPs are very simple and will derisk your portfolio as you approach your target retirement age.

If you are a higher rate taxpayer then pensions are the way to go but you will not be able to access the money until your are 57/58.

As an example if you put £6k into a SIPP the Govt would put in another £4k.

I thought they just provided 20% i.e. the basic tax rate that you would have paid if it had gone straight in before tax?

surrey_commuter

joeyhalloran said:

shirley_basso said:

You can make £1k tax free interest income

Depends on what tax bracket the OP is on, higher rate (40%) can only earn £500?

A significant chunk of savings outside an isa could reasonably get to £500.

My inexperienced advice would be:

Contribute to pension
Save in an ISA
Overpay mortgage

and if you can't make your mind up split it 3 ways

joeyhalloran

Ah, here is a graph, you can claim tax relief AND contribution for higher rate tax payers for a SIPP contibution.

Dorset_Boy

What sums are you talking about?
Who is your workplace pension with?
What are your objectives?
Do you want to access some or all of the money before retirement?
What tax rate are you paying?
What is the interest rate on your mortgage?
Go and find an attitude to risk questionnaire to complete.

Answers to the above will help with any 'advice' given.

There are very good reasons not to invest in cash / deposits over the medium to longer term (ie 5 years+).

You won't need a Sipp, even if the Workplace Pension is not great, but would at best only need a personal pension - you shouldn't pay for the added functionality and investment choice of a Sipp if you don't need it. (Though I suspect SC is using the term SIPP to distinquish from a Workplace Pension).

Pensions give you tax relief on your contributions (so the Government add £25 for each £100 you pay as a basic rate tax payer, and higher rate tax payers get an effective 40% relief). however you can't access it until 10 years before your State Pension date, and should only ever take money out if it is going to be spent.

But go and get some professional independent advice.

wakemalcolm

Basic financial planning should be on the national curriculum but sadly it's not.

I'd urge you to educate yourself, there's some excellent free resources out there but there's also some utter chod and the internet can't make that filter for you. I've always enjoyed Pete Matthews' meaningful money podcasts. He's an independent financial adviser, fairly straight talking and over the years has covered most areas of personal finance.

If you don't have the time or the inclination to do this, get some financial advice, preferably independent. Always ask to see their terms of business first and take time to understand them. If you can imagine walking into Markie's, asking how much their pants are and them answering: depends how rich you are, and if they turn out to be lucky pants, we'll charge you more each year, then that's where a lot of advice charging still is. They're regulated professionals, but you have to comfortable with price v value.

Anyhow, I'm off to the Money Saving Expert forum to ask if Geraint Thomas should swallow his pride and retire.

surrey_commuter

Not for me but how would anybody find a "good" financial advisor? Seems to be one of those services that even if you asked around mostpeople would only have used one so their recommendation is not worth much

MidlandsGrimpeur2

As above, I would be open to using a Financial Advisor, but I have no means of ensuring I find the right person. I have no contacts and none of my friends have ever used one.

I would essentially be reliant on sites such as unbiased which I don't really want to risk.

I have no doubt there are plenty of people out there that would offer good advice, but really I would be taking a punt.

surrey_commuter

when I get closer to retirement I would happily pay somebody by the hour for tax advice just to make sure I am not missing anything.

pblakeney

surrey_commuter said:

when I get closer to retirement I would happily pay somebody by the hour for tax advice just to make sure I am not missing anything.

A tax accountant is not a financial advisor. You need both.
Or at least a financial advisor who knows their way around taxes.