The Money Thread...

[Jenuall]

I've been surprised at how well my pension has held up in what has been a pretty volatile year. I'd moved most of it out of the default investment option that our company scheme uses a few years ago and stuck a bunch of it into some higher risk funds so was concerned that it would have taken a bit of a hit over the last year but it seems to be mostly on track with where I had expected it to be now. Most of what I was invested in seemed to bounce back pretty quickly after a (major!) dip in March/April

[Dual]

Watch those stonks go up

[Oblomov Boblomov]

Does stock investment ever actually end, or is it just a perpetually swinging state ranging from panic to glee and back again?

On an individual level? Yes, as you use your working life to pay in and use your retirement to have it pay out. To reduce the wild swings you'd normally look to have a higher percentage in bonds and a lower percentage in shares by the time you're looking to retire. Most default workplace pension funds offer this as the default investment option but I prefer being 100% in the stock market at my age.

And at least with passive index trackers (which I stick to) you generally don't have super wild swings either way due to how heavily diversified they are in sheer numbers of companies, geographical locations and that they are therefore also diversified in business sectors too. This year has been an exceptional volatile year of course!

Individual stock picking is more prone to the terrifying roller-coaster ride. Especially if using leverage and doing meme investments:

So it is essentially a mechanism in pursuit of an early retirement. Fair enough. Until then, enjoy the drama as the pendulum swings!

[Skarjo]

Hey what are Mexican cartels like as investment vehicles?

[Oblomov Boblomov]

Hey what are Mexican cartels like as investment vehicles?

I knew we'd steer you back onto the straight and narrow .

[Skarjo]

You joke but it was suggested by my HSBC relationship manager.

[Tomous]

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

[Grumpy David]

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

Lifetime ISAs will give you a 25% bonus so the 4k becomes 5k.

HR tax relief is 40% so putting 4k in becomes £6,666.

If your work offers Salary Sacrifice for the pension method rather than the pension contribution showing in your deduction column of your payslip then you also avoid paying NI on it too and student loan payments if you have one. So you get an effective rate of 51% (assuming student loan plan 1).

If the payment into the pension is showing in the deductions column then you need to contact HMRC as HR relied is not automatically applied to it.

1 interesting idea I've heard of is essentially double dipping. Do the lifetime ISA until you can withdraw the funds and then put that into the SIPP in your 60s. I've not been able to confirm if this is allowed but I would expect this loophole to be closed and treated like "pension recycling" if it is allowed. And HR tax relief could be eliminated by the time you're old enough to withdraw from the lifetime ISA so it has risks to it.

I've decided to hold off on the lifetime ISA being used as a retirement vehicle because salary sacrifice on the pension is so much more tax efficient.

[Dual]

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

You started a Halifax Regular Saving account for the baby? It's 4% on £100 p/month!

[Tomous]

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

Lifetime ISAs will give you a 25% bonus so the 4k becomes 5k.

HR tax relief is 40% so putting 4k in becomes £6,666.

If your work offers Salary Sacrifice for the pension method rather than the pension contribution showing in your deduction column of your payslip then you also avoid paying NI on it too and student loan payments if you have one. So you get an effective rate of 51% (assuming student loan plan 1).

If the payment into the pension is showing in the deductions column then you need to contact HMRC as HR relied is not automatically applied to it.

1 interesting idea I've heard of is essentially double dipping. Do the lifetime ISA until you can withdraw the funds and then put that into the SIPP in your 60s. I've not been able to confirm if this is allowed but I would expect this loophole to be closed and treated like "pension recycling" if it is allowed. And HR tax relief could be eliminated by the time you're old enough to withdraw from the lifetime ISA so it has risks to it.

I've decided to hold off on the lifetime ISA being used as a retirement vehicle because salary sacrifice on the pension is so much more tax efficient.

I am actually starting a new job in Feb where they are matching 5% against my 5% contributions. So, if they offer SS I should look to invest more from my payslip via that, and if not set up a SIIP?

And then, I understand you get £20k stocks and share ISA allowance a year-if we want to get money in index funds should we be doing it via that?


Thank you, always a huge help

[Tomous]

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

You started a Halifax Regular Saving account for the baby? It's 4% on £100 p/month!

Ah yes, we were going to do that, just had to register his birth first which I've finally just done. Thanks for the reminder

[Grumpy David]

Now that we have the house, car and baby expenses out the way, we want to look at setting up investments.

We've been looking at stocks and shares ISAs with a view to investing in index funds but one thing I've seen mention is lifetime ISAs. Is it it worth looking at these from a retirement perspective? I am a HRT so I'm not sure if using a SIPP is more efficient in the long run.

Bit confused so any direction much appreciated!

Lifetime ISAs will give you a 25% bonus so the 4k becomes 5k.

HR tax relief is 40% so putting 4k in becomes £6,666.

If your work offers Salary Sacrifice for the pension method rather than the pension contribution showing in your deduction column of your payslip then you also avoid paying NI on it too and student loan payments if you have one. So you get an effective rate of 51% (assuming student loan plan 1).

If the payment into the pension is showing in the deductions column then you need to contact HMRC as HR relied is not automatically applied to it.

1 interesting idea I've heard of is essentially double dipping. Do the lifetime ISA until you can withdraw the funds and then put that into the SIPP in your 60s. I've not been able to confirm if this is allowed but I would expect this loophole to be closed and treated like "pension recycling" if it is allowed. And HR tax relief could be eliminated by the time you're old enough to withdraw from the lifetime ISA so it has risks to it.

I've decided to hold off on the lifetime ISA being used as a retirement vehicle because salary sacrifice on the pension is so much more tax efficient.

I am actually starting a new job in Feb where they are matching 5% against my 5% contributions. So, if they offer SS I should look to invest more from my payslip via that, and if not set up a SIIP?

And then, I understand you get £20k stocks and share ISA allowance a year-if we want to get money in index funds should we be doing it via that?


Thank you, always a huge help

Yes, if they offer salary sacrifice, it's easily the most tax efficient return on investment. Even if you sacrifice enough to bring you below 50k then you'll still get a 32% return so it beats the LISA.

I set up a SIPP even whilst doing SS since I periodically transfer the workplace balance to the SIPP (due to lower fees).

Yeah, I use an ISA for investments rather than the lifetime ISA because I suspect I'll likely want access long before the age of 60.

JISAs might be worthwhile too if you plan to fill your ISA allowance each year. A SIPP can also be set up for a new born baby too. You can put £2880 in there and it'll become £3600 with tax relief. The compound interest of 60+ years of stock market returns.