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I'm new - not sure how to start

Investment discussion for beginners. Why you should invest your money, get help getting started
OneFootEight
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I'm new - not sure how to start

#383144

Postby OneFootEight » February 2nd, 2021, 6:11 pm

Hi,

I used to go on the Motley Fool many years ago and bought shares in ARM during the tech bubble. I loved buying and selling shares but life got in the way. I got married, bought a house, and had 3 children. I didn't have the time or the money to invest

My children are nearly grown up now, and due to Covid I've got a lot more time. I'm 50 and realise its not that long till we'd like to retire (thinking at 62). We still have a small mortgage which is offset, so any money has been put into this over the years. The only debt we have is one 0% credit card. No car loan or any HP.

We don't have much in the way of savings as anything extra has just been offset against the mortgage. My husband works for a bank and they let us buy £100 a month in shares which we've done this for the last 5 years. He has 2 pensions - one with the bank he currently works for and one from his previous company. I don't have a pension. These currently total around £180K.

Instead of investing a lump sum, I'd like to start investing £100 a month in something? Is this possible or would I need a lump sum to start. I'm thinking some sort of tracker where the money can go to each month without me thinking about it.

Any help appreciated, thanks.

JohnB
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Re: I'm new - not sure how to start

#383148

Postby JohnB » February 2nd, 2021, 6:20 pm

I'd get a SIPP and invest your 100/pm in that for the tax relief. You can put in up to £2880 a year even if you have no earned income, and the government will top it up to £3600. Pick a broad accumulating index tracker, and many brokers will allow regular investments with small fees each time. You'll be tying your money up to 55 (possibly 57). Read website monevator.com for advice on picking a broker, you'll want one with a %age custody fee while your sums are small.

XFool
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Re: I'm new - not sure how to start

#383172

Postby XFool » February 2nd, 2021, 7:29 pm

Not really my thing giving financial advice. However...

wrt a SIPP (which seems to be standard advice on here), forget about the "tax relief". Invest in a SIPP if what you want to currently invest your own money in is a personal pension. Otherwise don't - invest via an ISA.

The pension, when it pays out, will be taxed. Income going into a tax would have been taxed, but income coming out of an ISA is not taxed (under current legislation). Obviously, if a higher rate taxpayer now and a standard rate taxpayer in retirement, a pension can offer tax advantages for a long term saver. There may be other considerations as well.

But as I say, my opinion is that a pension is a pension, is a pension.

OneFootEight
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Re: I'm new - not sure how to start

#383173

Postby OneFootEight » February 2nd, 2021, 7:33 pm

Thanks for your replies.

I don't know if this makes a difference but I'm self employed but only ear around £12000 a year, so although I pay NI, I don't pay tax. So not sure if a pension in my name would be worthwhile.

Alaric
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Re: I'm new - not sure how to start

#383174

Postby Alaric » February 2nd, 2021, 7:35 pm

OneFootEight wrote:Instead of investing a lump sum, I'd like to start investing £100 a month in something? Is this possible or would I need a lump sum to start.


That's certainly possible, "regular investment" is a search term.

Investing it via a SIPP has already been mentioned, another alternative is via an ISA. Brokers and platforms would like to see your money, there's plenty of flexibility in how they accept it !

JohnB
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Re: I'm new - not sure how to start

#383183

Postby JohnB » February 2nd, 2021, 7:58 pm

Its a common misconception that you need to pay tax to get tax relief on pension contributions. Actually if you earn 12000, you could put 9000 in a pension, and it would be topped up to £11250 by the government, even though you paid them no income tax. Its just that the total of your contributions and the governments must not exceed you earned income

Newroad
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Re: I'm new - not sure how to start

#383192

Postby Newroad » February 2nd, 2021, 8:24 pm

Hi 1'8".

In broad terms, if you're investing with post-tax income, I agree with XFool - ISA rather than SIPP. What to invest in depends on your tolerance for risk and desire to self-manage it - only you can determine that. One sensible option to consider is perhaps one or more of Vanguard's LifeStrategy funds (via an ISA): https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa

In the old days, people often said put 100 - your age in equities (stocks), I've heard some say 120 - your age these days. To give an example of the latter (120-50=70) you could synthetically create a "Lifestrategy 70" by putting £50 a month into a Lifestrategy 80 and £50 a month into a Lifestrategy 60.

I would also observe that retiring "comfortably" at 62, doing the above, is optimistic unless you and your husband have additional (e.g. final salary) pensions that you haven't mentioned. However, I may misjudge your likely expectations in this respect. In any case, with the £180K in pensions you mention, make sure what your husband has them invested in is

    (a) performing OK, and
    (b) doesn't have too high charges
If they fail either test, you could consider moving them, e.g. create a SIPP somewhere, but this might not be possible with the current employer and may not make sense if the amount with the former employer's pension is only modest.

You've done the right thing thinking about what to do - now's the time for you to consider and perhaps research some of the options which have been mentioned. Best of luck! :)

Regards, Newroad

OneFootEight
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Re: I'm new - not sure how to start

#383296

Postby OneFootEight » February 3rd, 2021, 10:09 am

Thanks for all your replies.

I think I want to start with some sort of tracker and perhaps look at buying my own shares again at some point in the future as a bit of a hobby. I invested at a bad time before, I think the feelings I had were similar to a gamblers. Luckily, I did ok out of it due to the ARM shares. Don't want to feel that way again though - highs and lows.

This lockdown has made me realise that I spend a lot of money, on what I'm not totally sure. My son and I both have an expensive hobby but even that doesn't cover where the money goes. Its been so interesting seeing how much we have left over each month even though my earnings have dropped dramatically. My husband worked from home anyway, so he's not seen much change. He's just had a payrise and we'll find out on payday exactly how much this works out at after tax. I want to put this money away initially and then increase it as time goes on. Since lockdown, I've managed to put nearly £20K against my mortgage so as I gain in confidence I could put more away and possibly use some of this £20K.

I'm self employed and my earnings can fluctuate quite wildly.

Urbandreamer
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Re: I'm new - not sure how to start

#383319

Postby Urbandreamer » February 3rd, 2021, 12:07 pm

OneFootEight wrote:Thanks for all your replies.

I think I want to start with some sort of tracker and perhaps look at buying my own shares again at some point in the future as a bit of a hobby. I invested at a bad time before, I think the feelings I had were similar to a gamblers. Luckily, I did ok out of it due to the ARM shares. Don't want to feel that way again though - highs and lows.

This lockdown has made me realise that I spend a lot of money, on what I'm not totally sure. My son and I both have an expensive hobby but even that doesn't cover where the money goes. Its been so interesting seeing how much we have left over each month even though my earnings have dropped dramatically. My husband worked from home anyway, so he's not seen much change. He's just had a payrise and we'll find out on payday exactly how much this works out at after tax. I want to put this money away initially and then increase it as time goes on. Since lockdown, I've managed to put nearly £20K against my mortgage so as I gain in confidence I could put more away and possibly use some of this £20K.

I'm self employed and my earnings can fluctuate quite wildly.


As the previous replies deal with most investment maters I'll just comment that starting in the mad frenzy before the dot com crash was no bad thing. The mistake possibly was to stop investing. You missed a lot of learning time in the intervening period.

On the money spending side, this is the wrong board and I suggest that you add questions on a relevent board. However you desperately do need to find out where it all goes. EVEN or possibly ESPECIALLY if you decide that you wish to spend the money the same way.

Most bank and credit cards allow you to download your spending as a spreadsheet. In that form it's easy to sort into supermarket/food spending, Amazon, Netflix, Sky, Greggs or Starbucks. You can go further and manually enter supermarket reciepts to seperate food from booze. What you learn can inform decisions that you make in the future.

EthicsGradient
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Re: I'm new - not sure how to start

#383341

Postby EthicsGradient » February 3rd, 2021, 1:00 pm

There are distinct advantages for someone in the OP's position of using a SIPP, not an ISA.

They do not currently have a pension. Even if their National Insurance record is good enough to get the full state pension (and that is something they should check - see https://www.gov.uk/check-national-insurance-record ), that still does not pay enough to use up the personal allowance, once they stop working. At £100/mth net contribution, a pension they build up in, say, 12 years, is not going to be huge - perhaps £21,000 in today's money - and they would be able to withdraw it all tax-free in just a few years (and everyone gets 25% of it tax free anyway). So the tax relief they get will be better than the ISA's ability to always be withdrawn without tax.

If they do decide to invest more in the future, it may become worth putting some of it in an ISA. That gives you the flexibility of withdrawing it when you want (before age 57, or a lot at once if wanted).

OneFootEight
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Re: I'm new - not sure how to start

#383349

Postby OneFootEight » February 3rd, 2021, 1:19 pm

It sounds like a SIPP is definitely the way to go. I hadn't realised the advantages of a SIPP and I like the idea of the money being locked away, stops me spending it !! If I needed money in a hurry I'd take it out of my mortgage. I've started having a look at Vanguard and will definitely look into where I spend our money. A lot of it goes towards my son's sport, which is expensive. I paid £1000 for equipment last February and competitions are always expensive as they involve hotels / eating. I try and do this as cheaply as possible and we've stayed in some dives. But I think a lot must go on other trivial stuff too. This is why I only want to put away £100 to start with as I know this can be managed easily. I want to make sure there's enough money for my son to continue in his sport if it ever returns.

Sorry if I picked the wrong board.

Thanks for your replies.

Urbandreamer
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Re: I'm new - not sure how to start

#383355

Postby Urbandreamer » February 3rd, 2021, 1:30 pm

OneFootEight wrote:Sorry if I picked the wrong board.

Thanks for your replies.


It was me that wasn't clear. This is the right board for your initial question.

We try to discuss how to start investing on this board. It's me that was acting wrong in talking about spending.

Other boards are more appropriate to how to plan for retirement, which may or may not involve stock market investment. Or how to manage your spending.
I.e)
Retirement investing
viewforum.php?f=30
or
Living below your means (dealing with what you spend)
viewforum.php?f=14

Welcome to the boards. Sorry that I didn't already say that.

Newroad
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Re: I'm new - not sure how to start

#383383

Postby Newroad » February 3rd, 2021, 2:59 pm

Thanks UrbanDreamer and JohnB.

Always good to learn something or get a different angle (in this case, the relative advantage of SIPP's for small pension pots). In context, I now agree - tax free lump sum withdrawal, after government top-up is worth more than ISA flexibility, for most people anyway.

Regards, Newroad

OneFootEight
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Re: I'm new - not sure how to start

#387905

Postby OneFootEight » February 19th, 2021, 10:25 am

Hi,

I just thought I'd let you know what I've decided to do for now.

I've opened a SIPP with Vanguard. My husband got a bonus in January of £2800, so I've started it with £2880 as suggested and it was interesting to see it go straight to £3500. I'm going to pu £100 a month in but try to save £250 in separate account. After a few months I might add this as a lump sum or I might by some shares with it or maybe a bit of both. I've plenty of time to decide.

Thanks for all you help. I wouldn't have considered or looked at SIPPs without this thread.

swill453
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Re: I'm new - not sure how to start

#387921

Postby swill453 » February 19th, 2021, 11:14 am

OneFootEight wrote:Hi,

I just thought I'd let you know what I've decided to do for now.

I've opened a SIPP with Vanguard. My husband got a bonus in January of £2800, so I've started it with £2880 as suggested and it was interesting to see it go straight to £3500.

£3600 surely?

Do Vanguard really credit the tax relief straight away? Most providers don't until HMRC refund it 6-9 weeks later.

Scott.

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Re: I'm new - not sure how to start

#388164

Postby Leif » February 20th, 2021, 11:43 am

It’s worth looking at your husband’s pension. If it is defined benefit (for example pays 50% of his final salary), then leave it. If it’s defined contribution (you get out what you put in +/- and growth), then take a look at the performance. Sometimes, maybe often, group pension plans are invested in mediocre equity funds. Many of mine were. One hovered at £4,000 for ten years (no contributions) before I finally had the sense to transfer it. I transferred all of mine to a SIPP.

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Re: I'm new - not sure how to start

#388182

Postby SPURLEY » February 20th, 2021, 1:12 pm

Hello Leif this may be a daft question - you said you moved your DC pensions to a SIPP - Did you receive tax relief added on when they went into the SIPP ? . I have about 4 small DC pots and i am considering doing the same as you have done . Robert

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Re: I'm new - not sure how to start

#388189

Postby jonesa1 » February 20th, 2021, 1:35 pm

270160 wrote:Hello Leif this may be a daft question - you said you moved your DC pensions to a SIPP - Did you receive tax relief added on when they went into the SIPP ? . I have about 4 small DC pots and i am considering doing the same as you have done . Robert


The DC pensions will have already had tax relief applied, so no uplift when transferred to a SIPP

Andrew

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Re: I'm new - not sure how to start

#388199

Postby SPURLEY » February 20th, 2021, 2:07 pm

Thank you Andrew . Robert

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Re: I'm new - not sure how to start

#388222

Postby Leif » February 20th, 2021, 3:56 pm

270160 wrote:Hello Leif this may be a daft question - you said you moved your DC pensions to a SIPP - Did you receive tax relief added on when they went into the SIPP ? . I have about 4 small DC pots and i am considering doing the same as you have done . Robert


Answered above. I transferred because a) platform and management charges were less in the SIPP, b) I had access to more funds and c) consolidating many pensions into one SIPP makes management (and password memorisation) much easier.


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