Idaho
blah blah blah
I don't know that much about offset mortgages. What I have read suggests that they are not that great a deal.
Low interest rates on savings
- Thread starter AnnO'Neemus
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I have a big mortgage that I could pay off but have it invested instead, because my mortgage rate is only 1.5%. Now, I potentially need 3% pre-tax to beat that (only I don’t because our savings are in ISAs and in my wife’s name, who doesn’t work, but the point about tax is still worth making). But over the long term, I’m confident in managing to beat 3%. I actually have some investments in equity income funds that pay out about 4%-5% income quite aside from what their valuation is. So the mortgage payments as a cashflow are already covered by one third of the mortgage value invested in these funds.
That’s all based on my being in work and being able to afford the mortgage payments of savings, though. When I stop working, I’ll prioritise having no mortgage because the most important thing will be not having my house at risk!
That’s all based on my being in work and being able to afford the mortgage payments of savings, though. When I stop working, I’ll prioritise having no mortgage because the most important thing will be not having my house at risk!
Yeah, it’s a bit of a niche that could be useful if you fancy your ability to time entering and exiting the equity market, but that’s definitely not me. I think it’s better to either prioritise paying off the mortgage or to take out one with as low a rate as possible, rather than kind of doing neither.
I've got an offset mortgage with Coventry Building Society. I got one initially when I was a contractor as I liked having cash easily available if I needed it (and I kept my personal tax money in there too). I've still got one now I've got a proper job though most of my non-pension savings are in stocks and shares ISAs for the reasons given above.
I like being able to feel I could go 'fuck it' workwise etc if I had to (having once been stuck in a job I hated cos I couldn't afford not to be, I swore never to be in that position again) and relying on S&S ISAs for that is a bad idea as the timing might not work. I have a very good rate -- I could probably do a little bit better with a non-offset mortgage -- but I'm prepared to take a slight hit for the flexibility I've got. And obviously if you pay off your mortgage and then need the cash, that could be difficult/impossible.
you’d almost certainly be better off putting the money into your pension first - it goes in tax free and will likely be earning more than you are paying on your mortgage.
eg if you are a basic rate tax payer, it costs 4 pounds to put five pounds into your pension.
So Unless your mortgage rate is very high, and bearing in mind the rate your pension is earning is probably higher than you are paying for your mortgage, and the government top up pension contribs on the way in - extra pension payments are probably better for you in the long term than paying off your mortgage sooner.
alex
ATOMIC SUPLEX
Member Since: 1985 Post Count: 3
My wife is looking at stocks and shares ISAs instead of the now useless normal ISA. Are these things anything to worry about? Makes me nervous. This is what she sent me.
www.vanguardinvestor.co.uk
Stocks and Shares ISA | Vanguard UK Investor
Any returns you make in a S&S ISA are tax-free and you choose how your money is invested. You can pay up to a total of £20,000 a year into your account.
Idaho
blah blah blah
Yeah that's a good company to use - very low fees and a good range of fundsMy wife is looking at stocks and shares ISAs instead of the now useless normal ISA. Are these things anything to worry about? Makes me nervous. This is what she sent me.
Stocks and Shares ISA | Vanguard UK Investor
Any returns you make in a S&S ISA are tax-free and you choose how your money is invested. You can pay up to a total of £20,000 a year into your account.
ATOMIC SUPLEX
Member Since: 1985 Post Count: 3
Is there much risk do you know?
Money matters really give me heart palpitations, I find it annoyingly difficult to look at them. . . . which is why I have probably fucked up and not got a pension. I've not had stable work for years so didn't think putting money aside was a good idea. . . but equally I haven't really explored options. I find it all rather frightening.
strung out
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Probably the most successful low cost investment company out there.My wife is looking at stocks and shares ISAs instead of the now useless normal ISA. Are these things anything to worry about? Makes me nervous. This is what she sent me.
Stocks and Shares ISA | Vanguard UK Investor
Any returns you make in a S&S ISA are tax-free and you choose how your money is invested. You can pay up to a total of £20,000 a year into your account.
From their 'about us page'
It makes them positively communist by most capitalist standards.
Idaho
blah blah blah
The head in the sand approach is particularly popular with generation X alas. You really need to overcome your fear and sort it out. Failing to plan is planning to fail when it comes to pension.
As to risk - that really depends on the balance of different funds you choose. You are current on a risk free trajectory guaranteeing old age poverty. I can't see what risk you could take worse than that to be honest
strung out
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In the short term of 1-5 years, there's always the risk that your savings can go down as well as up, especially if there's a stock market crash at some point.
Long term, by investing in a Vanguard fund, you're gambling on the fact that worldwide capitalism having grown by an average of 7-10% per year for the last 100 years, will probably continue to do that. Over 10+ years, it's about as safe a bet as you can make, unless the global capitalist system completely falls over, in which case the fact you've lost your savings won't really matter either way.
ATOMIC SUPLEX
Member Since: 1985 Post Count: 3
What I mean by risk, is that I put money in a pension I can't get at when I need it suddenly.The head in the sand approach is particularly popular with generation X alas. You really need to overcome your fear and sort it out. Failing to plan is planning to fail when it comes to pension.
As to risk - that really depends on the balance of different funds you choose. You are current on a risk free trajectory guaranteeing old age poverty. I can't see what risk you could take worse than that to be honest
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This is always a really tough question and one only you can answer, really. I can sit here and tell you that you could or should split off a portion of your income to allot to future savings but who am I to do that? You're right -- money you put towards your retirement (whether that be via a pension or an ISA) needs to be considered to be gone from your life until you retire. That presents a risk that you will suddenly need access to money that is no longer there. Idaho is right, though, that by not putting that money away, you are creating a situation that is also problematic. Ideally, you would find a way to balance those issues. Some people do it, for example, by allocating any pay rises, bonuses or windfalls to their savings, so that their standard of living doesn't rise in line with their improved financial situation. I'm not saying this could apply to you, though -- see my first sentence.
Thora
Differently Ethical
My dad got into stocks & shares as a hobby when he retired (his other hobby is gambling mostly on horses so this is better
) and then set up ISAs for me and my kids. I have no knowledge or interest in it but he sorted a help to buy ISA for me a few years ago which I’m using now to finally buy a house, and the kids are going to have proper savings once they’re 18 (all birthday & Christmas money now going into their ISAs).I only wanted ethical investments and actually mine have done better than my dad’s non ethical ones.
I need to start paying more attention to this stuff.
Although “ethical” (always a woolly term) is being increasingly supplanted by “ESG” investment (which focuses on companies with good policies towards environmental issues, social issues and corporate governance). A lot of big companies (eg Microsoft) score highly on ESG factors — in fact, you generally need to be quite big before you have the scale to create good corporate governance in particular.
Idaho
blah blah blah
Heh - typical. Any advantage the little guys have gets eaten up by the big boys.
ATOMIC SUPLEX
Member Since: 1985 Post Count: 3
Windfalls and excess has always gone into paying off my mortgage, which I have had set at an interest only with between 10% and 20% overpayments allowed each year. I always saw the mortgage as a priority because it was such a huge monthly pay out, and to be honest, I wasn't looking hard at any other options. Every time there was a renegotiation (every two or three years) I pumped everything I could into reducing it. I'll be paying it off this year, which on the one hand is great, but on the other . . . it's now already dwarfed by bills and council tax.
Well that's really good if you're going to have the mortgage paid off. For the future, I would suggest using the money you would have put into the mortgage to pay into investments instead.
ATOMIC SUPLEX
Member Since: 1985 Post Count: 3
Investments like the stocks and shares ISA thing or something more substantial?
If I am anything it's not a gambling man. Scares the crap out of me.
Idaho
blah blah blah
Just opt for some kind of blended lifestyle fund. Vanguard has loads of them, with various risk profiles.
There is no zero risk option. The lowest risk option you have is to get a public sector job and sign up for that pension. But even then there are macro risks.
Putting your money into some kind of savings account wouldn't really be low risk - more a guaranteed and predictable slow and steady loss.
I mean, this is generally a recipe for a happy life anyway but on this occasion, she also is absolutely right.
bimble
floofy
in about 6 weeks, i'm going to receive quite a large bunch of money. I think i should do something like what people have been talking about here (tracker funds) with the part of it that i can put away and not need for some years.
Anybody got any idiot-proof advice on how would you go about choosing from, for example, this list ?
www.vanguardinvestor.co.uk
Anybody got any idiot-proof advice on how would you go about choosing from, for example, this list ?
Vanguard Asset Management | Personal Investing in the UK | Vanguard UK Investor
strung out
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The Vanguard FTSE Global All Cap (Accumulation) will effectively track the global stock market and give you returns based on that without having to worry about making gambles/choices on specific sectors.in about 6 weeks, i'm going to receive quite a large bunch of money. I think i should do something like what people have been talking about here (tracker funds) with the part of it that i can put away and not need for some years.
Anybody got any idiot-proof advice on how would you go about choosing from, for example, this list ?
Vanguard Asset Management | Personal Investing in the UK | Vanguard UK Investor
It is globally diversified so you're not overweight in any specific country, sector or company size and essentially lets you set and forget for the next 10+ years without having to worry about rebalancing, as it's all done for you.
That’s better than me offering specific advice because I’m notoriously bad at guessing where the next growth spot is going to be. My feel is that UK stocks are undervalued right now, which probably means you should invest everywhere other than the UK.
strung out
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The problem with picking specific stocks, or specialised funds is exactly that, that it's essentially a guess or a gamble about what you think will do well over the next X number of years. Now you might make a good guess, and make good returns over a certain period of time. But what if you're not, or you forget to rebalance and the sector crashes, or a new market emerges that does even better than your guess.
Statistically, the global stock market has increased by an average of 7% year on year for the last 100 years, which makes it one of the safest bets out there, particularly for new or unconfident investors. Having said all of that, past performance doesn't guarantee future returns, and there's always a chance of another crash like 2008. If that's a worry, be prepared to leave money in long enough to recover from any crash (2009/2010 were fantastic years for growth if you could afford to leave your money where it was, or even add more to it), and if you know that you will need money for a specific purpose, sell some of your global tracker for some bonds in the run up to retirement/a big purchase or whatever, to decrease the risk of losing money in a crash just before you need it.
You might get the odd person recommending a red hot tech fund (or whatever) that has got them 20% returns for the last 5 years, and that everyone should definitely be investing in. It's the same as someone giving you a tip on a horse though, and you've always got a chance of losing big if you stake too much on it. Buying a bog standard globally diversified tracker like the one I recommended above, is the equivalent of putting a bet on the bookie himself. He might lose the odd bet from time to time, but in the long term, he always wins.
Yes, all quite right. You’re betting on capitalism, basically, such is the safest bet there is. Either it wins and you get your blood money or it all fails and all investments become pointless anyway.
My caveat is that by investing globally you do introduce exchange rate risk. For that reason, my balance is always weighted towards the UK. I aim at about 50% UK and 50% RoW but right now it’s more like 60% UK.
For those who prefer a little more stability in their valuations at the cost of lower expected return, I came across this high income bond fund the other day:
www.ii.co.uk
About 95% of my investments are currently in equities, so I think I’m going to start introducing this as and when I have some spare to put away.
My caveat is that by investing globally you do introduce exchange rate risk. For that reason, my balance is always weighted towards the UK. I aim at about 50% UK and 50% RoW but right now it’s more like 60% UK.
For those who prefer a little more stability in their valuations at the cost of lower expected return, I came across this high income bond fund the other day:
interactive investor
www.ii.co.uk
About 95% of my investments are currently in equities, so I think I’m going to start introducing this as and when I have some spare to put away.
mauvais
on reddit or something
One of my pensions has written to me about some boring changes, but amongst it is that they've sacked off the 'UK active equity' fund choice because it underperformed and "the future potential to consistently add value through active management in UK equities was thought to be challenging".
