Just Started to Save

A question about : Just Started to Save

Hi All,

Was looking for some advice please, I am looking to start saving (Yes at 39 I should have done it years ago but hindsight is a wonderful thing!)

I saw an article - https://www.thisismoney.co.uk/money/s...a-instead.html

Which made me think, yes, I could afford Ј200 per month however I cannot work out how they believe that will turn into Ј72k after 20 years - It would be perfect if it did as I would like to retire at 60.

I guess my question is, what is the best way? Yes I have a mortgage so I know there is an argument to overpay that instead but with my Ј200 Id like to understand what is the best option for me to build a nice little nest egg. I currently put Ј50 into Premium Bonds (Yes I had a dream of winning that million!) and Ј50 into a Post Office Online Saving account so realistically I may be able to afford Ј300 per month if I cancel the above.

Thanks in advance.

Best answers:

• It's never too late. My suggestion would be to save into a regular saver account an ISA could be a good choice then once that matures find the best savings rate for the money to be transferred into. They usually offer a great introductory rate which after the introductory period is over is quite bad.
  Ј200 times 12 months times 20 years is Ј48,000. Interest will increase the final figure but inflation will reduce the spending power of the money probably back to whatever you could buy with Ј48,000 in today's money....whatever is worth Ј48,000 today will probably cost double i.e Ј96,000 in 20 years. Just look for the best rate you can find and review it regularly.
• Thanks, daft as it may sound is Ј300 a month worth putting in an ISA? I know its not a huge chunk of money but all I could afford.
• Thanks Masonic - Ill start to put Ј300 away per month then, next thing is where to put it!
  I know there is an argument to say overpay the mortgage but I do like the idea of having a "just in case" pot
• 10 years ago when I was 21 I thought the same if I save Ј500a month in 10 years' time I will have Ј60000 in my savings. I think I did thatfor few months and then I was greedy and I wanted more so my target was goingup and up. And now that im 31 I have just under 300k.
• Would the money be best placed in an M&S 6% interest saving account then? I am a higher rate tax payer so an ISA seems advantageous however looking at the Hargreaves Lansdown proposition it says you can come out with less than you invest
• Wow Kingrulzuk - Thats impressive - You must have a seriously good income!
• If you're saving for retirement has the radical idea of investing within a pension wrapper been considered?
  If not, why not?
  For me, get 3-6 months net wage into an easy access account. Then pile the rest into pension, typically global growth funds, maximising employer contributions.
• As a higher rate taxpayer and with 20 year time frame in mind I think you would be mad not to use a pension.
  For every Ј60 you pay in the government top up to Ј100 with tax relief.
  Investing will beat saving over 20 years.
  You can take 25% out tax free.
  As you wont have a huge pot at the end due to leaving it late and only contributing a small amount monthly you will likely to be able to draw all of it tax free at the other end if you are sensible by keeping under your tax free allowance each year.
• Thanks DRP, I currently put Ј187 per month into my pension (5% of salary) and my employer matches this. This is the maximum they match.
  Do I have to fill any forms in to get the tax back? Sorry Im a complete newbie on this!
• If you pay in more through work, they would usually take your contributions from your gross pay, so you should save the 40% tax at source, although best to check with them. Do they offer salary sacrifice so you can save NI too?
  If not, if you paid Ј60 into a personal pension, it would become Ј80 with tax relief and then you would have to call/write to HMRC for the other Ј20.
• Thanks DRP, I shall ring them tomorrow, Ive looked on the portal and all it says is: You pay Ј187.50 per month This is 5.00% of Basic Salary Ј112.50 per month after estimated tax savings. Your employer pays
  Ј187.50 per month This is 5.00% of Basic Salary. Total monthly contribution Ј375.00 in Aviva Mixed Investment (40-85% Shares) S6
• Unless you do salary sacrifice you will probably only be getting a 20% rebate and the onus will be on you to claim the rest via a self assessment or similar
  If you are a HR tax payer, already have a mortgage and your employer offers salary sacrifice it's a no brainer to take it, almost no down side as as mentioned you get a break on NICs as well. Check it out
• Hmm I cant see if they offer salary sacrifice or not, Ill have to ring up HR tomorrow. Ive noticed it says on the website if you earn more than basic rate taxpayers you will need to complete a self assessment tax return.
  Hmm, Ive been paying in all year and never done a SA return before - EEK!
• HR should be able to answer that for you. A self assessment is pretty easy to do if your affairs are simple (yours are), especially now you can do it online. Alternatvely you can just give HMRC a ring and get the money back via an adjustment of your tax code
  It's another good reason to contribute via salary sacrifice though, none of those pesky tax forms
  Edit: your numbers above suggest you are already using SS
• Thanks ColdIron, I shall email them and see what they say, I have a copy of my last payslip would that give any clues?
• Thanks Masonic, Ill have a look now
  So looking at the advice above, my Ј300 would be best placed in a pension than a savings pot? I guess my only fear is a pension can vanish cant it, im thinking of all the newspaper articles you see about pension black holes!