Savings for property and pension AIBU

[TheTimeToChange]

AIBU to ask for your advice please?

I’m looking into buying a flat/house over the next five years or so (so a fairly short-term goal) as well as wanting to save into a pension (a much longer-term investment).

At the moment, I’ve got some savings in Premium Bonds (haven’t reached the investment limit) and a fixed-rate 5-year ISA.

I’ve now been looking into whether I should open a Lifetime ISA as well, as it sounds like a fairly good investment for buying property and/or saving for a pension. Martin Lewis mentioned it was a worthwhile investment, and a few posters on here have also recommended it. The only thing is that Lifetime ISAs are fairly new, so I don’t know whether they’ll hold their value years down the line.

Should I carry on investing in Premium Bonds until I reach the investment limit or should I save into a Lifetime ISA (or maybe save into something else)? I’d like to invest in something low-risk but with at least some return. Can anyone help please?

Thanks :)

Use the lifetime isa for the deposit on a place - its great and free money.

Beyond that it’s a shit pension (25p for every pound vs. My Company pension which is £1 for every pound)

And my company pension is frankly middling at best

A lot depends on your age and tax rate. You should really be putting a meaningful amount into a pension before your 30 and if you are a higher rate tax payer there's nothing else compares to a pension. Don't let the very long term nature of pensions put you off. It's extremely hard to make up for low pension contributions if you leave it too late and the flexibilty of investment options, freedom not to take an annuity and access from 55+ make them far more attractive than they once were. Next choice would be LISA due to the 25% govt contribution and if you're saving for a house they are the obvious choice. You have a lot of flexibility as to where you can put your investments within your LISA so your question about whether they hold their value suggests you really need to do a bit more self-education. Why the obsession with premium bonds? The return is very poor and you'd get better with just as much security from other options such as bonds (in an ISA preferably).

Thanks trojan and Too :)

Too I’m in my mid-twenties and a basic rate taxpayer. I’m not particularly fussed about Premium Bonds. It’s just my parents had given some to me as a present a couple of years ago, so I just wasn’t sure whether it would be worth me investing in more Premium Bonds. That’s only because they always seemed like a risk-free investment, which I have found tempting in the past, but recently, they haven’t got a great return, as you say.

So it looks like, from what you’ve both mentioned, the Lifetime ISA is a good way to save for a house deposit but not so great for a pension. I have a work pension that I pay into - should I look at anything else apart from that to save into? Or should I focus more at this stage on saving up for a house deposit?

Anyone else with any more advice please? :)

If there's something you're looking to do in the next five years, and you care about that timeframe, then a low risk investment is sensible.

For a pension, that's so far away that the ups and downs of the stock market will balance out, and you really need to prioritise long term returns, not worry about risk.

Honestly I didn’t bother with a pension until I had my property - financially this worked amazingly well for me. If I had been contributing to both I would now not be able to buy the place I am in and a smaller property would have come with a much larger mortgage
I’m on track to be mortgage free in 7 years and now aggressively investing in shares and pension

I would absolutely go for a LISA, the 25% bonus gets paid annually so even if the scheme doesn't last you would already have the money. It hasn't been around for long so I couldn't use it for my first home so I used a help to buy ISA instead, that extra money made all the difference. I will certainly be getting a LISA to save for retirement as well as my company pension.

This need to knows list helped me make my mind up as it's really clear and helpful: www.moneysavingexpert.com/savings/lifetime-ISAs