Investing for a house purchase

[DropDeadFreida]

Hello all, I will soon be in a position to invest £1000 a month for a future house purchase, and I wanted your advice on the best plan of action. Some info:

I'm 35, aiming to buy by the time I'm 40.
I already have nearly £50k invested in premium bonds and want to fully top that up and keep the £50k there.
I am planning on starting to invest small (say £50 a month) in a stocks and shares ISA and build that up as I earn more.
Where should I invest the £1000 a month? A standard ISA? I do not want something high risk due to it being for a house purchase, and I am planning to take more risks with the stocks and shares ISA.
And just in case it's relevant, I have no debt, and have a good DB workplace pension so do not need to do anything there. This £1000 a month will be purely for the house deposit.

Any thoughts?

What about a fixed-term cash savings account? You should be able to find something north of 5% on cash savings.

@Hermione101 can you keep topping up those accounts each month? The information on these is quite confusing.

For 5 years, stay out of the stock market. Too volatile.

If you're a first time buyer start with a LISA. Then cash ISA. But remeber the total paid into a LISA, cash ISA and S&S ISA has to stay below the £20/k a year threshold, and you can only pay into 1 of each type per year.

Fixed term accounts usually need the whole lot invested at the start, so anything over the ISA limit would need to go into a regular saver or a normal savings account.

@BinturongsSmellOfPopcorn I'm not a first time buyer so would not be able to use a LISA for this unfortunately.

In terms of ISAs, can I not have a cash ISA and a stocks and shares ISA and pay into both every year as long as I stay below £20k?

Yes, 1 of each type. So 1 LISA (for those eligible), 1 S& S, 1 cash.

@BinturongsSmellOfPopcorn oh I see! Okay that makes sense, thanks for the clarification.

Do you know, very roughly, how much your property purchase might be? LISA has a £450k house price limit and shocking terms to withdraw if you bust it and need the money.

@Chewbecca I won't be able to invest using a LISA for the house purchase as I'm not a FTB, and I'll also be buying with my partner who isn't a FTB either.

For those who have stocks and shares ISAs, what level of risk are you comfortable with? This will be a long term investment for me (I'd say at least 20 years) and due to the lower amounts I'll be starting with at first I might be up for a higher level of risk. Are there any ISAs you can recommend? And can I open both a cash and a stocks and shares ISA in the same financial year?

Yes to the last question.

The rest is trickier to answer - the ISA is just the wrapper, so a 'good' one is any with low dealing/management fees (for the types of things you want to invest in) and an easy to use interface (for the way you want to use it). So it's quite personal. Actual performance will depend on the stocks & funds you invest in, rather than on the ISA itself.

I do like Trading 212 for a fee-free (almost) stocks and shares ISA. No annual platform charge and no dealing charges for funds or shares. Only really relevant charge is a small FX fee for buying/selling in foreign currencies, which you can ignore if you stick to UK funds/shares in £.

It's a DIY platform so you'd need to choose your own investments. Plenty of funds available including low cost trackers and a very good range of shares as well. Buying small amounts of shares on other platforms gets expensive as dealing charges really add up, so I really appreciate the lack of charges here.

Customer service is pretty responsive too. Referral link for 1 free share: link

If you are only 35 and looking to invest for 20 years or so then you really need to be invested I 100% equities in my opinion. It can be really simple by investing in a global index tracker fund, it will have low charges usually and will give you global diversification. Personally, and this is just what I have chosen for myself and is in no way me making a recommendation, I've gone for Vanguards FTSE Global All Cap.

What is your pension situation looking like? In many circumstances investing for retirement though your pension is often the first thing to focus on due to tax relief and employer matching. If you are a basic rate tax payer, try and pay in at least to a level that maximises the contribution from your employer. If you are a higher rate tax payer it is beneficial to pay in more.

Having a S&S ISA along side your pension is a sensible idea though as you won't be able to access your pension funds until you are 57.

@BinturongsSmellOfPopcorn that's a good way to think of it, thank you. I do want to open one of each once I've completed my research.

@Lucanus thanks for this, I'm not sure I want a DIY platform at this stage as I need to learn more but that's something I can consider in the future.

@Hitchens my pension situation is pretty decent, I'm in a scheme where my employer and I pay in over 30% of my pre tax pay a month (combined), so I'm happy to leave that as it is at the moment and diversify my investments a bit. I also have a small DC pension from an old employer that is doing okay.

The Vanguard one is the one I was looking at, and I want something with a bit more flexibility than my pension, just in case I decide to go part time etc in the future. I'll look into it further, thank you.

@DropDeadFreida It's actually better value to invest in Vanguard funds like the one @Hitchens suggested through Trading 212, as there is no platform fee. Vanguard charge 0.15% annually, in addition to the fees for the actual fund which would be the same either way. Worth having a look at it.