Savings or retirement fund

[wooooowwww]

Looking for some insight on savings vs retirement fund please

I've recently turned 40 and just returned to paid work after five years as a SAHM.

I currently work 16 hours a week with a take home of £1400. My company contributes 3% to my NEST pension which works out about £70 a month.

I have £15,000 in savings and £13,000 in my NEST retirement account.

I also have £2,000 in Vangaurd stocks and shares account which I pay £50 a month in to.

Is this a good approach? Rather than putting money on my saving each month should I be putting more in my NEST or an alternative retirement fund?

I really am clueless about this.

I/we (DH) are debt free part from our mortgage if that's of any use for this.

TIA!

It's sensible to have around 6 months in cash savings as an emergency fund, which based on £15k sounds like you may already have that. Make sure you are getting the best return on your money, you should be able to get 4.5% interest for instant access fairly easy.

I'd pay in as much as you need to in your pension to maximise the contribution from your employer.

After that I'd regularly contribute to your S&S ISA at whatever level you can afford. This on the basis that you are investing for 10+ years.

Thank you @Hitchens that's very helpful.

DH and I have a family emergency account so the £15,000 I have is separate. I wonder if it would be worth moving that to a S&S ISA?

I will also look at what I can contribute to maximise employer contributions

I have more in my ISA than in Pension, so I am tipping my investing so that more goes to pension now.

Pension is age restricted access, so I feel it is good to have non-pension investments in addition to pension. Pension is more tax efficient, so more to that is good, though there is the future unknown of what a Government may do with tax rates. ISA is tax free and I doubt a future Government will change that, but you never know.

The different wrappers have their pros and cons, so nothing wrong in my view in having both.

Emergency fund... is that 6 months of expenses, more? The next year may see recession hitting more, so more accessible money may be useful. Depends on your view of how the economy will do over the next year or so.

Money going to S&S ISA you need to be prepared to keep there for 5+ years. Market can go up and down a lot. I would view that as being for long term savings, which could be accessed prior to retirement.

If your £15K isn't required in the short term and you're happy for it to go into long term savings, I would put £10K into your pension and £5K into your ISA - assuming your Vanguard S&S account is an ISA account. Increase your monthly pension contribution if you can afford it.

I don’t understand this. Are you advising that she takes her emergency fund - ie something that needs to be liquid and locks it away into pensions and long term investment vehicles?

That is the opposite of what a rainy day fund is meant to be. The most liquid and accessible vehicle should be the place for a rainy day fund (and there is no way she can say it’s not likely to be required because emergencies don’t occur like that) - and for that liquidity one pays the price of a presumably lower returns rate on that particular accessible pot.

Longer term investment vehicles are for other savings.

I would start to prioritise your pension payments as much as possible. As well as maximising the employer’s contribution the Gvt tops your payment up with a refund on the tax paid.

Thanks all, this is very helpful.

@BrimfulOfMash I like the sound of what you're suggesting but really don't understand maximising my employer contributions if I'm being honest.

Is there an amount that I can pay in that will give me the most benefit?

I've had a look online and I see I can pay in up to £60k a year tax free. I'd never have that much though!

Since yesterday I have changed the fund my money is in to a higher risk setting so hopefully that will have a positive impact

Employers will have different amounts they will contribute, so you are best chatting with work payroll about your particular employers pension scheme works. You may find that by paying in more yourself, your employer pays in more. Though you may equally find that your employer pays in a set percentage and nothing more, thus you need to ask.

My employer pays a flat rate of 3%

Just to give you an example, I have recently taken early retirement at 59, my elected pension age was 60 so less than a year early with about a 3% penalty. I have a civil service pension so gold plated.
My lump sum was over 100k and my yearly pension will be just under 40k from next year.
My pension pot was around 700k, superann employee and employer contributions over 35 yrs.
It gives me a comfortable pension and at 67 I will get state pension on top of that.
My advice is to pay as much as you can possible spare into a pension fund or ISAs.
I also sold a business just before Covid pandemic which allowed me to go part time and paid for our lifestyle ( not over flashy). Most of the money has gone, we’ve updated a lot of stuff in our home that needed doing and had a couple of nice cars, paid off school fees etc.
I have a large pot of savings and still work 1-2 days a week to cover University costs.

I hope this gives you an idea of the reality of pensions. I was lucky to join the scheme when it guaranteed a decent pension. Things have changed. Private pension fund returns are much more volatile.
You need to look at when you want to retire and what income you will need at that point.
My DH had a stroke last year, out of the blue aged 60, and can no longer work. Our outgoings are lower but we still have a DS at Uni so I still work part time to cover his expenses.
Both DH and I will get state pensions but not for a few years. I will probably work until then. DH does have a small draw down pension which he will draw down until his state pension kicks in.
Overall we are covered but I am now looking at the future with regard to care, it’s frightening.

If you have any savings now is the time to take advantage of short term fixed savings accounts. You can get 5% fixed for 1-2yrs at the moment. You need to be able to leave the money in the account for the full term though. Flexible accounts are paying out 2-3% and with interest rates stable you will be able to get a return for another 12 mnths or so. Then invest in ISAs.

Thank you @Angrymum22
I'm so sorry about your husbands unexpected illness