What to do with savings

[Careerpanic]

Hello,

Can anyone one advise what to do in our financial situation? Is this something a financial adviser can help guide us with (or are they for people with a lot of money?)

Both 40, with 2 primary aged kids
Salaries unlikely to change much for foreseeable - DH 60k, me 40k
£30k savings - currently sat in ISA and savings account
£70k left on mortgage - 2.95% interest fixed July 2027
Have around £1k a month spare to do something with

Do we pay off mortgage first? Start getting a bit more serious with pensions? Save or invest elsewhere? What type of financial adviser do we go to for this scenario - we're a bit clueless!

Thank you

Hi, what % are you savings sat in? If they are more than the 2.95% your mortgage rate is at, best to keep saving them pay off when your mortgage terms comes to an end in 2027 🙂 but yes, you may also want to look at increasing your pension contributions too as lots of benefits of doing this

How are your pensions?

Thank you for replying. £10k in 4% saving account but the rest is less I think. Need to check!

Pensions are terrible. We've just been paying minimum contributions through work pension schemes and never really given them much thought.
Mortals a pension specialist would be the way to go for advice?

No brainer. Prioritise pensions as they are your most tax efficient option and also you need to build them up.

I would be wondering if you want to/intend to help your children learn to drive, get cars/insure cars, go though university (remember the government reduces the money available to students based on their household income and I think you would be expected to make maximum contributions which might still barely cover their rent; or to help them with house deposits?

If you were clear which of these you intend to help with then you can calculate how much money you need available for those goals - and not locked in a pension or mortgage.

There was a post the other day from a mum that had saved 20k to help her 2 kids at uni and her realisation that this would not cover her minimum expected contribution for more than a couple of years - and leave her children needing to get jobs to support themselves which is OK on some degrees and not possible on others.

The Money Saving Expert website can give you information on how much you are expected to top up your kids to match what those from poorer households will get.

This is an example if your child chose to go to uni in London - just to top them up to the amount someone from the poorest households would get ...and depending on their age gap you could have 2 at uni?

Pensions would be my main concern.

Also, where exactly are your savings? Are you putting the maximum allowed - £20K - into an ISA to avoid paying tax on your interest (a good thing by the way).

Your DH would get 40% tax relief on pension contributions so financially upping his pension contributions would be best.

However, as other people say, that locks your money up and if your kids are primary age, you may need it, if not now then when they go to university. With that joint income, you will be expected to make a substantial contribution.

There is definitely no point paying off the mortgage when you can easily beat the mortgage interest rate in savings. You get £1000 interest tax free, your DH gets £500 as a higher rate tax payer. Alternatively, ISAs are tax free.

If your mortgage rate shoots up in 2027, you can always pay off a lump sum from savings then.

Pension
ISA
High interest Easy Access

Have you used your ISA allowance this tax year? You can put in another £20k after April 6. You can transfer your ISA into a higher interest one but you must do it in the right way: it has to go ISA account to ISA account. The provider will tell you. Typically you would open a new account after April 6 with your new savings then transfer your existing ISA in if it has a lower interest rate.

MSE is great for listing the best ISAs and tells you their various T&C and whether it suits you.

I'd concentrate on getting rid of the mortgage. That really expands your options. Once money is in your pension you can't access it easily. Being debt free is the way to go.

You need to plough all you can afford into pensions or you will really have a shit life once pension age. Also you get 25 percent government put in if you open Sipp.

I'd also be concerned about the likely increase in your mortgage when you come to remortgage, so I'd probably be saving as much as I could so that I could pay a chunk off before remortgaging.

And yes, it sounds like your pensions need some attention as well. And possibly also savings for support for your kids at university.

I don't think you need any kind of specialist advice though, it would just be relatively expensive for something that you could do reasonably well yourself if you're happy to put some time and effort in.

As others have said, if you can lock the money away for retirement get your husband to up his pension contributions you'll get tax relief at 40% - 20% straight on the contribution then another 20% when you do your return if through a private scheme.

If you do go for financial advice, be careful where you go. You want an independent financial advisor not one tied to a particular provider and if possible one that is fee based where any continuing commission gets added to the account.

That way you will get advice that’s right for you not advice that gets the advisor the most commission. Many commission based financial advisors are honest. My family is currently dealing with the result of one that wasn’t and maximised commission, massively impacting the trust income of a disabled relative.

Do you have savings that are (at least some of them) instantly accessible in case of emergencies ?
Do you have any debts / loans (other than mortgage) which could be paid off ?
Do you have anything which is in need of maintenance work / replacement in house /white goods / car / garden ?

Those items could easily swallow up your £1k per month.

After you've decided on the above - you should definitely prioritise pensions imo.

Have you looked properly at your pensions? I would start by understanding exactly what you have so far and how your scheme works. Will your employer increase contributions if you do? A pension is likely to give you a much better return than paying off your mortgage, especially for the higher rate portion of your DH's salary. At the moment you have a lowish mortgage for your income and a low rate so in real terms inflation is eroding the debt for you. I can't see much benefit in prioritising the mortgage. I'd also think about putting some for longer term investments for your children's future (uni/house deposit), possibly with some in a s&s isa, though that depends on your time frame and attitude to risk.

Have a search for uk personal flowchart https://flowchart.ukpersonal.finance/?_gl=11sachae_gaMTM5Mjk0Nzc5OS4xNzExOTcwNDMx_ga_TYXK2X3WJT*MTcxMTk3MDQzMS4xLjAuMTcxMTk3MDQzMS4wLjAuMA..

Really logical approach to money management. I have also learnt a lot from the meaningful money podcast and book. When my OH and I were younger we signed up with a financial planner rather than advisor they have a different approach. Look at where you are now and what you hope for in future eg as PP said do you want to help kids with uni/cars/house deposits, what age would you like to retire and what lifestyle would you like then?

Yes, that flowchart is a really good starting point.