Low income with large (ish) cash savings WWYD?

[equuscaballus]

Hi everyone,
I’m looking for advice and hoping to gain a little perspective.

I didn’t have any financial advice from my parents growing up and their house being repossessed left me very (overly) cautious about risk and debt.

I work full time on NMW and live in a housing association property.

I’m 40 yrs old, don’t have debt or a pension..

But I have 40k in cash savings.

It was originally for a house deposit but I can’t borrow enough to get a mortgage for property in my area.

Plus to be honest given what happened to my parents I’m not keen on borrowing anyway!

any advice?

I’d love to know what someone else might do with the money!

Tia

My advice would depend on a couple of things.

do you have state pension? You can check your entitlement at https://www.gov.uk/check-state-pension

Is shared ownership or similar an option? Would you consider moving area or retraining?
if not, and you’re focused on this life, then you need a pension. Start paying in through work (as your employer will also pay in). I would probably look to put much of that saving in too, potentially keeping back £16k (which is the max for universal credit).

The lack of pension is a worry
you should have a workplace one tho as it’s been mandatory for years

Hi,
yes,
my state pension is all paid up.

I’ve just started a new job and intend to let auto enrolment happen.

You have a secure tenancy so wouldnt be overly concerned about not owning a property. You must have a pension with work? Its compulsory, but id def be considering investing at least half of the savings for retirement.

I was self employed, and was feeling pessimistic about ever reaching retirement age.

I’m totally committed to my area.
I’ve looked into part buy but I couldn’t afford it.
My rent is about half the amount.

I'd start investing, you've 20 years to weather any storms. I'd pay in to employer pension. Shame you're just over the age for a LISA, but could consider a SIPP?

If you like where you live, don’t worry about owning a house. A lifetime tenancy is the same level of security, and you will get pension credit/UC in retirement if needed to support your future rent payments.

Focus on pension savings and more cash savings but some in a stocks and shares ISA which should give you a longer return

Thank you everyone!

I shall look into Sipps and I’m researching more into pensions.

As a teenager I was always undermined by my father and it had long lasting repercussions.

Invest and higher earnings were for other people - it was an embarrassingly long time (and therapy) before I realised just what I’d missed out on by not questioning how my upbringing affected my life choices.

It’s great that you have the security of the HA home.

Definitely sign up to the workplace pension and you might be able to pay extra in each month from your salary. This is great value because the gvt adds an extra 25% to anything you pay.

You have done really well to save £40k.

Keep saving when you can. Keep £10k or £15k in an easy access emergency account and the rest can be in higher interest accounts that might be locked in.

The other thing to bear in mind is that any interest you earn over £1k will be taxed , so on £40k at 4%, for example, you would earn £1600 and £600 would be taxed. Then next year due to you adding to your savings and compound interest even more would be subject to tax.

So it would be good to have savings in ISAs which are not taxable. Maybe you already do? Make sure you have out in £20k this financial year - you have time to do it! And then another £20k in the new financial year in April. In 2027 the amount you can put into ISAs is being reduced.

MSE gives up to date info on the best IASs.

I consolidated my ISAs into premium bonds.

The “winnings” for me so far have always been about equal to the top rate cash ISAs.

This advice is fantastic- I’m very grateful!

Splitting it up is a big step but it obviously seems to be the way forward

I’m not saying you are, but don’t end up hoping you’ll get pension credit in your retirement and you getting housing benefit as part of the pension credit because even just a little private pension can make you illegible. I would calculate how much your private pension pot will be and what you’ll get each month - would you be able to live comfortably on that and your state pension?

Personally - and I know this is drastic and possibly not feasible - I would at least look into relocating to a cheaper part of the country to buy a small house.

Have you considered investing in yourself to improve your earning potential?

If you're currently on NMW but have the capability and desire to earn more (and some training will help with that) then spending on that training may have a much greater payback on your long-term financial stability than a good interest rate on your savings.

Unless you are late 50s or 60s or need access urgency I'd get them into s&s ISA.

My kids ones made over 25% last year. Mines a less volatile mix and made 14-17%

Wow, really?!
I’m about to put 40k into ISAs over the next month. I’d be absolutely thrilled with this level of return!

You arent going to get that every year but yes.
I think 12% was average last year.
The kids are in fruity high risk stuff because it'll be in for 15 yrs or whatever...

My long term plan is to invest in extra training but after a few health problems I’m using my NMW job to improve my overall fitness and fight brain fog and anxiety.

I know it sounds awful, but after using a calculator it seems that investing into a pension will only give me very low income in future and disqualify me from future housing benefits.
It seems this society rewards those that spend their money!

May just purely investing in a s&s isa would be better?

Please invest in an ISA stocks and shares which will over a longer period give a better return. You can chuck in half now and then half once the financial year starts again on 6 April. I would probably keep 1k in premium bonds just for the tiny chance of a win.

That’s one of the main ways I have made money and I have a very healthy amount in tax free ISA products.

@BeardOToots over the last year calendar year mine have gone up 30%, at one point it was 35% but then in the last 2 weeks it’s dropped 6%.