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55 single --no pension/no savings/5k emergency fund

compound200
by compound200 21 June 2011  |  Comments 6 comments  |  Love Love  0 loves

positives--- mortgage paid off---equity(110k)

self employed--i have £700 a month disposable income.

i plan to work till 65--then p/t to 70

do i put my money into a cash isa or isa stock/share tracker?

thx

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Comments (6)

  • MikeGG1
    Love rating 909
    MikeGG1 posted

    The first £5,340 per tax year should go into a Cash ISA. The remainder would depend on your top tax rate. If that is Basic Rate, then don't bother with a S&S ISA. Just go for an All-Share Tracker. If Higher Rate then go for the Tracker within a S&S ISA, It shelters you from the additional tax but not the basic tax.

    Mike

    Posted on 21 June 2011 | Love Love  1 love Report
  • compound200
    Love rating 7
    compound200 posted

    how do you check on-line cash isa accounts are secure?

    thx

    Posted on 21 June 2011 | Love Love  0 loves Report
  • MikeGG1
    Love rating 909
    MikeGG1 posted

    They are just the same as other cash savings. The ISA is only a wrapper.

    Mike

    Posted on 22 June 2011 | Love Love  0 loves Report
  • compound200
    Love rating 7
    compound200 posted

    thx

    Posted on 22 June 2011 | Love Love  0 loves Report
  • Mark Trehorn IFA
    Love rating 4
    Mark Trehorn IFA posted

    You have 10 years to go till retirement. By keeping it all as cash you will effectively halve the 'real' rather than 'nominal' value over this period. A cash ISA is certainly useful, but you don't say how much cash you already have. Do you want to add to this in the currenty interest rate environment ? An 'All Share' tracker is certainly a low cost option for growth. (A school of thought believes that most fund managers do little better than the market average. Not always true. Depends on the manager.) Be careful here because if the market goes down, God forbid, your tracker will go down with it, if it goes up, which we would all like, then it goes up with it. Also check 'exactly' what it tracks, FTSE 100, FTSE 250, FTSE All Share, FTSE World. (There are lots to choose from) and how it tracks. Trackers are excellent for keeping costs down, but there are lots of different markets out there which you will miss on as you restruct yourself to companies based in the UK only, even if most of their earning come from abroard.

    Also consider, multi-asset funds that invest in things other than just shares alone to reduce risk, such as bonds, deritives, commodities, gilts all within a single fund for simplicity. The costs will be higher than a pure tracker but then so will the opportunities for growth. I suggest you sit down with an IFA and talk through your long term objectives and your preferred approach to risk. You don't even have to do 'either/or' why not consider a split and do both ?

    I see Mike's point with regard to not doing a stocks and shares ISA, but don't entirely agree. Basically, most people never use up their Capital Gais Tax allowance anyway so are unlikely ever to make enough to worry about investing 'outside' of an ISA 'wrapper'. (An ISA is just a 'wrapper' inside which you can put different types of investment. It is not a type of investment as is commonly believed) However, if you are not being charged extra to put your contribution inside an ISA then why not ? Who knows what you might make in 10 years time, or how your personal circumstances might change over 10 years. Both funds and trackers are both available within an ISA. You can fit in £10200pa into a stocks and shares ISA if you don't use up your cash allowance. If you decide to do the cash option you can still put up to £5100 inside a stocks and shares ISA and place the balance in the same fund held outside the isa 'wrapper'. Shouldn't cost you anymore and that way you fully take advantage of all your tax breaks both ISA and Capital Gains Tax allowance, both for now and the future :) Good luck.

    Posted on 22 June 2011 | Love Love  1 love Report
  • MikeGG1
    Love rating 909
    MikeGG1 posted

    If you plan to work until 65 then part time to 70, you need to think in terms of investment until 65 only and then start to draw from 70. You are unlikely to have the spare cash unless you draw your State Basic Pension for part of that time.

    You are currently scheduled to reach State Pension Age at about 65 but there could be changes before then. There would then be options to defer taking state pension if you wished.

    Your Cash ISA can become your emergency fund so release that money for an S&S ISA so you should be able to invest the full £5,340 (not £5,100) for both Cash & S&S ISAs this year and for 2 or 3 years before your current emergency fund is exhausted.

    As Mark says, you may as well use an ISA for S&S investment provided that it doesn't cost you any more.

    S&S investment over a 15 year period is likely to produce better returns than Cash.

    Mike

    Posted on 22 June 2011 | Love Love  1 love Report

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