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saving for a deposit

Crystal Lil
by Crystal Lil 06 February 2013  |  Comments 3 comments  |  Love Love  0 loves

I lived in New Zealand for 5 years and have a pension fund there that is worth about £4500, which I can withdraw because I have emigrated permanently (back to Scotland). My partner and I would like to save up a deposit for a flat in Glasgow, which might cost around £130,000. I earn a regular wage but my partner is self-employed and his income is irregular, so we have decided to use my income for rent, bills etc and his income for savings and holidays etc. We would hope to have saved our deposit (around £20K?) in 12-24 months.

First Q: should I leave my pension money in NZ for the time being? The pension is in a 'conservative fund' which means that most of it is earning interest as cash and some of it is invested in the stock market. The interest rates there are a little higher, although there are no tax free savings accounts. Also, the exchange rate favours the pound at the moment - but obviously in time this could change.

Second Q: As my partner's income is erratic, what is the best savings account for us to apply for - we would need one that can accept lump sums of up to £100-£1000 at irregular intervals.

Third Q: Would it be better to consolidate all of our savings - my pension fund amount plus what we can save from my partner's income?

Thank you!

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Comments (3)

  • MikeGG1
    Love rating 909
    MikeGG1 posted

    First of all, you should bear in mind that purchasing a home together is a long term commitment, in a similar way to a marriage. However, there is no legal framwork for a partnership, so you need to build in an exit strategy just in case. In England that should be incorporated in a Declaration of Trust as part of the legal paperwork of the purchase. There is a Scottish equivalent, I believe.

    If you read through past questions on this site, you will find many, many examples of problems faced by people who have not done so. It is so much easier to agree a fair exit stategy when you don't expect it to happen rather than to face the consequences of trying to sort things out when trust has broken down.

    You are likely to need another £15,000 before you will have enough for a deposit, fees and furniture, etc. How long is that likely to take because your investment strategy should reflect that period. Equities are a mid to long term investment(at least 5 years).

    Cash investment should be in ISA's to save the tax.

    I would not comment on the merits or otherwise of transferring your NZ pension fund.

    As your partner is self-employed, he will need audited accounts for at least 3 years for his income to be taken into account for the amount of mortgage available. You will probably need a mortgage of at least £115,000 so would need joint earnings of about £35,000.

    It is better not to have all your eggs in one basket so keep your NZ pension fund as a separate entity even if you do transfer it. It should also be in your sole name if it pre-dates your partnership. New savings should be in joint names as you are both contributing to the partnership in one way or another. When the time comes, you can decide whether your new home should be 50/50 or reflect the use of your pension fund.

    Mike

    Posted on 06 February 2013 | Love Love  0 loves Report
  • Crystal Lil
    Love rating 0
    Crystal Lil posted

    Hi Mike

    Thanks for your reply. My partner and I do plan to get married, although whether this will happen before we buy a flat is anyone's guess! So that is useful advice. I am hoping that we will have the deposit saved in about 18 months, so I guess that we should make as much use of Cash ISAs as we can, though the interest rates look pretty rubbish.

    Cheers, Lil.

    Posted on 07 February 2013 | Love Love  0 loves Report
  • MikeGG1
    Love rating 909
    MikeGG1 posted

    Lil

    18 months does mean cash savings, but rates are generally poor at the moment and likely to remain so for foreseeable future.

    There are usually ISA offers during the period from the beginning of March to the middle of May but this year the government is lending cheaply.

    Consider a 12 month fixed rate monthly saver such as Principality BS with a variable subscription of between £20 & £500 each month at 3.5% There are other alternatives, so please do your own research.

    Some don't have ISA products as such but will offer any of their products in an ISA format.

    Mike

    Posted on 07 February 2013 | Love Love  0 loves Report

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