Savings/Investments

shares vs cash for an isa effectively depends on your appetite for risk. As your long term investment (house) is pretty risky (all your eggs in one basket, etc), I'd suggest your appetite for risk might suit a low-risk stocks and shares ISA fine (ie a FTSE tracker, or something similar) - drip feeding £500/month into it reduces the risk of price at point of entry, so your only real concern is the price when you pull money back out again.

I'd ask why you want to buy a rental property when you don't have pension?

A cash ISA might be an option. Also some banks offer higher rates to encourage regular savings. https://www.moneysavingexpert.com/savings/best-regular-savings-accounts/

As you want to use the money for a house purchase I'd be wary of higher risk/reward options like shares etc, as the old adage is to only invest what you'd be happy to lose.

I'd be inclined to start a pension too, is there an employer one that you could be saving into? They'd also then be contributing.

I was self-employed through my twenties and had no pension, I'm now 55 and all my mates who have been paying into pensions since their teens are looking to retire and go travelling etc while I'll be working until I'm 67. Don't underestimate how quickly retirement will come round. IANAFA

Do you already own a house?

ISAs are only useful if you think you'd pay tax on any savings. as a lower rate earner you're allowed £1000 of INTEREST, tax free each. Anything above this would be declared as income and therefore would only be at the lower rate.

So might be best to just pick the best Interest rate account you can find. (excluding stocks and shares)
saying that, some ISAs have better rates than a lot of savings accounts.

Money Saving Expert is my usual go to place to find the best available at the moment.

other points to consider
ensure you're not exceeding the financial protection limit (80k I think) for any one institution
how many years do you think you'll be saving for?
Look for best rates even in you're limited how much you can save per month. eg Nationwide offer a regular saver account at 5.5% but can only put up to £200 per month

the-muffin-man asks a pertinent question as I'd say a LISA would be a good idea to open for the bonus you get from the government while you still can, but that does require you to not already own a house (I think, but I do already so I could be wrong about this).

safest option would be a high interest saver £250-300 a month, currently circa 7% first direct or coop, but most banks do them,

interest isnt great as they expire after one year,

7% 12/12 of % on the first payment in, then 11/12 of 7% on second payment to 1/12 of 7% on your final contribution

Do you have access to any professional financial advice through the uni you are doing a PhD at?  That would be my first stop, not having a pension at 38 sounds scary and needs some focus.

You don't mention any existing assets (ie. do you own a house / mortgaged etc...)

Renovating a house is not the cashcow it used to be, trade and material prices are ridiculous now and I'm not sure you can expect to get the returns that used to be the case.

I’d ask why you want to buy a rental property when you don’t have pension

I'd echo this. Pensions have a lot of benefits (tax etc) that second houses don't. And you don't have to spend evenings and weekends stripping wallpaper and painting ceilings with a pension, either.

Regular savers will get you started, virgin is 10% if still available. A few are 7%, no risk decent reward.  At end of term just roll the money over into a new one.  I wouldn't buy a second property at current levels.

Ha maybe a pension is the way to go.

So to answer a few questions, yes I own a house (very fortunate to be mortgage free).

So I've been self employed right up until I stopped work last year, hence no pension.....I did have an investment property which was my 'pension'. Sold it to fund our barn conversion....hence now being mortgage free with no retirement pot aged 38.

I don't come from a background where people have good pensions etc, my dad was a self employed plasterer and has retired on the state pension. What that did mean though was that historically I did well out of property as I did much of the work myself/with my dad.

I think that I'll open a co-op regular saver and max that out this year.

Maybe the rest in a SIPP then? I'll be honest, property still seems very appealing to me. My last renovation, in 4 years I made pretty much 100% ROI. Some of that was good luck in the market, but I do have a decent track record with them.

S. I’m currently on a PhD studentship….which is tax free (it essentially pays what you’d earn on minimum wage after tax), not sure if that affects things?

Quit your job and become a train driver! I'm no expert in anything but if you think you are capable of driving a train then it might be worth applying. Crappy shifts and weekend working with lots of money shoveled into your bank account every month.

Come back in 6 months asking where to invest surplus cash!

As for your current situation, chase savings account, SS ISA, spend less (make your own lunch, coffee (unless 'free' octopus coffee)), stick 20% of your salary in your pension, no foreign holidays and most of all sell your bikes!      😉

Owning a rental property is just buying yourself a sh1tty job IMO.

being mortgage free at your age certainly makes no pension less scary, still I'd be looking at a pension first

having the skills or contacts for renovation also makes a difference, if you count as your/families time as 'free'.  If I didn't have a massive mortgage and 2 kids I'd probably ditch my job and look at buying starter homes in need of reno, doing them well, cleanly but nothing fancy and then selling them on.

rental properties are likely a better (from a financial perspective) return on investment than most pensions, under current tax laws. I got out of mine a few years ago because :

1. over time successive governments have ratcheted up the tax on landlords. I felt this was unlikely to stop (and it has continued) - meaning it may be unviable at some point (at which point the market for landlord houses, and their values, will drop)
2. having all your value in one asset class (property) is a bad idea. Owning the house you live in is a lot of cash in one place, having another few hundred k wrapped up in property is highly risky - spreading that so your pension savings and living location aren't the same asset type is sensible.
3. its not care-free. I spend enough of my time working for cash, I didn't enjoy the work & effort involved in earning a little bit more. Having pensions in relativetly low-maintenance tracker funds requires about 10 mins a year of work, vs days a year for keeping on top of maintenance on a house. The idea the tenant could call at any time and create more hassle hung over me the whole time. This can be outsourced to a management company, but if you do this you'll end up with an investment that's not much better than simple shares.

Your PhD studentship is a stipend so doesn't attract income tax. That means you have your personal allowance for income and have the full starting savings allowance of £5000 interest. So if you really are only saving for a few years and then going to use it, you don't have to use an ISA wrapper, any savings or investment account will do.  https://www.gov.uk/apply-tax-free-interest-on-savings  Buying stocks, shares or funds have the risks that prices go down as well as up, bank saving account interest rates are poorer because they are 'safer', lower risk to the money you put it. I agree with looking at MoneySavingExpert, CAB and Money and Pensions Service to start thinking about your long term aim.

Putting savings into a pension ... because you've paid no income tax you can get the tax relief on the first £2880 each year (i e. you get 20% extra top up from government) so worth divying up between you and your partner. https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief

Even having paid the mortgage I would still want a personal pension on top of anything the government might pay as state pension. The state pension even now is an absolute minimum needed for most people (council tax, utility bills especially heating, keeping a car going, insurances, and eating, nevermind help around the house / garden and sudden expenditure like boiler or roof).

Also consider your National Insurance contributions since the PhD is a gap and you were self employed.

Quit your job and become a train driver! I’m no expert in anything but if you think you are capable of driving a train then it might be worth applying. Crappy shifts and weekend working with lots of money shoveled into your bank account every month.

Come back in 6 months asking where to invest surplus cash!

I'm not an expert either, but a train driver is one or two years of apprenticeship with pay of around 25-30k. Not sure how much surplus cash you're expecting.

The best time to start saving is always now.

A pension is probably most efficient because of the tax relief, even more so if you were employed and the employer puts in a bit each month. If its easy access savings that you might need without any interest penalty for withdrawl a cash ISA might be best. I recently transferred a matured fixed rate ISA and put it in Trading 212 at 4.9% so many high street (sic) banks offer half this for easy access.

Opportunities in property exist if you know where to look, I know someone who is renovating a semi near me in nw, there's 100k margin after his material costs, he can't bill his labour, for say 6 months work.  So that's 75k post tax, I d do a building course and do that if I was mid 30s.

Usual tricks, good road, worst property, motivated seller.

Lots of food for thought here. Not quite sure where the train driver stuff has come from.... we'll call that 'plan z'.

I'll be making voluntary NI contributions throughout my PhD to ensure no gaps.

Interesting re the 20% government 'top up' on the first £2880, I wasn't quite sure where I'd stand on that.

I’m not an expert either, but a train driver is one or two years of apprenticeship with pay of around 25-30k.

Im sure someone on here said train driver is £70K plus. Impossible to get a job as one though as competition is high.

Anything your wife can do to become a 40% tax payer? Then dump what she can into her pension at 40% relief you’re not a tax payer on a PhD, so tax advantages to yourself are minimal. But a stocks and shares tracker ISA is my default. You need to leverage your wife’s tax position until you pay tax yourself.

And when you finish your PhD, load up your pension until it hurts. You won’t miss it, but like you, I started later and have paid as much as I can into the pension at the expense of other things.

Anything your wife can do to become a 40% tax payer?

She could become a train driver!  😉

In 25 months time you'll have lots of cash to put in your pensions!  😉

Ha no she's at about the peak of her earnings currently and the flexibility she gets in her job outweighs trying to find something better paying. Fiscal drag might make her a 40% tax payer in a few years time mind!

I can't work out now if I am only allowed to invest £2880 in a SIPP, or if I only get the 20% relief on that amount but am free to invest more?

If you don't have a Lifetime ISA, consider opening one. You can only open them up until you're 40 I think, so even if you don't intend to use one immediately, it might be worth opening one now.

There's a financial planning flow chart here which is useful...

https://ukpersonal.finance/flowchart/

Is a lifetime ISA more worthwhile than a SIPP for someone in my situation?

Is a lifetime ISA more worthwhile than a SIPP for someone in my situation?

You can draw a pension a bit earlier, but you might have to pay income tax on it if you're above the threshold. You'll get a bigger top up on a LISA too (25%). You can only pay in up to £4k/year on a LISA, so it's not really a substitute for a pension.

Edit: I'm wrong, works out the same as 20% tax relief.

To answer your question but also food for thought on buy to let. £500 a month at an average index tracker stock return of 10%, would net you 100k after 10 years (£40k in tax free interest). I looked at rental property but I couldn't get the sums to add up. I've actually got a 14.5% average return over 4 years with a spread of investment trackers. I'm not sure any property would match that at the same risk level, stress and effort.

Property certainly won't match stocks for effort, property is a job, albeit a very part time one. For returns it's an easy win for property. You have the rental income, which usually increases at least with inflation. You also have the capital growth. There are a number of big problems with property like needing a big chunk of cash upfront, way more complicated tax, all your eggs in one basket and more. For many reasons property shouldn't be looked at purely as an investment vehicle but it can be great for some people