So, it’s the new year and it seems like a good time to assess things financial.
Over the past year-and-a-bit I’ve bought a place and spent money bringing it up to date, so now I find myself with more disposable income that needs a good home, now that I’m no longer paying high rent and saving.
Last year I was putting spare cash into mortgage repayments (after the renovation work, of course). This year I want to be a bit more considered, as I have a fair bit of spare income (and who knows, that may not last forever).
First off, with needing cash for deposits/renovations, I haven’t been maximising my pension contributions for tax relief and I pay quite a lot of top-rate tax. I’ve already set up AVCs for the maximum 20% relief this year. I suspect that one of the best things I can do financially this year is to make a once-off AVC and claim it against 2016’s unused relief as well, which I believe I can do until October 2017. My pension is growing nicely these last few years but it’s nowhere near needing to worry about overfunding in the next decade, even with good growth.
As an aside, I didn’t know until yesterday about the Standard Fund Threshold of 2 million… for a career-long investment that is supposed to benefit from compound growth that’s a shockingly low ceiling, in my opinion. Especially given what sort of an annuity 2 million buys you, and compared with some of the defined benefit packages that people are retiring on these days. Those of us with defined contribution pensions are certainly being well screwed over in recent years between that, the reduced relief, and the levies.
So after pension AVCs for this year and last year, the question becomes what’s the best thing to do with other disposable income. I have about 190K mortgage remaining at 3.3%, and a moderate rainy-day fund in cash. With the lack of ‘safe’ returns elsewhere it seems sensible to keep putting cash into overpayments, but then of course it is inaccessible, and it’s possible that over the long term there are better returns elsewhere.
I’m starting to lean towards splitting 75% of available funds to mortgage overpayment and 25% to another investment, maybe into buying ETFs or similar.
Maybe this is the year to start thinking about getting a financial adviser - do folks here find them worth it?