The Lemon Fool

Greetings Dear investors, I'm new here and also in the topic of investing.
I want to invest £5000 and I plan to save up about £100-200 per month. I want to put off money for pension and I'm wondering what instrument will be the most reasonable in my situation. I thought about ETF's but I would like to know your opinion about it and get to know other alternatives .

Luke

You mention investing and a pension.

Are you wanting to invest your money on the markets adding to it monthly or use that money just for a pension.

There are big differences in the two with pros and cons for each. Your employer might have a pension scheme.

Do you have any other debts or commitments. What rate of tax do you pay. Do you have a broker or one in mind. Roughly what age are you.

There are lots of factors that need consideration.

Forgive me, i will clarify. I think that it would be great if the wallet contains both. At this point I want to put £2000 for a pension and £3000 on the markets. Then adding a certain amount every month to once for pension and once for markets. If I had to pick one form it would be pension. I don't have any debts or commitments. I don't pay taxes yet since I'm a student in my twenties. I thought about XTB.

Luke

XTB...Poland

XTB Ltd (XTB UK) is authorised and regulated by the Financial Conduct Authority (FRN 522157) with its registered and trading office at Level 34, One Canada Square, Canary Wharf, E14 5AA, London, United Kingdom.


https://www.xtb.com/en/education/client ... protection

-All retail Client Money is held in segregated client bank accounts in line with our obligations as a Financial Conduct Authority regulated company.
-Your funds are held in a ring-fenced account to our own funds.
-Your funds are protected by the Financial Services Compensation Scheme (FSCS), up to £85,000 per person in the unlikely event of our insolvency.

woocash wrote:Forgive me, i will clarify. I think that it would be great if the wallet contains both. At this point I want to put £2000 for a pension and £3000 on the markets. ...
Luke

Ok, a pension can be invested on the market. My pension holds such diverse investments as an Investment Trust that owns shares in companies exploiting outer space to a company with a long history of making soap. However suggesting that you invest it all in a pension would possibly be a bad idea.

You won't be able to access a pension until at least 57, maybe later depending upon government actions. The LISA is worse, you can't access it until 60 currently, well unless you use it to buy a house and depending upon where the house is you may not be able to do that. Well you can, but pay penalties.

Personally I'd recommend putting the lot in a stocks and shares ISA and setting a reminder to review the situation next year.

I've not heard of XTB, but a web search found XTB trading. They are not a company that I would chose*, regardless of how good they are. Specifically because they don't offer either an ISA or SIPP (pension).

Instead I'd recommend the likes of II, A J Bell or even HL.

What you invest in is a very personal choice, as you may see from my own examples. However many would argue that a global index tracking ETF should be a long term core holding. Something like VWRL.

*Well it's not quite true that I wouldn't consider a company that doesn't offer ISA or SIPP, but I'd only consider them in addition to such.

woocash wrote:Greetings Dear investors, I'm new here and also in the topic of investing.
I want to invest £5000 and I plan to save up about £100-200 per month. I want to put off money for pension and I'm wondering what instrument will be the most reasonable in my situation. I thought about ETF's but I would like to know your opinion about it and get to know other alternatives .

Luke

You have stated above about putting £3,000 into a SIPP and the rest in shares. That rest would be best in an ISA. With both you have to decide what to invest in. Assuming that you want to build up your pension fund, you can add to both plans monthly. The money in the SIPP is tied up until 57 or whatever, while the ISA is flexible with no restrictions on withdrawals. You could concentrate on the ISA, then withdraw lump sums to go into the SIPP once a year. You might wish to organise this to avoid going into a higher tax rate.

If ETFs ring your bell, then go with them. My preference would be one of the big global ITs, like F&C or Alliance. Once you have built up a decent sum, say £20k, then maybe switch into another IT for further savings. If you are with a provider who has cheap dealing days, then you can afford to invest smaller sums each month. On the regular flat fee arrangements, you need to be investing about £1,000 as a minimum. If you can get fee free dealing, that's even better.

TJH

Thanks Urbandreamer and TJH, I'm grateful for your suggestions, i will analyze them and take action. Good luck!
Not closing this post - I will also follow what others say.

tjh290633 wrote:

woocash wrote:Greetings Dear investors, I'm new here and also in the topic of investing.
I want to invest £5000 and I plan to save up about £100-200 per month. I want to put off money for pension and I'm wondering what instrument will be the most reasonable in my situation. I thought about ETF's but I would like to know your opinion about it and get to know other alternatives .

Luke

You have stated above about putting £3,000 into a SIPP and the rest in shares. That rest would be best in an ISA. With both you have to decide what to invest in. Assuming that you want to build up your pension fund, you can add to both plans monthly. The money in the SIPP is tied up until 57 or whatever, while the ISA is flexible with no restrictions on withdrawals. You could concentrate on the ISA, then withdraw lump sums to go into the SIPP once a year. You might wish to organise this to avoid going into a higher tax rate.

If ETFs ring your bell, then go with them. My preference would be one of the big global ITs, like F&C or Alliance. Once you have built up a decent sum, say £20k, then maybe switch into another IT for further savings. If you are with a provider who has cheap dealing days, then you can afford to invest smaller sums each month. On the regular flat fee arrangements, you need to be investing about £1,000 as a minimum. If you can get fee free dealing, that's even better.

TJH

I completely agree with TJH. As an initial investment vehicle, I started with Alliance as it happens but any big generalist trust will give you a good spread of shares within the trust and will give you a flavour of how investment works if you carefully read the Annual Report.

You could and maybe should open both an ISA and a SIPP (making sure you understand both of them and how they work) and spread the investment between them.

Dod

woocash wrote:Forgive me, i will clarify. I think that it would be great if the wallet contains both. At this point I want to put £2000 for a pension and £3000 on the markets. Then adding a certain amount every month to once for pension and once for markets. If I had to pick one form it would be pension. I don't have any debts or commitments. I don't pay taxes yet since I'm a student in my twenties. I thought about XTB.

Luke

Before investing it's worth getting your thoughts in order, when will you graduate, what's your housing situation? Well done on being debt free, do you have a buffer of cash that would see you through an emergency? Picking a number out the sky £5k would be a good cushion
If you're a student in your 20s and don't pay tax you can only contribute about £2880 to a SIPP, but check the specifics, are you permanently in the UK and expect to be for the foreseeable future? ISAs and SIPPS rules change if your resident does. Also as a 20 something student having a "spare" £5k now and £200 per month is a rare and lucky situation to be in. Might you want to buy a house, form a lasting commitment with a partner, have kids? Once your cash is in a pension it cannot be redirected to any of those life events. That's not necessarily a bad thing.
When I worked at university and was in regular contact to talk about money with students, investing into a SIPP wasn't really on their agenda. Those few with some spare cash were far more inclined to direct it at a holiday, car, tattoo. Life.

Can't comment on XTB.

kempiejon wrote:
Can't comment on XTB.

XTB seems marketed rather more as a dealing and trading platform than an investment one. Lack of ISA and SIPP is a clue.

Alaric wrote:

kempiejon wrote:
Can't comment on XTB.

XTB seems marketed rather more as a dealing and trading platform than an investment one. Lack of ISA and SIPP is a clue.

Perhaps call me too cynical. But a new poster arrives and in the second post puts up details of a trading app that the majority of people will never have heard of?

My thoughts, my largest investment is VWRL the Vanguard All-World ETF. Effectively buying a share in the whole world market, so good for diversification. As a long-term investment.

If might need access to cash in under 5 years think about a savings account instead paying 5%+.

woocash wrote:Forgive me, i will clarify. I think that it would be great if the wallet contains both. At this point I want to put £2000 for a pension and £3000 on the markets. Then adding a certain amount every month to once for pension and once for markets. If I had to pick one form it would be pension. I don't have any debts or commitments. I don't pay taxes yet since I'm a student in my twenties. I thought about XTB.

Luke

You can only put a maximum of £2,880pa (pa = per tax year in this case) into a pension if you have no earnings so you couldn't put the whole £5k in anyway.

Being a student does not stop you from paying tax, by the way - it is the level of your earnings that dictates how much tax you pay, and that is from the day you are born. A newborn could have a tax liability, as can a student if they earn over the nil rate earnings threshold (currently £12,570pa).

If you do have earnings, you can pay in up to those earnings pa or £60,000, whichever is lower. With an ISA, you can put in up to £20k per tax year, in either a stocks ISA or a cash ISA, or any combination of both (I tend to stick £20k in a cash ISA each year, then move it to stocks the next year when I put the next £20k in, for example).

As is very common, you are confusing yourself between what is the *vehicle* for the money, and what is the *underlying investment*. If you can get your heard around the differences and the tax treatment of both you would find that very useful.

Mel

I agree you are confused as to the difference between "investments" and "wrappers".

Wrappers are holding devices used (usually) to reduce tax liability. You can use a Pension, ISA or LISA. Or none!
Investments are the actual things that (hopefully) make you money, and may be individual shares, funds (UTs, ITs, ETFs) or cash.

All 3 types of wrapper are available to hold any of the different types of investments. Although not all options from all providers permit all the options. (L)ISAs are either stock market or cash.

So you can put all or none of your money into wrappers, and all or none of your money into etfs. They are not exclusive.

Wrappers - All 3 avoid capital gains tax and dividend tax, which is why they are a good choice. Even if you don't pay such tax yet, you might in future.
Pensions refund tax on the way in, but charge tax on the way out. Your money is protected, but locked in until old age. You cannot get it back even if you are desperate. Pensions are protected from bankruptcy, but not divorce.
ISAs neither refund nor charge tax. But you can withdraw the money freely whenever you want. That may be good, or it may be bad depending on your saving mentality. ISAs are protected from neither bankruptcy nor divorce.
Lifetime ISAs give you a 25% bonus when you pay in, which you never have to give back But are also restricted on when you can take the money out. Although they do allow withdrawal to buy your first home. LISAs are protected from neither bankruptcy nor divorce.

Given you are a student, and have limited funds, a LISA may be a good option for (most of) your money (£4,000pa limit). Of course, given the restrictions on when you can remove money, it does depend what you are saving for. But the ability to remove it to pay for a house is a good benefit, not available from a Pension. And you never have to repay the govt refund.

Gryff

I originally posted information on XTB...checking that it is regulated by the Financial Conduct Authority (yes) and benefits from the Financial Services Compensation Scheme (it does). OK, good so far!

However, why go with XTB when one can currently open an iWeb account for free?

Personally, I would go iWeb rather than XTB.


( reasons...backed by Lloyds, UK based, memories of SVS Securities, ITI Crapital).

monabri wrote:I originally posted information on XTB...checking that it is regulated by the Financial Conduct Authority (yes) and benefits from the Financial Services Compensation Scheme (it does). OK, good so far!
However, why go with XTB when one can currently open an iWeb account for free?
Personally, I would go iWeb rather than XTB.
( reasons...backed by Lloyds, UK based, memories of SVS Securities, ITI Crapital).

Just to expand on this, for the benefit of someone who doesn't know the history...

There have been a whole plethora of new startup broker companies. Their business model is to attract a heap of customers with cheap charges, then sellout their business to one of the big operators, who slap on much higher charges. Leaving you stuck either paying the high charges, or the hassle of moving or the account elsewhere.

iWeb are equally cheap, but already belong to a large company (Lloyds) and have been operating for many years. They are therefore significantly less likely to be sold off in this manner (not impossible). I would agree with monabri they are a better choice than a new startup who have just appeared, and will likely disappear just as fast.

Gryff

Whilst you are a student your income will be low ish if anything. So you might want to be able to access your funds in the future for some reason. It might be to buy a car to get to work etc. Even more medium term a deposit on a house.

So therefore I would be tempted to use an ISA. It's tax free and you can redeem it quickly if needed.

You could use some of the monthly money to add to a pension but once working you might get employer contributions and it can be taken from your earnings. Whilst it's good you want to start early you might not get the maximum benefit until you are earning. You don't say how long you intend to study. If you do well you might be a higher rate tax payer shortly and then it might more sense to do more in your pension for maximum efficiency.

You can also do monthly contributions to the ISA, many do free or cheaper set days to invest small amounts. I would pick one of those until you build up higher amounts.

Several suggestions have been made over what or the type of investments you might want to make.

Hopefully you have some nice choices to make.

Gerry557 wrote:Whilst you are a student your income will be low ish if anything.

On another board woocash asks about a fuel card, presumable for their business - so not necessarily a low income student as they've so much cash there isn't time to count it and have a large employee churn rate.

https://lemonfool.co.uk/viewtopic.php?p=623539#p623539

woocash wrote:Hello!
I'm looking for a bank that provides company cards in UK that will not be allocated to a person, but for example to a car registration or described as number. We want to get rid of cash settlements and conduct everything online, rather than counting money physically every week. The reason that i'm looking for that type of card is because of high employee turnover...

gryffron wrote:I agree you are confused as to the difference between "investments" and "wrappers".

Wrappers are holding devices used (usually) to reduce tax liability. You can use a Pension, ISA or LISA. Or none!
Investments are the actual things that (hopefully) make you money, and may be individual shares, funds (UTs, ITs, ETFs) or cash.

All 3 types of wrapper are available to hold any of the different types of investments. Although not all options from all providers permit all the options. (L)ISAs are either stock market or cash.

So you can put all or none of your money into wrappers, and all or none of your money into etfs. They are not exclusive.

Wrappers - All 3 avoid capital gains tax and dividend tax, which is why they are a good choice. Even if you don't pay such tax yet, you might in future.
Pensions refund tax on the way in, but charge tax on the way out. Your money is protected, but locked in until old age. You cannot get it back even if you are desperate. Pensions are protected from bankruptcy, but not divorce.
ISAs neither refund nor charge tax. But you can withdraw the money freely whenever you want. That may be good, or it may be bad depending on your saving mentality. ISAs are protected from neither bankruptcy nor divorce.
Lifetime ISAs give you a 25% bonus when you pay in, which you never have to give back But are also restricted on when you can take the money out. Although they do allow withdrawal to buy your first home. LISAs are protected from neither bankruptcy nor divorce.

Given you are a student, and have limited funds, a LISA may be a good option for (most of) your money (£4,000pa limit). Of course, given the restrictions on when you can remove money, it does depend what you are saving for. But the ability to remove it to pay for a house is a good benefit, not available from a Pension. And you never have to repay the govt refund.

Gryff

good, concise summary

HEy, great to know you're beginning. FIrst as a newbie you should be careful and invest probably a bit of your money on you and your knowledge. WIth 5000 the best is to begin to invest on funds