First-time savers
The news is always full of stats about first-time buyers:
- in 2016 there were an estimated 335,750 first-time buyers – the highest figure since 359,900 in 2007
- the average first-time deposit has more than doubled since 2007 to more than £32,000 • the average price of a first home broke through the £200,000 barrier for the first time in 2016
- those buying their first homes have an average age of 30 across the UK
And then there are the schemes to help people get a foot on the property ladder:
- Help to Buy ISAs let first-time buyers save for a deposit tax-free
- Help to Buy Equity schemes provide a government loan of up to 20 per cent to first-time buyers
- Shared ownership offers the chance to buy a share of between 25 and 75 per cent of a home, typically a new-build, and pay rent on the remaining share.
With all this news about borrowers we rarely hear about first time savers. Whatever stage you are at in your life, whether you are saving for yourself or others, there are many options for your near, mid and long-term plans.
You’re never too young
Kids aged 4-14 received an average of £180.44 in pocket money over the last year. An important lesson to instil from a young age is not to spend more than you have. Dividing money into different pots labelled “spend now” and “save for later” is a great way to help your child visualise where their money is going – and how valuable saving can be.
Investing for children
The arrival of a new baby may make parents, grandparents, aunts and uncles think about saving for the child’s future. When thinking of investing for children you may consider putting a little away each month to provide a lump sum at 18. With higher education, marriage and getting on to the property ladder all becoming increasingly expensive, it’s a good idea to make investment plans beyond 18 or even beyond 21. When it comes to a child’s pension plan it doesn’t matter what relation you are to them you can start to put money aside until they take their benefits, which can be any time from age 55. You can contribute a maximum of £2,880 year and get 20% tax relief which means the government tops it up to £3,600.
Help to Buy
Whether saving for your own home or helping a child with their first home, the Help to Buy ISA is available until 30 November 2019. If you open your Help to Buy ISA before that date you can keep saving into your account until 30 November 2029 but must claim your bonus by 1 December 2030. There is no minimum monthly deposit but you can save up to £200 a month and the government will boost your savings by 25%. That’s a £50 bonus for every £200 you save.
Personal pensions
If you don’t have your own pension, the sooner you start saving the better; there’s no minimum age. There are different types of personal pension, including:
- stakeholder pensions – these must meet specific government requirements, for example limits on charges
- self-invested personal pensions (SIPPs) – these allow you to control the specific investments that make up your pension fund
You can either make regular or individual lump sum payments to a pension provider and you usually get tax relief on money you pay into a pension. You usually pay tax if savings in your pension pots go above:
- 100% of your earnings in a year – this is the limit on tax relief you get; or
- £40,000 a year – the ‘annual allowance’, if lower.
HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.
The tax efficiency of ISAs is based on current rules. The current tax situation may not be maintained. The benefit of the tax treatment depends on the individual circumstances. Although no fixed term you should consider stocks and shares ISAs to be a medium to long term investment of ideally 5 years or more.
The value of your investment and any income from it may fall as well as rise. You may not get back the amount you originally invested.
There are a range of different ways to invest for yourself or your family. If you want any more information on investments please get in touch.
