So FirePlanter recently asked why my selection of portfolios was so varied and setup the way it was, and so as I started to reply I realised it would take more than just a reply in the comments to explain it all, and hence the post! If you want to see the spread and what is in there then you can look at the portfolio page. If you want to know how my cash positions are held, you can read that here.
Over the years, each time I have changed company, I have joined a new pension scheme. As I leave a place, the pension then gets transferred into my Private Pension which my IFA manages. The only exception to this is my very small defined benefit pension which should kick in when I am 60, giving me approximately £1,000 per year.
So that covers the pensions – my private and then the company one. Now onto the ISAs, the fun part!
So this is an actively managed by my IFA. A while ago I realised that I had quite a lot of cash ISAs, and this pulled in two of my Cash ISAs into a single pot, and managed by my IFA. I haven’t put in any further contributions, and these were only transferred in the 2015/16 tax year (I need to hunt out exact dates for my benefit) when the FTSE-100 took a big dive. It’s ticking up steadily now after the crash. This was done before I really started to have faith in my ability to invest or make rational decisions. Will I move it in the future? Maybe, maybe not.
So this is another actively managed set of portfolios by my IFA on this one, however this ISA is in my other half’s name. This is complicated as it has several sub portfolios within it. Yes, we could have just thrown everything in to say a LifeStrategy fund, however this is also trying to bring my other half onboard with the FI idea (she is up for FI, but not for the work to get it as yet). By doing this I am also able to demonstrate the increasing pot of cash and the increasing cash flow coming in.
Sub portfolio 1 – House fund.
So we both contribute to this portfolio, but split based on the percentage of ownership we put into the house (so I put in significantly more). We have built up a cash buffer for any major works that need to be done on the house just in case, but the interest rates are terrible, and so I wanted to make the most of the growth potential and tax benefits and on the grounds that if it is more than our buffer I will dip into my emergency funds to cover it. The funds this invest in are all growth funds, and hopefully by the time we need it then we should have a very substantial amount of money in there. Our home is a new build and we have another good few years of the 10 year guarantee left, so I am really not expecting anything to come up, and hence I can afford to take the risk. I may start putting another £5 or £10 into the cash reserves once I am more comfortable with my budget.
Sub portfolio 2 – joint savings
So we contribute evenly to this portfolio, and the aim is that this will provide income into the joint account to pay our bills when we retire. I was a little naughty when I set this part up as I didn’t tell my other half I was doing it (the funds come from the joint account) as I know she would probably have resisted. I think she is aware that we are contributing, but not 100% certain! This means we are both putting in a bit of money to into the funds and will provide us with an extra boost to the income. The funds are being invested in Acc. units of income funds (i.e. the income generated is reinvested, so the size will grow).
Sub portfolio 3 – my pay rises!
So I decided the best way to make the most of my pay rises was to invest this into my other half’s ISA. This started back in 2015, and every time I get a pay rise (be it from a job move or just a regular pay rise), the entire pay rise, all 100% net increase, goes into these funds. All my tax refunds that I get back from HMRC also go into this portfolio which gives it a boost. The aim is that these funds will pay all of our joint bills when we retire. The funds invested in are Income producing units, that pay out into a different joint account. Is it ideal to take money out of the tax efficient wrapper? Not really, however the funds can then either go off the mortgage (as they have done more recently) or if there is a one off expense or similar I can use it for that – it gives me an extra cash flow without needing a job 🙂
When we both retire, portfolios 2 and 3 will be merged into a single portfolio and pay out to cover all of our bills – hopefully with a little extra to reinvest.
ISA 3 – Actively Managed ISA
So this is the ISA I manage myself via TD Direct. It has grown over the years and is now reasonably significant, however I am trying to rebalance it to increase my trackers holding so that I worry less about volatility and individual shares. I accept that I think this will affect the performance, but I don’t mind given the size – peace of mind is priceless. I will continue to play around with this but I am not planning on adding any new funds for the next few years. This came about from my original ISA investments back in 2007 with an IFA, and then through other providers who are no longer in existence and further contributions. I do love the (lack of) fees that TD charge me (as I hold only 1 minute fund – I just got my latest fee bill – 70p!), but I wait to see what the purchase by Interactive Investor does to the approach. I took the view that once money goes into this account, it will not come out again until I retire, so treating it as a pension.
ISA 4 – Go T’ Pub ISA
I set this up specifically to diversify my other ISA holdings from my IFA and TD Direct, just in case there was a problem with any of those. This means that I will plug away money into VWRL. I am also treating this more as a savings vehicle than a pension, so I have told myself that if I wish to, I can withdraw the income. Why spend the income from an ISA rather than just invest less? I want to replace my salary with re-earned income, and the best way to do this for me is to build up the total capital as fast as possible, and so that is keeping the high level of initial input. This forces me to contribute a set amount each month and I always think twice before taking money out. This really is my psychological side – and I realised one benefit today as I transferred an extra £20 in as I realised this would let me buy an extra share!
I am struggling with the budget at the minute I have to be honest, I am not really building up anything in the cash flow fund, which means I know that skiing next year is going to be a challenge (“What?!” I hear you cry – a holiday before you are FI? Are you mad?!}) but let’s see what happens.
So there you go – quite a few pots but very easy to track. Have you balanced your portfolios over providers?