A wider (and quicker) look back on the 2017/2018 Tax Year

So you may have read my post on last tax years performance, this post is more about reflecting on how it was overall.

So first of all, the numbers and where this puts me. So overall a very good year and a large increase in my total retirement pots – with growth and contribution, it went up more than my net income (but not gross). This really does give me hope and should not be sniffed at.

The increase and forecast in my ISA pots also make me start to think quite positively about where I am getting towards. Whilst this won’t be enough for me to stop working in 2025 without selling down some of the pots, it is still going to be a good healthy balance. Given when I started this blog I thought this was completely impossible, it shows what the regular saving and investing can do for you.

The mortgage continues to go down, but never as fast as I would like. We have just remortgaged – a new 5 year fix at 1.74% – a fair rate, and a lot lower than our last fix. We are going to leave our payments as they were which means if everything were to remain constant then we will have knocked almost 4 years off the mortgage – I won’t complain at that!

The amount of tax I paid last year was, whilst still obscene (in my opinion of course!), lower than the year before, a reflection of my tax rebate for putting my bonus into my pension.

So, from a financial point of view I am pretty happy.

What about outside of just the ££?

So, first up work. A real rollercoaster of a year if I am honest. I took on about 4 different roles over the course of the year culminating in the one I am still in now which is keeping me very busy (as an example, one Friday I was already on conference calls before 7am), but I am enjoying it. From the potential and career it is one I couldn’t say no to so I will continue to plug away at it.

I got a pay rise, which was good – although never as much as I would like or want, it was better than I had feared given the company targets. The bonus was lower than ideal, but we failed to meet our key target, so I can understand that.

Needless to say the whole bonus went into my pension so it didn’t feel real, but means my pension continues to head upwards.

And finally, the personal side. Overall yet another tough year (for reasons I will not be sharing on here). I don’t expect this to change over the next few years, although it is starting to highlight just how run down I am getting and the need for some quiet time out. To help this we have started a direct debit into a holiday fund for the first time – not a lot but it means we should be able to cover a break once a year!

I had Christmas off but was unwell, before then it was October. I definitely need a break!

 

What on earth….

Has been going on here?! It’s been over a month since my last post, which I can only apologise for – I am way behind despite having mostly created the posts ready, I need to get myself in some form of order!

This really is only a short post to demonstrate I am still alive!

The last month has flown by faster than I could have ever imagined – a week away with work meant some very long days, then playing catch up on my return and combining with mid-year means things tend to get away from me.

I’ve been catching up with people (face to face would you believe) which also involved a rather large volume of various beers (including a fantastically named “Arrogant Bastard Ale” and an Ice Cream ale – bloody delicious on a hot day!). Coupled with a bit of entertaining at home, a weekend away, this is probably the first time I have had chance to properly sit down and pen something.

Added to the slight distraction of the Tour de France on the background also uses up some of my time!

Have I got bored of posting and talking about finances? Not at all although if I am being critical I probably could have posted sooner, so I will have to try harder on this.

I can’t believe I haven’t done June’s data yet, never mind my year look back.

I could do it today, however having been up since 6am (I have a huge long list of things I have done) and been non stop until 2pm, so now a nice glass of white wine, enjoy the breeze and plonk myself in front of the Tour and, a little later, some nice cold meat, salad and cheese.

Cheers!

Another broker changes their fees….

So I fear that this post is going to end up in more of a rant than anything that may possibly make sense, so please do indulge me and put up with it 🙂

It’s just over a year now since I opened the Go T’ Pub ISA with Selftrade. Whilst their website is a little on the basic side, it worked very well for me. I paid a £1.50 per trade for my regular order and for any dividend reinvestments, and that was it. No other fees – a truly cheap price for using their service.

The perfect fire and forget strategy… or so I thought.

Out of the blue yesterday evening I get an email via their secure inbox to me. Note: not to my registered email address, but to my selftrade account. This means to read it I have to log in, look out for the tiny mail icon just above my account logo and click on there to read it. Nothing else to tell me I have a message. At least with premium bonds they email me to tell me I have a message.

Out of the blue they are announcing a new pricing tariff – effective from the 1st July 2018. I can’t believe they didn’t know about this plan before the new tax year so I can only assume they have deliberately waited until now to notify people.

This really annoys me as I have now made an ISA contribution to them, and so I need to research if I am able to move my ISA without any consequences (I have enough trouble as it is with HMRC not getting my tax code right!). I’ve made one payment to them. For this I feel that they have me over a barrel.

So, what is this new tariff I (don’t!) hear you cry? They are introducing a new “custody fee”. And yes, you guessed it, it applies quarterly. They are reducing the cost of trading (if you don’t buy on regular direct debit) – which I never use. To make matters even worse, ETF trades will not change (my main purchase)

The new cost is “Up to”£17.49 per quarter. Needless to say this is fees you have to pay inside the ISA wrapper (unlike my IFA who’s fees I can pay before it goes into the wrapper).

The whole reason I chose Selftrade was their low fees, however it seems that they are now going the way of iii who took over TD Direct, and others who are charging a quarterly charge regardless.

Am I going to take action? Yes. Unlike when iii introduced their fees, I took the view that I was happy to pay them (as it offset my trading costs, and I really do like their platform so happy to pay a slight premium for it, it leaves others in the dust). For Selftrade, I am not happy to pay the fee.

Unfortunately for me, the Selftrade helpdesk isn’t open at 6am on a Saturday morning (why on earth not?! :)) so I won’t be able to do anything yet, but my clear actions are:

1. Call Selftrade. Find out about the cost of transferring the ISA out from them to another provider
2. Find out if, now I have started this ISA year, if I can actually move to another ISA provider (or do you, dear reader, know if I can?)
3. Review the broker table on Monivator to find out which broker I will be moving to

My biggest fear is that in a relatively short space of time another broker is moving to a quarterly fee and that this will become the norm.

I think I need another coffee….

The joy of (work) travel

So, one of the fun parts of my role is that I travel a lot more than I used to. The plus side is that I put all the expenses on my rewards card which means more money back, which you have to love! The downside is the distances and the tiring nature of it (the worst case I have to do on a regular basis involves over 10 hours of commuting for about 5 hours in an office). Not ideal, but all part of the job and pays me. The plus side is that bit is coming to an end.

The flip side to this, is I get to do a lot of people watching as some of the trains I can’t work on (as there are no tables), or I have to change too frequently and I am not getting a laptop out for just 5 or 10 minutes. It isn’t the best use of my time, but it is all part of the job so for now I continue to suck it up, and to a degree enjoy the various areas of the UK countryside.

On a recent trip I got to go down the good old “commuter belt” from London and the home counties. Not too surprisingly there was the usual group of suited and booted types heading into work – just like me! There were the odd tourists or people clearly on a day trip, but they really were the minority. Funny how us humans develop our patterns of knowing exactly where to stand to get on the right part of the train to minimise the distance we need to travel when we get to our stopping point. Shame people don’t do the same for their finances. But I digress.

I do enjoy staring out of the train window, and looking at the countryside and houses. Whilst I wouldn’t want to live that close to a railway line, it is always nice to see different types of homes and give me an idea of what could be nice for when we retire. Every so often of course we hurtle (or sometimes stop) at train stations. What really struck me however was as we went past the various railway stations, what was in their car parks!

I am not a secret fan of car parks unlike some, however it was always the cars, and similarity that struck me. You had some of the sensible small cars there, however there was also row after row of high end BMW or Mercedes, Porsche or large 4x4s and it got me thinking of the level of insanity that exists in this country (and that’s without even talking politics!). Whilst I am not up on the costs of these I am fairly certain that these would be at least £30,000 each – and that’s assuming they were bought outright, something I highly doubt. Now I am not familiar with the intricacies of lease hire or hire purchase for cars (for obvious reasons), so I don’t know how much this would cost, but I would guess at least a couple of hundred quid a month.

What really got me laughing was seeing several Porsche 911’s in a railway car park. I am of course assuming the owners were commuting to work (but of course I don’t know for certain). So they spend, I would guess, £500 per month on the car, plus the daily parking charges, plus the train commute. Now I guess not everyone can (or would want to) live close enough to the train station, so I can imagine the belief that they must have a car. But seriously? A 911 and still having to commute and work?

Why on earth would you spend so much (I dread to think of the other associated costs) when you still had to work? Don’t get me wrong, I would love to have a Ferrari, but I wouldn’t pay for it in preference to paying down my mortgage!

For reference, years ago someone I know took their Ferrari in for servicing. 4 new brake pads. Can you guess the cost? It was £22,000. You could buy a whole knew car for that!

Over the years, the increase in London property prices has been mad, but compared to the cost (both financially, and health and time wise) of commuting, does living outside and facing that really be worth it?

When I first took a job in London (hands up, I was attracted by the massive increase in salary) I thought I would commute it. Back then my rent (one room in a shared house) was £200 per month, and my transport cost was £250 per month. The commute time? Just over 2 hours each way. The cost of renting (a room in a shared place) a 25 minute walk from work? Just over £600 per month. So £150 per month bought me 3 hours a day, or 60 hours a month – so £2.50 per hour. I knew there was a reason I did it!

Would it be possible to do it now? I suspect it would be a challenge – central London rents being what they are, but it is possible to find something for under £1,000 per month. No you don’t have your own place and you share it, but think of the amount you can save this way. The cost of renting a flat on your own in central London, or even buying, are just prohibitive unless you land some insane banking job.

It’s what I did (share, not land an insane banking job!), and I think it still is, it is just that people would rather live further out and spend the difference on something else they don’t need! I can accept that with a small kid or two people would want more space that you don’t get (at a reasonable price) in London, but that opens up the can of worms of should you have the children if you can’t afford that side. But that is a different conversation!

Contemplating Insurance

So one of the things that often gets discussed is the level of insurance that you do, or do not, need. This Christmas gave me some time to think about my insurance, and what to do about it (and on the back of a conversation with a work colleague). So a complete essay of mindless drivel follows!

So some of the insurance is a no brainer for me:

• Car Insurance. Well I can’t really drive without it so no choice there
• Buildings (& contents) insurance. Well a stipulation of my mortgage is that I have buildings insurance so I can’t not, and I have contents insurance as it would not be cheap to replace everything I have here (and I don’t just mean the food and wine :)) – add in clothes, tv, shoes, food, alcohol, white goods etc.
• Travel Insurance – as and when needed. In the past I had an annual one, but nowadays as I have cut back on travel I don’t need it as much. That said I would always have some for when I travel, it just isn’t worth the risk not to for me. I have once had the misfortune to need to call on it (that’s a down the pub discussion)

There are also two other insurances that I have at the minute, that I am contemplating if I really do need. Life / Critical Illness insurance, and Income Protection. I am actually over insured on these at the minute as I had an existing policy before I joined my new company. The new company has these, but not to the level I would have liked. And who knows how long I will be at my current company, and if I move, will the new company offer anything similar?

I ended up looking at both if I used my current company one and if not where that would land me.

First up – why do I have these insurances? Simple – as I may have mentioned once or twice before on this blog… we have quite a large mortgage, in fact larger than my other half could cope with if she had to pay the whole lot herself, never mind bills. I want to know that if anything were to happen to me she could remain comfortably in our home without money worries (and she is not yet the best on that side anyway!).

So, Life / Critical Illness insurance. This will pay out a lump sum if I either die or have one of a long list of illnesses, and is sufficient to completely pay off the mortgage.

The Income means if I am out of work for whatever reason (non critical illness) or something else happens, I can continue to pay the mortgage, bills and invest, enjoy life.

I am now in a position where my retirement funds are greater than the outstanding balance of our mortgage, however a large chunk of this is in my pension and so can’t be accessed for some time. So, working backwards…

When I can access my pension at the age of 55, I will be able to use drawdown and this should cover my monthly mortgage cost (and a little bit of bills, but not a lot). This means in reality, I need to look at the time period from now until I hit 55 (or maybe 57 given the governments never ending tinkering).

Realistically this means I need to be able to cover the time through until I can access my pension. To cover this time then the mortgage and bill money needs to come from ISA and cash reserves. For now I will discount cash reserves as they are low at present, but I will gradually increase them. One day I will get to that elusive 6 months of income!

My ISA investments will now cover approximately 10 years of mortgage payments (excluding dividends), subject to volatility. With my current employer this would be sufficient to get me to my pension age, however should I move I will be short by a few years. For these things I always go on a worst case basis, so I am going on the assumption that I will change jobs, or my company will stop the benefit.

This means I am about 2 or 3 years short of mortgage payments. In reality I am adding at least 1 mortgage payment a month into investments and savings, so lets say its 18 months I am short.

If I were to stop my insurance payments, and invest them instead, then in 18 months that would buy 3 more months of mortgage payments, bringing me down to 15 months.

If I were to stop paying the insurance then I would invest the difference into an Investment Trust.

The big question for me is do I risk it? Technically, we could sell up, move to a small property somewhere out of London and be FI already – just not in a lifestyle we would want or be happy with!

If I can cover my side of the mortgage, then we could really tighten the purse strings and survive without moving. Now, if I change jobs (you never know with me!), then I may lose the companies cover which means I will have to cover the whole period.

Right now I am borderline. If I knew I was going to stay in my current company for at least another 3 years then I would just cancel the insurance and throw it into my GTP ISA. I will keep an eye over the next couple of months and then maybe make a decision.

What’s the worst that could happen?

So, flipping it the other way around – what would be the worst case? Suppose I did lose my job and there was no insurance payout – what would I do?

Well first up I would hammer back all expenses to the absolute minimum – no alcohol, tighter food budget (if I am at home I will have time to cook from scratch etc.), and I wouldn’t have to be paying my insurance premiums either. No eating out, no drinking out. I think I could make my cash reserves last probably 8 months when they are back where they should be (right now probably only 5 or 6 months. Sell out my GTP Investment Trust cash replacement would buy me a little longer.

So I could probably stretch to a year before I need to sell anything, in which time I should get dividends to cover another couple of months. Now I would hope by this stage that I would have found another job, or be back earning in some way.

Within this year I would know if I could or could not work again, so assuming I can’t work again then that means we would probably have to make some very tough decisions. In all likelihood we would move out of London, or at least downsize.

As part of the downsizing that would mean we would buy a smaller property with no mortgage and free up a reasonable chunk of cash to generate income. I suspect this would leave me with enough to pay the bills and survive. So from a numbers perspective yes we would be ok, but probably not happy.

So supposing we choose not to sell up? Then I am not quite there yet sadly. I am close I know that much, but still not quite. Cancelling the insurance and investing it would get me there faster, but would remove any peace of mind.

So for now, to help me sleep at night, I will continue to pay the insurance. This time next year however I expect that regardless of where I am working then I will be in a position to cancel it.

What would you do?