I took two half days off work this week to tackle our finances. A lot of things have happened at once and I needed some solid time to review and organise things.
Savings
I've been trying to find places for our savings with good interest rates now our Coventry Building Society Regular Savers have matured. To compound this, I received a letter from Tesco letting me know they are ditching their current accounts in November. I've been using our account as a savings account, as it was offering 3% on balances up to £3,000, although we kept a lot more in there. This dropped last year to 1% and continues to fall so I have to find a home for those savings.
Some of the accounts with the best rates are for existing customers, others are only for people living in a specific postcode. Some that look ok will only take very small maximum deposit limits and so are not worth the hassle of setting them up.
We already have Stock and Shares ISAs which we use those specifically for investing for my retirement, and I don't want to reduce our annual limits by opening up a cash ISA.
I've looked at premium bonds but I actually don't like the lottery aspect of it. According to MSE's premium bond calculator I could be looking at about £75 in prizes for the amount I would buy, but that is obviously based on chance. I could get more but it is statistically likely I will get less.
I've never been keen on tying my money up for a fixed term, in case we have an emergency and need the money, but I'm slowly coming round to the idea as some of the better rates on the market are fixed term accounts.
After much research the only options that suits my specific requirements are a 12-month fixed term account with Oak North Bank for 1.23% interest and/or a regular savings account with Coventry Building Society at 1.05%. That's a lower interest rate than last year but it allows larger monthly deposits so is simpler to maintain, and crucially, I can still access the latter if I need it.
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Retirement accounts
Once that decision was made I turned my attention to Martin's accounts. His SIPP is being transferred to Vanguard from BestInvest, as the latter's drawdown costs were far too expensive. I'm looking to keep that invested for the rest of the year and start drawdown after April next year. Our aim is to keep Martin's income under the Personal Allowance of £12,570, which we won't be able to do this year due to him working his last two months in the new financial year. Once we add in his occupational pension the SIPP will put him over.
However, I noticed last week that his monthly pension statement stated HMRC has given him a Basic Rate tax code, which is not correct and means he is being taxed at 20%, despite only having a small pension as income. That tax code is often given to people who have pensions and are still working. So, we rang up HMRC, talked through the issue with them and they have now changed the tax code to account for this. He should now get a refund on the tax taken from his pension since June and a refund of the tax he paid during April and May while working.
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Credit cards
Finally credit cards. One of my 0% rate promotions is coming to an end in September. If you've read my blog for a while you'll know I favour putting larger spends on these cards, paying back a set amount and keeping my savings earning interest. It's a technique called stoozing. Because I have savings I can pay off the debt at any time if I need to so I don't feel burdened by it, but I get the luxury of repaying it at my leisure over time. The card repayments come from our income every month so my savings and investments can sit there untouched from one year to the next.
After searching the market, I found a Marks and Spencer card that offers 0% interest for 20 months and was successful with my application. The car we bought last week was purchased using our normal household credit card to get the buyer's protection, and originally I was going to use a combination of my bonus and savings for that but I've decided not to so that balance will shortly be transferred onto the Marks and Spencer card. I'll then set up a regular payment every month and just forget about it. We will be renewing our mortgage deal in a couple of years and so I'll clear the balance three months before our new deal.
There is another technique to saving/making money using credit cards but it's not as easy as it used to be so I don't do it. It's called a Super Balance Transfer or Money Transfer. Basically, you get a card with a 0% interest rate on money transfers and a low fee, then do a money advance off the card, up to the credit limit you've been given, into your current account. You're effectively taking a cash advance from your card. You can then put the cash into a savings account and get the interest. This is not so easy to do as it was 10 years ago. Back in the day there were very little, if any fees, for cash advances and huge savings interest so it was quite lucrative, but credit card lenders didn't like people doing it so changed their terms and conditions, the fees have increased massively (lowest is currently 3%), and savings interest rates are low.
You can still do it, but you need a special Money Transfer credit card but really it is too much faff for no reward so I stick to the stoozing. The only way I would change my mind is if we had a recession and the price of the funds in my pension and ISAs dropped significantly, making it worthwhile to buy the lower priced units in anticipation of the day they increase in value. I've done that before during a market dip, using savings though not money transfers.
It's still good to have that possibility in my back pocket. I may need to use every means available to me if I'm to retire early.
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