Hi Holly,

Good question.

Great to hear you’d like to add to your existing arrangements – and considering how you diversify your money is very sensible.

Salary contributions

I don’t know how old you are, nor what your income tax status is, but you say you have 3 workplace pensions, one of which is public sector and I, therefore, assume comes with some salary related guarantees.

The pension you are in at the moment will be receiving at least 8% of your salary from contributions made by you, your employer, and tax relief from the Government.

ISAs vs Pensions

You also have the Stocks and Shares ISA with Wealthify, but don’t say what that is worth.

The first thing to think about, then is the balance of your investments across pensions and ISAs.

A Stocks and Shares ISA may not offer you tax relief on the way in, as a pension does, but it does allow you to take benefits free of tax on the way out. And your money is not tied to any ‘age’ or date.

Notwithstanding the fact investment should never be considered for a timescale of less than 5, ideally 7+ years, if you needed to get your hands on money, you could access your ISA at any time.

With a pension, on the other hand, it is locked up until at least age 55 (age 57 if you are not yet 48 years old) and should actually be left alone until you finally retire. There are additional rules that make accessing it any earlier than actual retirement somewhat unattractive.

When a pension plan becomes attractive...

If you are:

• within 5 or 7 years of retirement,
• have maxed out your ISA allowance,
• or you remain a higher rate taxpayer even after your workplace pension contributions,

then the pension plan does start to become more attractive.

But in the latter case, that question about potentially needing the money is still more important than a bit of additional tax relief.

Your investment approach

For the ISA, you have an approach with Wealthify that you are happy with.

But how do you invest if you do go for the pension option?

Thankfully, virtually every pension plan now offers some form of multi-asset, passive investment approach.

The SIPP and pension designation is almost irrelevant from this point of view. Most workplace pensions are SIPPs these days.

What most SIPPs do now, workplace or otherwise, is segment the features of an all-singing (more expensive) SIPP, from the more basic offering of decent investment funds at a reasonable price. So please don’t feel just to diversify that you must go for an AJ Bell Youinvest-type approach, and manage your own investments within there.

However, to cover that off, AJ Bell Youinvest do offer access to a range of multi-asset passive funds that will do that work for you – from Vanguard, Architas, Legal & General, amongst others – and their own offering, called the Managed Portfolio Service.

Workplace pension top-ups

You should also be aware that your existing workplace pension will accept top ups – and should also offer a managed option.

In auto-enrolment arrangements, these are usually called lifestyle funds. You may already be invested in one of those if your workplace pension is fairly new. These offer the added feature of managing risk exposure downwards, automatically, over the final 5-10 years ahead of your chosen retirement date.

In terms of using a previous workplace plan, or if your current one is quite old, whether to use it will depend on:

• how old and what the terms are,
• ongoing fees & exit fees,
• fund selection
• what flexibility will then be available to you at retirement.

Whatever you decide, make sure you don’t tie yourself up in a high-fee or limited investment arrangement.

In that regard, pensions have (mostly) moved on.

Hope this helps,

Lesley

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

Making fund selections

If you’re happy making the selection yourself, and it sounds like you are, then I would suggest fund choice will be the important factor in deciding which way to go.

Costs

You mention that costs are similar, so it comes down to whether you feel the ‘robo’ option adds any value.

Investment Trusts

Investment trusts can work well for long-term investment, but there are two added complications to consider: leverage and the fact that they can run at a ‘premium’ or ‘discount’ to ‘net asset value’.

Overall

I would suggest that unless your son is within five years of turning 18 – and therefore having access to the money – then a global portfolio makes sense.

Just bear in mind that most research suggests the best ‘anxiety-adjusted’ return, is found in a diversified basket of shares and fixed interest, and only some funds will offer that.

Investing ethically

As for the ethical side of things, your own research should reveal which funds cover the areas you feel are important.

There is definitely a wide range of ‘shades of green’ available.

Finally, it’s worth keeping in mind that the Junior ISA is a ‘locked box’, except for in extreme circumstances, until the child turns 18. Not even you can access it for your son’s benefit e.g. his education.

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.

Hi Kate,

Congrats on getting yourself into a position where you can think about investing - you're already ahead of the majority of people!

We need to start by clarifying your terminology

An ISA is what financial advisers call a tax-wrapper, but is better understood simply as an account (That's what the 'A' in ISA stands for!).

It's a notional 'box' that you keep money inside. The underlying investment - the things you hold in the box - are the Stocks and Shares. You're right in thinking that a Stocks and Shares ISA is generally an excellent place to invest for the medium to longer term. Now you have to decide how to invest within your ISA.

For new investors...

Robo-advisers are a good idea because they offer a fire-and-forget solution. They will assess your risk profile and ask about the intended term of your investment, and then will build a portfolio for you - they will choose what goes in the box. They will manage the investments and tweak them where necessary, and you don't need to be involved at all. You just sit back and watch the money do its thing.

It may be that, in time, you develop an interest in investing and decide that you would like to be more involved in choosing what you invest you money into.

For that, you would need to open an ISA with one of the many excellent platforms available. These platforms offer lots of different kinds of accounts, including ISAs, and access to hundreds or even thousands of investments to choose from. They also provide recommended fund lists, and lots of tools to help you build your own investment portfolio.

So you see, the ISA decision is an easy one.

The real decision is how to invest within that account.

If you like the idea of Wealthify or one of the other robo-investors, then open an ISA there and see how you get on.

One last thought - you don't say whether you own your own home. If not, and you hope to do so one day, then consider a Lifetime ISA, where the government offers you a 25% bonus on top of your savings, as long as you use the money towards buying your first home (or you don't touch the money till after age 60).

Take your time, do your homework and good luck!

Just be aware...

We are not regulated to give personal financial advice - This isn’t full-fat regulated financial advice. Boring Money is a publisher and not regulated by the FCA. 

This means we can't help with specific personal circumstances or recommend specific investment products. It also basically means that if we say something daft, you have no recourse to come back and complain.

We’re only allowed to give you a steer or share an opinion or tell you the facts - That said, we promise that our answer to you is an independent unbiased perspective with no commercial gain to make. If you need regulated financial advice, you can find a good adviser via sites such as Unbiased & Vouchedfor.