Feb 2025
Objective
Anna and Mike want to buy a dream home for £1-1.2 million in the next 5 years, stop work at age 60 and pay for their children’s university fees.
Anna and Mike are both additional rate taxpayers and currently have £80,000 in savings and no investments outside their pensions.
They have childcare commitments of £2,500pm and no other debts. There's surplus income of £3,000pm plus additional amounts from bonuses.
Mike doesn't want his children to be stuck inside with no garden . Anna is worried that she’d have to continue working well into her 60s. They needed a plan.
Recommendations
We calculated Anna and Mike needed to save an additional £200,000 to meet stamp duty, moving costs and deposit for their new ideal home.
We provided individual recommendations based on Anna and Mike’s circumstances and objectives to:
Maximise cash ISA allowances to a high interest account
Maximising their £20,000 ISA allowances each increased interest by £1,600 and saving tax of £720.
Allocate £1,500 surplus income to overpay mortgage debt
Mortgage overpayments provide a guaranteed tax-free return and are good if you’re looking to build equity in your home or accelerate your mortgage repayment.
Set up regular £1,200pm contributions to a General Investment Account investing in a diversified investment portfolio
The regular investments will help build funds for a potential house move and/or children’s university fees. Mike and Anna were not using their dividend allowance (£500 dividend income tax free).
Increase salary sacrifice pension contributions by 2%
A marginal increase to pension contributions was affordable, tax efficient and helped build funds for target retirement age of 60.
Summary
Anna and Mike had no plan or timescale of when their dream home might be affordable.
MUVADO’s 100 day plan put them on track and as MUVADO members they have an accountability partner to keep them on track and adapt to changing circumstances.
With regular payments set up of £32,400 a year, surplus bonus income to be saved and childcare costs to reduce, they're on track for their dream home.
If you want help getting your finances on track, book a call to get started.
Risk warnings
Please note, a pension is a long-term investment not normally accessible until 55 (57 from April 2028). Lower salary may impact the amount you can borrow, such as mortgages.
Your home may be repossessed if you do not keep up repayments on your mortgage.