Thursday, 3 December 2015

Time to set up a pension

This week I decided to set up a SIPP

I'd been thinking about why I'm investing. Some of this is for buying my new Honda Civic Type R (in 5 years when they are sufficiently cheap), but some of it is long term investment. I still have 18 years before retirement, and although I have a healthy work pension, if I'm planning on keeping some of my investments for the long term, then the extra 25% chucked in by the tax man makes a very attractive offer.

So with that in mind, I opened a Hargreaves Lansdown SIPP and added £800. That means in January I get £200 from the tax man. I also added a £100 per month standing order so I'll be topping up by £125 per month. In the short term I want to get £10,000 transferred in there as I sell other shares, which will be instantly £12,500 with the tax contribution. I'll reduce my monthly premium bond standing order from £200 to £100 so I won't be any worse off - in fact the tax rebate of £25 is the equivalent of a premium bond win every month!

It still leaves me with £20,000 in the more liquid accounts, and that's soon to be topped up to £27,500 after my bank sent me an irresistible offer of a 3.6% loan. I thought long and hard - my plan is to invest about £300 per month into my share accounts. As I've topped up an existing loan and lowered the interest rate on that too, I'll be paying £288 per month over 4 years for effectively £12,000 up front. That's only about £800 interest over 4 years. Given that I've sold £340 worth of shares and received another £146 dividends (total £486 in 4 months), I'll cover the interest in no time. Why not get the capital up front and use the payments as my monthly investment?

Just waiting for the loan to come through - already decided what to buy with it, so the portfolio will grow again next week!

Another new venture was buying American stocks with my SIPP. I'd been reading up about renewable energy, and the money that's going to be available for development in this sector following the Paris conference. AA:Alcoa make aluminium - but they have been working in partnership on developing aluminium-air batteries. These are getting 1,000km from a single charge, and although there are still loads of issues, they have backing from Renault and Nissan with the research. If this takes off then demand for aluminium will go mental. They have also spent loads of resource restructuring over the last few years, which will hopefully see their share price start to rise again, as they appear under-valued. There's a bit of uncertainty as they may be about to split the shares into 2, so we'll see what happens with that.

I bought 124 shares for the equivalent of 633.2507p at a cost of £797.18. They're down to 611p today so not a great start. Must admit, I do feel a bit blind with them. I was also looking at ABB Ltd, as they are doing a lot of work with batteries, and these will be vital if we're going to rely more heavily on renewable energy. The ability to store energy at times of surplus and release it when the sun goes in or the wind stops will be in high demand, so the company that makes the next great breakthrough in batteries will shoot up in value. However, I need to find a web site with better stats on American companies before I buy any more.

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