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Disclosure. I'm HOPELESS with money. One work pension since 5 years, one stakeholder pension since 18 years and a personal pension since 31 years. only contribute £20 per month to the second two so probably worth nothing.
I'm coming up to 50 and have a reasonably large chunk of money from an inheritance. So rather than piss it on coke, hookers and bikes, I need to do the grown up thing and think about investing for the future. Only problem is, as I say, i'm hopeless. I have no clue about pensions, isa's savings etc.
Any suggestions for what to do ? I did think about a session with a financial adviser but they wanted £400+ just to provide advise.
Cheers all.
Nigerian Prince Happy Holiday Fund?
Im no IFA, but I know that good advice is easily worth £400...
Just a touch older than you and have similarly made little or no provision for when I can no longer wipe my own butt. Hedonism rocks!
I suggest you give it to me and I’ll do the coke hookers and bikes thing, leaving you with a clear conscience.
I know, you can thank me later.
Something like a low cost tracker fund in a tax efficient wrapper (SIPP or ISA). Vanguard are a good provider (very low fees).
You can put £20k/year into an ISA.
As the inheritance is received post IHT, you're not taxed on it as income, so I don't think a SIPP would be much use as they will tax the pension income when you take it; so probably not the best idea.
Im no IFA, but I know that good advice is easily worth £400…
+1
Depending on your tax rate, it might be good to spend the inheritance as day-to-day spending and salary sacrifice the same amount of your income into your pension - i.e. if you earn 60k, sacrifice 10k (or whatever the exact amount is that you're paying 40% tax on), and spend 6k of your inheritance that year instead (which is what you would have received if you'd been paid the money instead). Repeat for a few years.
This also works for 20% earners, but the additional returns are less good.
Invest in steel.
Ideally this steel should be in the shape of guns and swords to fend off the ravaging hordes after the imminent collapse of human society into a post-apocalyptic wasteland on 1st November.
As the inheritance is received post IHT, you’re not taxed on it as income, so I don’t think a SIPP would be much use as they will tax the pension income when you take it; so probably not the best idea.
The source of the money isn't really relevant, if you are paying income tax now you would still get the tax relief applied. In addition under current rules 25% any money taken out of a pension would be tax free so I wouldn't discount an investment where you get a minimum 25% boost as soon as you contribute.
https://www.moneysavingexpert.com/savings/ is worth a scan to give you some ideas.
House in the lakes and rent it out until your ready to move there for good,
The source of the money isn’t really relevant, if you are paying income tax now you would still get the tax relief applied. In addition under current rules 25% any money taken out of a pension would be tax free so I wouldn’t discount an investment where you get a minimum 25% boost as soon as you contribute.
Good point.
Although the 25% tax free bit at 55 is only available until the Chancellor decides its not, which could potentially change in the near future if a cash strapped post Brexit Government was looking for a soft target. NB I've got 7 years to go and am getting quite nervous about it 😉
if its enough to buy property then thats what I would do. If not premium bonds.
But then I am also a financial idiot albeit a lucky one
My mum was the same, knew very little about money and had even less interest but seemed to have been well advised in the past (and as it tunes out a well-off father..).
Depends how likely you are to need it soon. Three options for me: 1. Keep it fairly liquid - some in a cash isa (not much as there is very little return at the moment) some in a stocks and shares isa (I'd go for vanguard and Fundsmith, low cost, safe-ish, ok returns); 2. semi liquid - property. This will be work but the returns should be good and it is a tangible asset that you can theoretically cash-in. Lots of budget options depending on the amount or the holiday property mentioned is quite nice with extra perks. 3. Locked up - in the pension. Probably a SIPP using vanguard and Fundsmith again. I'm certainly no expert but have been investing a while now and so far so good/lucky. For me property is the best but mostly because I actually find it interesting and enjoy (mostly) doing the work whereas I struggle to get interested in shares and funds so just plump for easy ones.
Portugal. A property in Portugal if you have at least 280 000e to spend.
Important questions are - what is your appetite for risk, how quickly do you want to invest, and when do you think you'll want to access the funds?
Assuming the answers are (a) medium/low; (b) not fussed; and (c) age 65.
If it were me, based on the above, I would open a stocks and shares ISA (with Halifax, who have the lowest annual management charge of £12.50/yr).
Within that, I'd then set up an autoinvestment of £1666.66 / month (which will neatly put in £20k/yr - the max ISA limt) to buy Vanguard Target Retirement 2035: https://www.vanguardinvestor.co.uk/investments/vanguard-target-retirement-2035-fund-accumulation-shares
With the uninvested cash, I would put some in Premium Bonds and - if you can be bothered to fiddle - set up monthly savings accounts with (a) Nationwide (where you can 5% on £250/month); (b) First Direct (5% on £300 a month); (c) Virgin (in branch you can get 3% on £300/month).
That'll be £400 please 😉
Hmm Vanguard seem to be mentioned a bit.
Could I put 20K in an ISA and 40K in a pension per year ? lump sum ? and then find an account that pays interest for the rest ?
At the moment, not in Sterling.
Could I put 20K in an ISA and 40K in a pension per year ?
The 40K limit on pension contributions includes ALL contributions, i.e. it includes your employer contributions. Other than that yes.
Is the 40k limit on pension contribution before or after tax relief?
i.e. can I put 40k in and get 25% tax relief= 50k in pension
or
put 32k in, get 25% tax relief = 40k in pension
Always thought it was the latter, but I keep seeing it written as though it is the former.
It's the gross amount so it's the latter.
Although you can use up to the last three years pension allowance, so can put a lot more of your lump sum in as a one off.
The professionals don't know either, that's why bond yields are crashing. By way of example, today's FT said:
"Traders have dumped riskier assets such as stocks and crude oil and moved into perceived haven assets including bonds, driven by a growing list of interconnected fears including trade tensions between the US and China and slowing global growth."
Flat in Tenerife