INvesting Pension Lump sums

Marhaba_Man · 28 July 2007 at 7:24PM

I have been given notice of redundancy I will have a sizezable amount to invest where do u suggest I invest it please I dont want to put it all in one place

dunstonh · 28 July 2007 at 7:53PM

tens of thousands of options available to you.

You will need to narrow it down more. Plus we dont know about your tax position, the amount, timescales or risk profile.

Marhaba_Man · 28 July 2007 at 9:50PM

I am astandard tax payer about to be made redundant so would pay normal tax not in to anything too risky as this is all I have to earn from

dunstonh · 28 July 2007 at 10:39PM

Still doesnt help much. Where do you want to invest?

Marhaba_Man · 29 July 2007 at 9:42AM

i dont know where really Im ne wto this I didnt want to just put it into a Bank or Building Society was told there are property related investments I could consider just havent a clue where really !!

dunstonh · 29 July 2007 at 12:32PM

There are property funds available ranging from low risk bricks and mortar funds which focus on rental income through to high risk property share funds which are based on the shares of property companies and REITs.

The latter has the higher potential but wouldnt be consistent with someone saying they dont want something too risky (although that can mean different things for different people). The former is low risk.

Lets just say property funds were the area you fancied investing in; next you have to pick the spread of property funds you wish to use and decide which tax wrapper or wrappers are most suitable for you. Would ISA, unit trust/OEIC, onshore bond, offshore bond or pension be best for your circumstances?

If you really are not sure on this then attempting to go DIY could do you far more damage than good. The problem you appear to have is that you dont have the knowledge or ability to know where you should be investing, who with, what spread and which tax wrapper(s) to use. You sound as if you need the services of an IFA.

You shouldnt be dispointed you dont know. I cannot paint/decorate and I get someone in to do that. I get the dealer to service my car. British Gas service my boiler. When there is something you cannot do, you get someone in who can.

If you do decide to get an IFA, you need to be aware that it must be an IFA and not an FA. They must be independent (thats whole of market). Tied advisers cannot investment portfolio plan, wont have range of investments available (tied advisers typically have 2-10 investment options available compared to tens of thousands that IFAs can use. Just firing up one of the research software tools I have and it shows it currenly has access to 230 companies, 6647 contracts with 80,251 fund links. See the difference).

The term IFA also covers a range of skills and abilities. You have IFAs that do mostly mortgages, those that specialise in investments or corporate affairs etc. There is no point seeing a mortgage IFA for an investment. So, make sure you look for an investment specialist IFA.

Marhaba_Man · 29 July 2007 at 1:03PM

I am hearing what u say REIT was suggested to me how risky are they and what r the other options U mentioned

dunstonh · 29 July 2007 at 1:36PM

REITs are high risk. They are effectively property shares. Most are down around 15% in the last few months as the bubble appears to have burst on property

jamesd · 29 July 2007 at 2:09PM

Marhaba Man, I suggest that you first take a look at Ok then - How do I choose a S&S ISA to get an idea of what a sector allocation is and how you can use it to set a suitable risk level from a mixture of investments. You're right that just one investment is a very bad idea - too much dependence on just one thing.

Roughly how much money is sizeable? 5,000? 50,000? 100000? 500,000?

How much decrease in value in one year can you accept without being too worried? It's normal for stock market investments to fall by 20-40% or more depending on the details, the geater the drop potential the greater the gain potential in good years. You control the drop in part by mixing investments with different drop potentials so that he average drop potential matches your needs. Choosing a drop potential below 20% can significantly limit the long term growth and income potential.

How long do you need to live on the money? How much income is absolutely essential, how much is desirable and how much nice to have?

Do you have pension coming in the future? In about how many years? How is that currently invested (often badly, with lots of room to improve it).

Do you plan to work in the future?

Marhaba_Man · 29 July 2007 at 3:23PM

Up to 100000 need to spread it around have apension to come later in the year but need max pay back and hope not to lose on investments

dunstonh · 29 July 2007 at 3:26PM

How old are you ? What will be the amount of the pension? What other cash/investments do you have?

These are valid questions as you may be entitled to pension credit and picking the wrong tax wrapper now could remove your entitlement.

INvesting Pension Lump sums

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