£10k inheritance

JNW1918
JNW1918 Posts: 3 Newbie
in Savings & investments
Hi


I am 35 and have just been left an inheritance of £10k, which should be used to provide retirement income. It came with advice from an IFA, who has proposed investing the money into an Aviva managed pension, with a 50:50 split between two actively managed funds.


My concern is that with a find management fee of 0.8% and an ongoing adviser fee of 0.75%, once inflation has been factored in, the investment really wont grow that much in real terms. In fact in Aviva's key facts document they estimate that with a 2.1% growth, once fees are taken out and inflation factored in, the £10k will be worth £11k in 30 years!


I feel it would be better invested through ISA wrappers into passive tracker funds, minimising fees and enabling me to move the funds as I wish and work them harder to get a better return.


Any opinions would be really helpful!!


James
«1

Comments

  • Shashy
    Shashy Posts: 139 Forumite
    JNW1918 wrote: »
    I feel it would be better invested through ISA wrappers into passive tracker funds, minimising fees and enabling me to move the funds as I wish and work them harder to get a better return.

    I agree.

    Did the inheritance come with any conditions for how you'll use the money? If not then you're free to do with it as you please, and since the annual ISA limit is £20k you can go ahead and stick it straight in one (assuming you haven't yet used more than £10k of this year's allowance).

    One quick note on your 'passive' approach: when you say "move the funds as I wish and work them harder" you're really, in my view, talking about actively managing your portfolio. Not that it matters, but what counts as 'passive' is always an interesting discussion point on here.
  • ColdIron
    ColdIron Posts: 9,006 Forumite
    First Anniversary Name Dropper Photogenic First Post
    JNW1918 wrote: »
    I feel it would be better invested through ISA wrappers into passive tracker funds, minimising fees and enabling me to move the funds as I wish and work them harder to get a better return.
    Have you dismissed using a SIPP instead of an ISA? You could invest in the same thing with similar charges and still get the advantages of a pension wrapper
  • badger09
    badger09 Posts: 11,199 Forumite
    First Post First Anniversary Name Dropper
    ColdIron wrote: »
    Have you dismissed using a SIPP instead of an ISA? You could invest in the same thing with similar charges and still get the advantages of a pension wrapper

    Or some in a LISA? Especially if OP is a first time buyer.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
    First Anniversary Name Dropper First Post
    JNW1918 wrote: »
    Hi


    I feel it would be better invested through ISA wrappers into passive tracker funds, minimising fees and enabling me to move the funds as I wish and work them harder to get a better return.


    Any opinions would be really helpful!!


    James

    I agree with you, although I would not move the funds much after they are invested in a multi asset fund like VLSxx or your simple tracker portfolio.

    However, before you do that pay off all your high interest debt ie credit cards and then put at least 6 months spending in the bank. If anything is left put it in an ISA.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
    First Anniversary Name Dropper First Post
    ColdIron wrote: »
    Have you dismissed using a SIPP instead of an ISA? You could invest in the same thing with similar charges and still get the advantages of a pension wrapper

    If this is an inheritance the the money is tax free to the OP so I don't see any advantage of the SIPP
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • zagfles
    zagfles Posts: 20,317 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    bostonerimus wrote: »
    If this is an inheritance the the money is tax free to the OP so I don't see any advantage of the SIPP
    If the OP has at least £12,500 relevant earnings (basically employment income) after any other pension contributions, then he can put the £10k into a SIPP and get tax relief added.
  • bostonerimus
    bostonerimus Posts: 5,617 Forumite
    First Anniversary Name Dropper First Post
    zagfles wrote: »
    If the OP has at least £12,500 relevant earnings (basically employment income) after any other pension contributions, then he can put the £10k into a SIPP and get tax relief added.

    Ahh, that's a nice bump in value immediately.
    “So we beat on, boats against the current, borne back ceaselessly into the past.”
  • ColdIron
    ColdIron Posts: 9,006 Forumite
    First Anniversary Name Dropper Photogenic First Post
    edited 12 July 2017 at 1:28PM
    bostonerimus wrote: »
    If this is an inheritance the the money is tax free to the OP so I don't see any advantage of the SIPP

    That's because you are in the US. In the UK HMRC will rebate basic rate tax of £2,500. Depending on the OPs circumstances after 55 any withdrawals may also be free of tax. The IFA, who knows more facts than we do, concluded a pension was the best way forward, the OP is (rightfully) questioning the charges
  • JNW1918
    JNW1918 Posts: 3 Newbie
    Thanks everyone.


    To pick up on a couple of points, I own a house already, and have no debts and have accessible savings for a rainy day.


    I am self employed on a very relaxed basis (my wife is the main breadwinner) and earn c£10k pa. How does this affect the tax relief benefit of the SIPP over an ISA?


    And the IFA knew about the same amount as you when he came up with this proposal!


    Thanks
  • zagfles
    zagfles Posts: 20,317 Forumite
    First Anniversary Name Dropper First Post Chutzpah Haggler
    edited 12 July 2017 at 3:03PM
    JNW1918 wrote: »
    Thanks everyone.


    To pick up on a couple of points, I own a house already, and have no debts and have accessible savings for a rainy day.


    I am self employed on a very relaxed basis (my wife is the main breadwinner) and earn c£10k pa. How does this affect the tax relief benefit of the SIPP over an ISA?


    And the IFA knew about the same amount as you when he came up with this proposal!


    Thanks
    You can't put more than your earned income gross into a pension. (technically you can, but you can't get tax relief on it which generally makes it a bad idea).

    If you earn £10k then you can only put £10k gross into your pension, ie £8k net. So you couldn't put it all into your pension. Did the IFA advise you should put it all into a pension for you? If so he sounds incompetant.

    You could put some into your wife's pension.
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

Categories

  • All Categories
  • 343.1K Banking & Borrowing
  • 250.1K Reduce Debt & Boost Income
  • 449.6K Spending & Discounts
  • 235.1K Work, Benefits & Business
  • 607.8K Mortgages, Homes & Bills
  • 173K Life & Family
  • 247.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.9K Discuss & Feedback
  • 15.1K Coronavirus Support Boards