£250k to invest - Help!
nkb21
Posts: 44 Forumite
Complete investment newbie and generally naïve on the finer points of savings or personal financial wisdom, but would really appreciate any views/help/assistance on my situation. Im beginning to research financial investing and aim to be much more proficient over time but these forums appear to provide great targeted short term help. Wonder if the community would be kind enough to find the time to review my post and share their experiences...
Recently made redundant after working 30 years for a Financial Services company (not product related roles hence the naivety). Am 51 and was a HR tax payer (last few years), on final salary DB pension scheme (until it closed in 2009) which entitled me to take immediate non reduced pension if made redundant after 50!!!...so I did. Opted for 25% TFLS (part from DB and all of DC pot built up since 2009) with a view to buying a BTL property, using rent to boost pension income but have since decided, it may be wiser and less hassle to invest instead.
Family & Income:
- Me = £25k p.a pre-tax DB pension (index linked with 50% spouse pension in the event of my death). 16 years away from State Pension. Forecast is £135 p/w atm - need 6 more years to max it.
- Wife = 47 y/o non-earner and 21 years from State Pension. Forecast £110 p/w - needs 10 more years to max it. No other pensions.
- 2 x Children = 22 y/o (not dependant and currently working and living abroad but maybe not for long) and 16 y/o (dependant, living with us - may or may not go to Uni).
Other Finances:
- Debt free (redundancy paid off mortgage (home valued c.£300k) and car loan).
- £160k in cash (25% TFLS, plus existing savings, all in joint current account at present)
- c.£60k in shares obtained over years of employee sharesave with c.£20k more due in a couple of months. Have split existing shares between self and wife and we are looking to sell off the lot over next 2 or 3 years, but within annual CGT allowance.
- £10k in Cash ISA
- 2 x £20k S&S ISAs each for self and wife opened last month. £20k in VLS60 and £20k in Moneyfarm adventurous portfolio. No real logic to those choices other than general opinions good and costs are low.
- Just opened up 2 x 5% Regular Saver accounts for self and wife (paying on max £250 p/m)
Household outgoings:
- All told, generally c.£18k p.a so my post tax DB pension covers that but larger luxuries, unexpected purchases and holidays etc, would not be catered for.
This is where things get cloudy.
Future life plans a little up in the air. Currently looking after mum who lives on her own and suffers with Vascular Dementia (diagnosed in 2015). Further employment for me in short term, therefore on hold. Medium/Long term, may decide to go back full time, part time or not at all.
Aside of the 2 x S&S ISAs, way forward/plans for remaining savings/investable funds of c.£250k (£160k cash, £80k shares, £10k Cash ISA) is as yet, undecided. This is where Id appreciate some of your views on what myself and my wife MUST do, SHOULD do or COULD do with it. As we are debt free and my DB pension is guaranteed and effectively pays all current expected outgoings, we are open to some short term risk over the next 10 years but then the wife and I want to slow completely down and enjoy retirement. I know much would depend on what we want to do in retirement, want to leave our children and things like our life expectancy but as mum is priority atm, I cant think that far ahead.
I definitely aim to quickly set up a SIPP for the wife (HL is current favourite, again based on consensus), paying in max £2880 p.a for maybe 12 years, then possibly draw that down over 8 years until her State Pension kicks in.
Not decided whether to look to pay up NI contributions for self and wife over next 10-15 years to max out State Pension. Will there even be a SP by the time we can draw it?
Other fly in the ointment is that we are thinking of moving house within 10 years. We want to move into a bungalow (no stairs please. we live in townhouse atm and couldnt contemplate climbing them into our 60s and 70s), whilst also having space for family/grandkids (if there are any by then) to come and stay. Against the grain I know, but we would therefore not be downsizing. To get what we would need on todays prices, we may end up spending an extra £100k and this would need to come from our investments.
I apologise for the length of the post but wanted to paint as fuller picture as I could. I will likely use an IFA in the long run but have been reading these forums for a number of weeks now and felt it was the right time to seek some valuable and impartial short term feedback/advice from others (my head is spinning!!).
If there is any missing info you need that Ive missed, please let me know.
Many, many thanks, in advance.
Recently made redundant after working 30 years for a Financial Services company (not product related roles hence the naivety). Am 51 and was a HR tax payer (last few years), on final salary DB pension scheme (until it closed in 2009) which entitled me to take immediate non reduced pension if made redundant after 50!!!...so I did. Opted for 25% TFLS (part from DB and all of DC pot built up since 2009) with a view to buying a BTL property, using rent to boost pension income but have since decided, it may be wiser and less hassle to invest instead.
Family & Income:
- Me = £25k p.a pre-tax DB pension (index linked with 50% spouse pension in the event of my death). 16 years away from State Pension. Forecast is £135 p/w atm - need 6 more years to max it.
- Wife = 47 y/o non-earner and 21 years from State Pension. Forecast £110 p/w - needs 10 more years to max it. No other pensions.
- 2 x Children = 22 y/o (not dependant and currently working and living abroad but maybe not for long) and 16 y/o (dependant, living with us - may or may not go to Uni).
Other Finances:
- Debt free (redundancy paid off mortgage (home valued c.£300k) and car loan).
- £160k in cash (25% TFLS, plus existing savings, all in joint current account at present)
- c.£60k in shares obtained over years of employee sharesave with c.£20k more due in a couple of months. Have split existing shares between self and wife and we are looking to sell off the lot over next 2 or 3 years, but within annual CGT allowance.
- £10k in Cash ISA
- 2 x £20k S&S ISAs each for self and wife opened last month. £20k in VLS60 and £20k in Moneyfarm adventurous portfolio. No real logic to those choices other than general opinions good and costs are low.
- Just opened up 2 x 5% Regular Saver accounts for self and wife (paying on max £250 p/m)
Household outgoings:
- All told, generally c.£18k p.a so my post tax DB pension covers that but larger luxuries, unexpected purchases and holidays etc, would not be catered for.
This is where things get cloudy.
Future life plans a little up in the air. Currently looking after mum who lives on her own and suffers with Vascular Dementia (diagnosed in 2015). Further employment for me in short term, therefore on hold. Medium/Long term, may decide to go back full time, part time or not at all.
Aside of the 2 x S&S ISAs, way forward/plans for remaining savings/investable funds of c.£250k (£160k cash, £80k shares, £10k Cash ISA) is as yet, undecided. This is where Id appreciate some of your views on what myself and my wife MUST do, SHOULD do or COULD do with it. As we are debt free and my DB pension is guaranteed and effectively pays all current expected outgoings, we are open to some short term risk over the next 10 years but then the wife and I want to slow completely down and enjoy retirement. I know much would depend on what we want to do in retirement, want to leave our children and things like our life expectancy but as mum is priority atm, I cant think that far ahead.
I definitely aim to quickly set up a SIPP for the wife (HL is current favourite, again based on consensus), paying in max £2880 p.a for maybe 12 years, then possibly draw that down over 8 years until her State Pension kicks in.
Not decided whether to look to pay up NI contributions for self and wife over next 10-15 years to max out State Pension. Will there even be a SP by the time we can draw it?
Other fly in the ointment is that we are thinking of moving house within 10 years. We want to move into a bungalow (no stairs please. we live in townhouse atm and couldnt contemplate climbing them into our 60s and 70s), whilst also having space for family/grandkids (if there are any by then) to come and stay. Against the grain I know, but we would therefore not be downsizing. To get what we would need on todays prices, we may end up spending an extra £100k and this would need to come from our investments.
I apologise for the length of the post but wanted to paint as fuller picture as I could. I will likely use an IFA in the long run but have been reading these forums for a number of weeks now and felt it was the right time to seek some valuable and impartial short term feedback/advice from others (my head is spinning!!).
If there is any missing info you need that Ive missed, please let me know.
Many, many thanks, in advance.
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Comments
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You cant sensibly decide what you are going to do with your assorted savings and investments until you know what you want them for in terms of how much, when.
At the moment it looks rather difficult to see the wood for the trees so I suggest you make plans, perhaps using the the following approach
1) decide on a year by year life plan from now until you are both say 95. Fix a year for retirement, a year for moving, a period to subsidise son 2 etc etc. For anything you dont know make and document assumptions. This isnt cast in stone, you can always change it later but at least you will have a firm basis on which to understand your situation.
2) On the basis of the life plan decide how much expenditure you will want each year, including cost of house, perhaps gifts/inheritances for your sons etc. Make documented assumptions where necessary. Put some realistic looking numbers in, again nothing is cast in stone
3) Again on a year by year basis calculate your known guaranteed income - DB pension and State Pension.
4) From (2) and (3) you now know how much money you will need each year from your investments/employment/savings.
Now a top level plan for your savings/investments
5) Calculate your short term savings on the basis that every year you have enough cash to meet the needs for that year and the following 4 years.
6) What ever remains can go into long term investments with an assumed annual post-inflation return. Money from the long term investments can be used to top up the cash.
You can assume 0 return from your investments and see if the plan works. If not increase the assumed return until you get something that works. If that seems unrealistically high you will need to change your plans.
If the financial plan doesnt work go back to (1) and change your lifeplan and assumptions. Eventually you will end up with a high level plan that works and can be adjusted later as reality unfolds and circumstances change.
The amount and timing of the outflow from long term investments will drive how you invest it. And that is stage 2.......0 -
16 years away from State Pension. Forecast is £135 p/w atm - need 6 more years to max it.
- Wife = 47 y/o non-earner and 21 years from State Pension. Forecast £110 p/w - needs 10 more years to max it. No other pensions.
You will need to decide if you are going to get employment to maximise the state pensions, or not count on them.
Are you eligible to get your national insurance credited as a carer for your mother?But a banker, engaged at enormous expense,Had the whole of their cash in his care.
Lewis Carroll0 -
Go and find an IFA on unbiased.com - you have large enough pot to make it viable0
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Thanks to Linton, Theoretica and capitalOne for taking the time to review and respond. I suspected, as I was writing the post, that my current scenario might have too many variables for anyone to give any real targeted recommendations. I will look into the NI credits suggestion though.
Thanks again and if anyone else wants to chip in, feel free.0 -
Two tax shelters spring to mind. (i) This may be the last tax year in which you can make a big pension contribution for yourself. That will be particularly attractive if your redundancy pay exceeded £30k, with the excess taxed at 40%. In your shoes I'd look at how much Annual Allowance I could carry forward from 14/15, 15/16, and 16/17, and then get a move on. The capital will be tied up but only until you turn 55.
(ii) Your wife: try to move as much savings interest and dividend income to her as possible to maximise her use of Personal Allowance and all the rest.Free the dunston one next time too.0 -
Two tax shelters spring to mind. (i) This may be the last tax year in which you can make a big pension contribution for yourself. That will be particularly attractive if your redundancy pay exceeded £30k, with the excess taxed at 40%. In your shoes I'd look at how much Annual Allowance I could carry forward from 14/15, 15/16, and 16/17, and then get a move on. The capital will be tied up but only until you turn 55.
(ii) Your wife: try to move as much savings interest and dividend income to her as possible to maximise her use of Personal Allowance and all the rest.
Thanks for that suggestion kidmugsy.
Dont have any available allowance from 14/15 or 15/16 (and I suspect 16/17 but I need to try and locate paperwork to verify). For 17/18 though, assuming I have no carry over available from 3 prior years, is my AA still £40k even though Im now in receipt of a pension (having cashed in my DC pot)? Does the £4k AA (re MPAA) not take effect until 18/19 tax year?0 -
One suggestion, use Linton as your IFA!
Second (minor suggestion) if you wife has no income get her to elect to transfer the allowed amount of personal allowance to you!
.....but Linton's advice is excellent; to cut through the trees to find the clearing and then the path to the future......sound almost romantic! :eek::rotfl:0 -
OH and I are approx a decade ahead of you and I wish I had planned more contingency for the many unforeseen hits to income and expenses we have experienced in our 50s:
1) Needs of ageing/disabled parents (foreseen) escalated over a short period and triggered my early retirement (unforeseen).
2) Stepdaughter 1 wished to undertake a 2-year, postgrad qualification.
3) Stepdaughter 2 needed help with a house deposit (foreseen) - after moving to London (unforeseen) post-uni.
4) A requirement for lengthy, costly dental treatment appeared out of the blue
5) ..... as did the need to fund an expensive legal battle.
6) OH's change of job meant we had to retain a second property for our own use rather than rent/sell....
.... and the cherry on the cake....
7) A close family member required financial help.
Of course, our circumstances are different to yours but I offer these as examples of the issues that can affect those in their 50s. The kids reach the point of most expense just as they teeter on the edge of independence, whilst our parents are teetering in the other direction.
OH and I are now on alert to the possibility of a boomeranger (or two). :eek:
As we were in blissful ignorance of the next bulldozer heading in our direction we were only able to deal with each crash as it happened and reorganise finances based on knowns and on future probabilities. Sometimes this has worked out well, sometimes not. Hindsight is a wonderful thing.
I haven't totted it up exactly but I estimate the total cost of this little lot has been well over £100k net of my missing income. Our saving graces have been OH's ability to maintain a good income, a substantial cushion of accessible capital from the outset, and having pre-existing decent, individual retirement funds.
I also pitched-in by very actively managing our finances and investments, and I am just about at the point where I am sufficiently well-informed to know my limitations and to invest within those limits. This learning curve has taken some years and and costly mistakes have been part of the process.
You are in a reasonable place financially now but I think you will need to plan very carefully to cover your needs for the next 40+ years if neither you nor spouse work again. Your DB pension provides a decent base income but there isn't much fat to cover contingencies and discretionary spends - especially given your family circumstances and your desire to upsize your property.
Amber alerts:
a) You have a reasonable chunk of capital but it's likely to be substantially depleted by house move, discretionary costs and exceptional expenses in the years before SP kicks-in.
b) Neither you nor spouse currently qualify for the max SP.
c) Your wife has no pension other than the SP.
d) You and spouse have no plans to work short-term (and maybe not long-term).
e) If you upsize your property your household expenses may increase.
f) Your plan to move so much cash into longer term investments (should be at least 5 and ideally 10+ years if S&S) makes sense if you are investing just for retirement, but your age, plans and circumstances suggest that there could be lots of competing calls on that money, and in a shorter timescale. It isn't therefore ring-fenced as a retirement fund.
You are doing, or have been advised to do, all the right things tax-wise but I think you may discover that this will not be sufficient to match the needs that are identified from Linton's excellent plan. The results could be a bit of an eye-opener.
You seem well-set with respect to guaranteed income at SPA but you are at risk of reaching SPA cash poor. Also, your wife's income will reduce substantially (50+%) if you predecease her. Her income requirements are unlikely to correspondingly reduce pre/post SPA.
Based on the information you have provided, and mindful that you are needed to care for your mum, has your wife considered working for some years? This would potentially enable her to max her SP, build a chunk of independent pension, supplement the household income, and replenish any exceptional drawings on your capital pre-SPA. Your current pot (net of upsizing property and emergency fund) could then be ring-fenced for retirement and managed accordingly.0 -
theoretica wrote: »You will need to decide if you are going to get employment to maximise the state pensions, or not count on them.
Are you eligible to get your national insurance credited as a carer for your mother?
this- sign up for carers allowance and get the rest of the Nics you need (or until you go back to work).0 -
Thanks for that suggestion kidmugsy.
Dont have any available allowance from 14/15 or 15/16 (and I suspect 16/17 but I need to try and locate paperwork to verify). For 17/18 though, assuming I have no carry over available from 3 prior years, is my AA still £40k even though Im now in receipt of a pension (having cashed in my DC pot)? Does the £4k AA (re MPAA) not take effect until 18/19 tax year?
Ahhhhh! Yes, MPAA limits you from the day you took any of a DC pension that wasn't TFLS. Your DB pension of itself does not bring MPAA into action.
Skimming through your post; do I see that you effectively took all your DC money as part of a TFLS-for-the-total-scheme tactic? In which case I don't know whether MPAA applies.Free the dunston one next time too.0
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