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  • FIRST POST
    • SamAsh94
    • By SamAsh94 15th Mar 17, 9:26 PM
    • 3Posts
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    SamAsh94
    22 year old investing large amount?
    • #1
    • 15th Mar 17, 9:26 PM
    22 year old investing large amount? 15th Mar 17 at 9:26 PM
    Hey,

    I am 22 years old and currently live in a lovely new build (Dec 2016) property with my long-term partner in Central Cambridge. I mention this as I feel it may play into what I say later.

    I was involved in an incident 3 years ago that left me with a permanent injury that means I am in constant pain with a condition that on an official pain scale registers at the same level as giving birth or amputation. I have been on strong medication such as Morphine etc for years to deal with the pain and the injury led to a condition that cannot be treated nor recovers, therefore is life-long. It has meant I have lost full use of my dominant hand, wrist and arm.

    I was working full time before the incident, I not afraid to say I am a smart guy but I chose to not study in college (I tried in a very good sixth form but didn't like it) and therefore didn't go to University. I jumped straight into work aged 16-17 full-time, studied on my own and taught myself a lot with economics, politics, computer coding, graphics design, website design, marketing and accounting. I stayed in the same job from the age of 16 right up until last year where the injury caused so many problems because of pain and medication that I sadly had to resign from the job I loved. I am the true definition of a workaholic and an example is that the place I worked at was open 9:30-5:30 but I always volunteered to come in at 6am and leave at midnight (unpaid) to get work done. I loved it (my partner didn't!).

    So, recently I was awarded over £500,000 for the lawsuit because of the damages and future loss of earnings.

    I am wondering what is the best way to invest some of it and secure my future as I can no longer work, my partner can but I can't.

    My father and brothers are in the construction industry, they build houses, one is an electrician as well and another carpenter, one a good tiler. I was wondering if investing in say a block of 3-4 flats would be a good idea and with family helping renovate cuts costs. Put £100k-£200k into savings because, well, you never know what could happen!

    That would bring in an ok monthly amount from rent (£1000+?), plus my partners income and I get about £500 from PIP (Personal Independence Payment) per month.

    Now we were lucky to secure a nice new build modern open-plan ground floor apartment in central Cambridge for £500 per month on long-term basis which would happily do us for a fair amount of time. Neither of us drink or smoke, we don't have any expensive habits either so we have a fair bit of disposable income every month at the moment even with what we're on now.

    So I guess I am just seeking advice on how best to invest some of this money to secure the future because I can no longer work and I want to make sure that I can survive and that later in life there is still some money left.

    Any help is greatly appreciated, thank you!

    p.s I would trade all of that money back to have my hand back to normal but that isn't going to happen so I am going to have to make the most of what I've got. Before some of you think I am cheeky for suing a body for such a large amount.
Page 1
    • xylophone
    • By xylophone 16th Mar 17, 12:56 AM
    • 21,978 Posts
    • 12,680 Thanks
    xylophone
    • #2
    • 16th Mar 17, 12:56 AM
    • #2
    • 16th Mar 17, 12:56 AM
    Do you claim means tested benefits?

    Do you need to consider a personal injury trust?

    Should you consider consulting an Independent Financial Adviser?
    • Pincher
    • By Pincher 16th Mar 17, 1:41 AM
    • 6,516 Posts
    • 2,490 Thanks
    Pincher
    • #3
    • 16th Mar 17, 1:41 AM
    • #3
    • 16th Mar 17, 1:41 AM
    http://www.moneysavingexpert.com/news/insurance/2017/02/severely-injured-claimants-to-receive-larger-payouts-as-insurers-warn-of-higher-premiums

    "the Government's decision to award larger compensation payments to people who have an accident and suffer life-changing injuries"


    "When someone who has suffered a life-changing injury accepts a lump sum compensation payment, the sum they get is adjusted according to the interest they could expect to earn by investing it – what's known in industry jargon as the 'discount rate'."


    http://www.prolegal.co.uk/accident-compensation/lord-chancellors-discount-rate-review.htm

    "The discount rate is used to calculate the amount deducted from an injured person’s compensation to account for any income they may receive from investing their damages. The discount rate set by the then Lord Chancellor in 2001 was based on yields generated by index-linked government stock (ILGS) and was calculated at 2.5 per cent, but since then the Government has refused to review the rate even though ILGS yields have never been higher than two per cent since 2001, and over the last three years the average gross yield has fallen below one per cent."

    "To demonstrate how a change to the discount rate may affect future loss awards, a 25 year old male amputee with an average annual lifetime loss of £10,000 per year would receive £304,200 using the current discount rate of 2.5 per cent, but £442,300 if the rate is reduced to one per cent. This may seem like a large increase, but bearing in mind inflation currently runs at three per cent, yields from ILGS are less than one per cent, Bank of England interest rates are set to remain at 0.5 per cent for some time, and a 25 year old male is likely to live for a further 61 years, £442,300 still has to stretch a long way."

    Based on this insanity, you are doomed to get less than one percent yield.

    So, what's the solution? Don't use gilts.


    Obviously, you should still go back and ask for more compensation, based on this argument:

    “For years now, injured people have been under-compensated because of the previous Government’s failure to review the discount rate in light of economic changes,” said APIL president Muiris Lyons a few days ago.

    And pretend you were going to use gilts.
    • elephantrosie
    • By elephantrosie 17th Mar 17, 12:38 AM
    • 329 Posts
    • 82 Thanks
    elephantrosie
    • #4
    • 17th Mar 17, 12:38 AM
    • #4
    • 17th Mar 17, 12:38 AM
    i wouldnt invest in flats. but there is no wrong in doing that.
    • tacpot12
    • By tacpot12 17th Mar 17, 8:21 AM
    • 571 Posts
    • 492 Thanks
    tacpot12
    • #5
    • 17th Mar 17, 8:21 AM
    • #5
    • 17th Mar 17, 8:21 AM
    Given your family connections, I think investing some of your money in property is a good idea. You suggest keeping £100-200k as 'savings'. I would suggest that this is too much and that you should look to keep no more than 12 months of living expenses in cash, and invest the rest in assets that are likely to grow faster than the rate of inflation. If you continue to have more disposable income that you need, I would invest the excess also.
    • Bravepants
    • By Bravepants 17th Mar 17, 11:52 AM
    • 214 Posts
    • 235 Thanks
    Bravepants
    • #6
    • 17th Mar 17, 11:52 AM
    • #6
    • 17th Mar 17, 11:52 AM
    First of all, my best wishes to you OP, and I hope things get better for you sooner rather than later.


    Plus 1 for going for more compensation!


    You might consider regarding yourself as "retired", which might psychologically put you in a good frame of mind. Many retirees have the size of pot you have and seek to invest for income and safe drawdown. You may get some useful insights from some of the extreme early retirement blogs and websites. When retiring it is generally prescribed that you should limit drawdown of a retirement pot to 3% to 4% per year, to allow growth or maintenance of the pot and compensate for inflation. I would investigate all the safe havens for your money first before outlaying for rental property, which can have it's own pains and stresses - dodgy tenants being the obvious one!


    Find yourself a good independent financial adviser, and tell them you want to avoid volatility, keep strict drawdown limits (3% of 500k is £15k per year), and avoid as much tax as possible. You could bung £20k a year into index tracker funds (mixed equity and bonds) under an ISA wrapper, but of course it would take you 25 years to deposit all that cash!


    Speak to an independent financial adviser, I don't think anyone would want to commit themselves to providing you with any "definitive" advice on here given your situation.


    Best of luck!
    • SamAsh94
    • By SamAsh94 17th Mar 17, 3:06 PM
    • 3 Posts
    • 2 Thanks
    SamAsh94
    • #7
    • 17th Mar 17, 3:06 PM
    • #7
    • 17th Mar 17, 3:06 PM
    Ok, I didn't go completely into the settlement amount. Although I said I was awarded over £500,000 - the sum that was offered to me by the defendants was short of 7 figures, my lawyer said that he is going to get more than that. I am aware of the new rates set by the Lord Chancellor, my lawyer was very excited to tell me about this and said some parts of my claim could double in value from this new change. He is on it, don't worry! I just thought I'd give a sum that is less than what I am going to receive but still quite a fair bit of money, understandably perhaps not enough to purely live on alone for the rest of my life.

    I will look to find a financial adviser. I obviously have no experience in this area or using them and have my concerns when it comes to having someone else advise on what you do with your money, even though they obviously know best! I'm just a cautious person but I will need to overcome this concern to better ourselves in the future.

    I know that most things come with a risk, I'm simply terrified of losing a lot!
    • Mogley
    • By Mogley 17th Mar 17, 4:18 PM
    • 164 Posts
    • 160 Thanks
    Mogley
    • #8
    • 17th Mar 17, 4:18 PM
    • #8
    • 17th Mar 17, 4:18 PM
    You might consider regarding yourself as "retired", which might psychologically put you in a good frame of mind. Many retirees have the size of pot you have and seek to invest for income and safe drawdown. You may get some useful insights from some of the extreme early retirement blogs and websites.
    Originally posted by Bravepants
    Here is an example of such a blog which may help you get some ideas.
    http://monevator.com/try-saving-enough-to-replace-your-salary/
    Independent financial advice is best for you situation though.
    No.25 for 2017 £1070/£4000 saved.
    You should pay attention to the needs of the moment - otherwise there is no future. But to ignore the future is foolish - living solely for the moment leaves nothing for when the next moment arrives.
    • badger09
    • By badger09 17th Mar 17, 4:59 PM
    • 5,069 Posts
    • 4,269 Thanks
    badger09
    • #9
    • 17th Mar 17, 4:59 PM
    • #9
    • 17th Mar 17, 4:59 PM

    I will look to find a financial adviser. I obviously have no experience in this area or using them and have my concerns when it comes to having someone else advise on what you do with your money, even though they obviously know best! I'm just a cautious person but I will need to overcome this concern to better ourselves in the future.

    I know that most things come with a risk, I'm simply terrified of losing a lot!
    Originally posted by SamAsh94

    So I guess I am just seeking advice on how best to invest some of this money to secure the future because I can no longer work and I want to make sure that I can survive and that later in life there is still some money left.
    Originally posted by SamAsh94
    You have concerns about having an IFA advise you, but not about asking a random bunch of people on the internet?
    • Marktheshark
    • By Marktheshark 17th Mar 17, 5:06 PM
    • 5,524 Posts
    • 6,929 Thanks
    Marktheshark
    Many will have already told you no doubt, but nothing can even get within miles of Bricks and mortar.
    You could buy 3 or even 4 houses with £850 a month rental income each and your property portfolio will increase many times inflation year on year.
    No flats, no leases, freehold houses only.

    If anyone else can suggest where to invest £500,000 and get £40,000 a year return and have a capital portfolio that is increasing above inflation, then take they are lying.
    Brexit will become whatever they invent it to be.
    • Eco Miser
    • By Eco Miser 18th Mar 17, 8:38 AM
    • 2,888 Posts
    • 2,676 Thanks
    Eco Miser
    You have concerns about having an IFA advise you, but not about asking a random bunch of people on the internet?
    Originally posted by badger09
    The random people on the internet will propose many solutions, all of which can be carefully considered and then discarded. If many of the proposals coincide, that is probably a good solution. All of this 'advice' is free.
    An IFA will give only a few possible solutions, there is nothing to compare them against (unless you ask multiple IFAs), and there will be fees. There will also be an expectation, though not an obligation, that you will pay the IFA to implement the plan as well as give advice.

    So first anonymously asking the random people on the internet will get you ideas you never thought of yourself, or confirm your initial thoughts. You can then either implement them yourself, or pay a professional to implement them, happy in the knowledge that a dozen people on the internet have said this is a good idea (and thousands haven't said it's a bad idea).
    Eco Miser
    Saving money for well over half a century
    • Bravepants
    • By Bravepants 18th Mar 17, 11:13 AM
    • 214 Posts
    • 235 Thanks
    Bravepants
    Many will have already told you no doubt, but nothing can even get within miles of Bricks and mortar.
    You could buy 3 or even 4 houses with £850 a month rental income each and your property portfolio will increase many times inflation year on year.
    No flats, no leases, freehold houses only.

    If anyone else can suggest where to invest £500,000 and get £40,000 a year return and have a capital portfolio that is increasing above inflation, then take they are lying.
    Originally posted by Marktheshark
    This is sound advice of course, but there are caveats that the OP should also consider:

    1. Void times when tenants fail to pay rent for some reason. My brother-in-law had a nasty tenant who didn't pay rent for months and months, his family trashed his house, and I mean trash including filth everywhere...I mean I don't think they heard of dustbins! In the end he had to get them evicted which took time and money. I'm not saying this happens all the time, and I have other friends who have rented and had no problems.

    2. Void times when a tenant cannot be found. Having more than one property can offset this though.

    3. Maintenance costs.

    4. Landlords have responsibilities:

    OP: check out this for more details:
    https://www.gov.uk/renting-out-a-property/landlord-responsibilities
    • longleggedhair
    • By longleggedhair 18th Mar 17, 11:41 PM
    • 209 Posts
    • 295 Thanks
    longleggedhair
    Anyone else smell a rat?
    • Plus
    • By Plus 19th Mar 17, 1:00 AM
    • 216 Posts
    • 170 Thanks
    Plus
    £500K sounds like a lot of money. It isn't. Think about it. If you have average life expectancy you might live another 65-70 years. Assuming you invest it somewhere that keeps pace with inflation (ie the money keeps its value), that gives you £7100 per year (in today's money) to live on. Hardly the lap of luxury.

    Well done for getting a nice place to live for £500pm. The way the property market is there, that's quite a bit below market rate. However, even with that it'll eat £6000pa of your income in rent. That leaves £1100 for bills, food, transport and everything else. Per year.

    So, two things to think about: how to structure it best to avoid having to pay tax, and how to avoid it interfering with benefits - because everyone else on £7100pa can get that topped up with some kind of benefits. I believe a personal injury trust is one route for that - an IFA can advise.

    As for using an IFA, don't be scared of paying someone for advice. It's a bit like learning to drive. While you can teach yourself from first principles, it's a lot easier if you pay a driving instructor to show you the basics. That way you'll have a better understanding and be less likely to kill yourself. If you want to cross-check, pay another IFA for a second opinion.

    Once you know the ropes, you can go off and learn on your own. And feel free to come back and discuss the advice here. But bear in mind that IFAs have a responsibility to give advice appropriate for your situation, and you have redress if it was not - random people on the internet have no such responsibilities.
    • Bazofts Revenge
    • By Bazofts Revenge 19th Mar 17, 2:41 PM
    • 274 Posts
    • 137 Thanks
    Bazofts Revenge
    Would love to know how you go about getting a compensation payout increased. My Girlfriend lost half her leg 22 years ago and is in constant pain still and endures sores and blisters from poorly fitting prosthetic legs. The surgery back then was not as good as today. She only got something like £60k from the Motor Industry Bureau as a Drunk on a Motorbike mowed her down. To protect the money from her then Money grabbing dodgy husband she had bought a house outright there was nothing left to live on (Thankfully she kept it 100% when they divorced). Maybe she should have rented and just invested the money for income who knows. As stated how does she go about getting a review?
    Solar PV cost £5760 (15/03/13)
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    • SamAsh94
    • By SamAsh94 19th Mar 17, 10:05 PM
    • 3 Posts
    • 2 Thanks
    SamAsh94
    £500K sounds like a lot of money. It isn't. Think about it. If you have average life expectancy you might live another 65-70 years. Assuming you invest it somewhere that keeps pace with inflation (ie the money keeps its value), that gives you £7100 per year (in today's money) to live on. Hardly the lap of luxury.

    Well done for getting a nice place to live for £500pm. The way the property market is there, that's quite a bit below market rate. However, even with that it'll eat £6000pa of your income in rent. That leaves £1100 for bills, food, transport and everything else. Per year.

    So, two things to think about: how to structure it best to avoid having to pay tax, and how to avoid it interfering with benefits - because everyone else on £7100pa can get that topped up with some kind of benefits. I believe a personal injury trust is one route for that - an IFA can advise.

    As for using an IFA, don't be scared of paying someone for advice. It's a bit like learning to drive. While you can teach yourself from first principles, it's a lot easier if you pay a driving instructor to show you the basics. That way you'll have a better understanding and be less likely to kill yourself. If you want to cross-check, pay another IFA for a second opinion.

    Once you know the ropes, you can go off and learn on your own. And feel free to come back and discuss the advice here. But bear in mind that IFAs have a responsibility to give advice appropriate for your situation, and you have redress if it was not - random people on the internet have no such responsibilities.
    Originally posted by Plus
    You are right and as a few others have mentioned that figure isn't enough to really secure your future. He is confident that the final settlement value he will get will match what someone should get for a lifelong condition that lead to someone being unable to work. Worked out from my age to retirement based on the 'Ogden Tables' ? I was on a salary of £21k p/a before having to give work up over a year ago. I'm quite advanced in my skills from retail management all the way to computer programming, coding, web design and developer and designer. When he takes into account my past salary, he said they have to take into account what salary I could've achieved in life with my skills. The rate he uses on the Ogden Table is 82.15. So I won't say anymore on the figure and you can work it out if you're that interested!

    I think given the value that I will get, it wouldn't hurt to try an 'IFA' and see what they say. I've had some suggestions some involving ISA's, dividends (and dividend compounding?) etc but I'm a sensible person for my age and I know the money that comes will need to last me but I know that there are a few low-risk ways to make a little bit of money over the long term 20-30+ years. Of course people remind me that existing on that money is based on the fact I am single forever (ha!) and have no partner bringing in money but most likely (like now) I will be in a relationship and they'll be bringing in additional income.

    I will be sure to keep you guys informed with what advise I have been given and what ventures I look to pursue.

    Would love to know how you go about getting a compensation payout increased. My Girlfriend lost half her leg 22 years ago and is in constant pain still and endures sores and blisters from poorly fitting prosthetic legs. The surgery back then was not as good as today. She only got something like £60k from the Motor Industry Bureau as a Drunk on a Motorbike mowed her down. To protect the money from her then Money grabbing dodgy husband she had bought a house outright there was nothing left to live on (Thankfully she kept it 100% when they divorced). Maybe she should have rented and just invested the money for income who knows. As stated how does she go about getting a review?
    Originally posted by Bazofts Revenge
    Unfortunately I can't help here but I hope someone else can. I was fortunate and did a lot of research on my lawyer to find one who dealt with specific injuries such as mine and he's proved his worth as he has been rinsing them dry! Past and future costs for DIY, gardening, medication, treatment, care, loss of earnings, bits and bobs I would need to make my life easier, loss of enjoyment for past holidays/days out etc, expenses for travelling, having to take morphine/strong drugs for the rest of my life and so on. I've had a couple of interim offers from the defendants as well over the last 3 years to help me. If you are able to get more I would look to finding a lawyer specific to her injury. My injury led to a complex and rare problem developing a few months after injury that affects and exaggerates pain signals from brain>spine>limb etc.
    Last edited by SamAsh94; 19-03-2017 at 10:09 PM.
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