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  • FIRST POST
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 11:08 AM
    • 19Posts
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    Davethepioneer
    Help
    • #1
    • 15th Sep 17, 11:08 AM
    Help 15th Sep 17 at 11:08 AM
    Good Morning.

    This is my first time posting and I'm not sure if I have this in the right category so I shall apologise in advance if not.

    So I'm 41 years old, married and have two young children and I own a very small business that I run from home, it's been running 12 month and is not running st a profit yet but will be. My wife works full time and our house is currently valued at £240,000 - £250,000

    Anyway I'm about to receive some money in the region of £600,000 and £700,000 which basically has to last me the rest of my life. So my mortgage is with the Halifax and because of the Bank of England base rate I'm hardly paying any interest. I can pay off as much of the mortgage as I want without any fees so if I wish to pay £10,000 of I can and there are no fees or penalties etc.

    Anyway as it stands I owe at the last mortgage statement £118,000 and I have a loan which I got for my extension and that is £21,000 I have £2000 on my credit card and that's pretty much it apart from my car which I pay £350 per month for and then after 3 years I can pay the remaining balance or use the vehicle to trade in or hand it back and walk away.

    So in my head when I receive this money the best thing to do would be to pay the mortgage and loan and credit card off then I'm own nothing to nobody.

    If I worked of getting the minimum which would be £600,000 then that leaves me with £459,000 we would want to put £10,000 away to finish our house off (fitted bedrooms, four of them) and £10,000 away for a family holiday to Florida when my two young boys are older, currently 8 and 5.

    As you can see it still leave a good chunk of money, we think we would need to open several bank accounts so that we are covered up to the £85,000 but we are not sure what to do with it once we have distributed it into the bank accounts. I say I'm doing this because I bank with HSBC and I asked them if I could open several accounts to put the money into and they said yes but as an individual I'm only covered up to £85,000 or £170,000 joint account.

    We have briefly spoken to an adviser who was talking about isa and children's pensions but in all fairness it went over my head. I know I can put £20,000 in an USA per tax year but it still leaves a lot of money lying around.

    I suppose my question is this, I need the money to work for me, I'm not expecting or wanting a great return of it but enough so that my pot doesn't dwindle to nothing so I'm after any ideas that some of you may have. We have briefly spoken about buying a property and renting it out and managing it ourselves, we've head about the Santander 123 account I think it was called and that's pretty much it. We don't really want very high risk and I suppose we are looking at long term investment as we will put aside from the £600,000 a certain amount as a rainy day fund. We could at worst case scenario live off my wife's wages as we would only have utility bills to pay and my car. We go away for 3 weeks once a year, we like to eat out but I'm only talking Nando's and TGI's nothing to extravagant. We are a young family and we obviously want to do the best for our boys and ourselves.

    Any advice or ideas would be greatly appreciated
Page 1
    • redmalc
    • By redmalc 15th Sep 17, 11:22 AM
    • 1,256 Posts
    • 477 Thanks
    redmalc
    • #2
    • 15th Sep 17, 11:22 AM
    • #2
    • 15th Sep 17, 11:22 AM
    Dave you have not mentioned any pension provisions ?
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 11:47 AM
    • 19 Posts
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    Davethepioneer
    • #3
    • 15th Sep 17, 11:47 AM
    • #3
    • 15th Sep 17, 11:47 AM
    Sorry do you mean do I have a pension? I have an army one but won't be worth much (5 years service) and one from a company I worked with for 10 years so again not much, I suppose effectively this money is my pension
    • BLB53
    • By BLB53 15th Sep 17, 12:08 PM
    • 1,154 Posts
    • 932 Thanks
    BLB53
    • #4
    • 15th Sep 17, 12:08 PM
    • #4
    • 15th Sep 17, 12:08 PM
    I suppose my question is this, I need the money to work for me, I'm not expecting or wanting a great return of it but enough so that my pot doesn't dwindle to nothing so I'm after any ideas that some of you may have.
    First thing I would consider is setting up a pension for yourself and also wife. It is possible to do this yourselves via a low cost SIPP...get hold of a copy of 'DIY Pensions' by Edwards and see if you can follow the simple steps. If not you could employ an IFA to set something in place.

    Secondly you are best investing the bulk of the remaining money for the longer term as cash returns are not currently keeping pace with inflation. So a stocks & shares ISA for you both and something like Vanguard Lifestrategy 40 may be a suitable option.

    Again you can do this yourselves or if you are not confident then use your IFA or look at using a lower cost Robo Advisor.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • kidmugsy
    • By kidmugsy 15th Sep 17, 12:08 PM
    • 9,848 Posts
    • 6,639 Thanks
    kidmugsy
    • #5
    • 15th Sep 17, 12:08 PM
    • #5
    • 15th Sep 17, 12:08 PM
    I'm about to receive some money in the region of £600,000 and £700,000 which basically has to last me the rest of my life. So my mortgage is with the Halifax and because of the Bank of England base rate I'm hardly paying any interest. I can pay off as much of the mortgage as I want without any fees

    Anyway as it stands I owe at the last mortgage statement £118,000 and I have a loan which I got for my extension and that is £21,000 I have £2000 on my credit card and that's pretty much it apart from my car which I pay £350 per month for and then after 3 years I can pay the remaining balance or use the vehicle to trade in or hand it back and walk away.

    So in my head when I receive this money the best thing to do would be to pay the mortgage and loan and credit card off then I'm owing nothing

    As you can see it still leave a good chunk of money, we think we would need to open several bank accounts so that we are covered up to the £85,000

    We have briefly spoken about buying a property and renting it out and managing it ourselves, we've head about the Santander 123 account I think it was called and that's pretty much it. We don't really want very high risk and I suppose we are looking at long term investment as we will put aside from the £600,000 a certain amount as a rainy day fund. We could at worst case scenario live off my wife's wages as we would only have utility bills to pay and my car.
    Originally posted by Davethepioneer
    "which basically has to last me the rest of my life": that means that some of it ought to be invested in stocks-and-shares so that it might grow - however erratically - for the rest of both your lives. The question is how to do this in a way that suits your cautious nature. Redmalc has given you a clue: "rest of my life" implies look at pensions.

    But first, short term issues. Rather than opening a heap of smaller accounts to use the £85k/£170k protection, move a large chunk to suitable accounts at ns&i; that has a Treasury guarantee. Then the small loans: get rid, as you say. Then the mortgage loan: for someone else in a different position and a different personality it might be wise to keep the mortgage in hopes of making more money by investing. For someone as cautious as you it might be sensible to pay it off. What is your present interest rate? If you were to buy a BTL would paying off the mortgage limit you too much in choice of property to buy? Your children are young: would you like to move to a bigger house that will suit better as they get bigger? If so now might be a good time: it uses part of your wealth fruitfully.

    Longer term. While you are earning nowt your maximum sensible annual pension contribution is £3600 gross: you actually pay your provider £2880 and they claim the tax relief of £720 from hmrc and add it to your "pot" - even though you don't pay income tax at the moment. Good, eh? The money should, I suggest, be invested for example in a cheap "passive" fund or ETF that simply "tracks" the performance of, say, global stock markets. Then check how it's doing once a year and otherwise leave it alone until your next contribution in the new tax year. For your wife, I propose she make a large annual pension contribution. How big? We'd need to know more about her position. For her invest the pension money too. After all, this money is still a tiny fraction of your wealth so you can well afford to take some stock market risk. Also, if your wife is under 40 years old she should open a LISA: it takes £4k per tax year which hmrc will boost to £5k. Again, invest the money. She can keep contributing until she is 50.

    Note that so far all the money you will be investing gets a boost from hmrc which gives you some protection from stock market falls. Before the end of tax year 17/18 (05/04/2018) you need to decide whether to open S&S ISAs: you could subscribe £20k, your wife £16k. No hurry.

    This still leaves an awful lot of capital. You might like to weigh up the advantages of investing in a BTL versus investing more in the stockmarket. For example you could use your own current status as a non-taxpayer to advantage. You could aim, say, to invest in investment trusts that prioritise protecting your capital over growing it.

    As for BTL, the recent changes in tax treatment for BTL owners might mean that deferring entering that market for two or three years might be good idea. Who knows?

    The usual advice for investing is (i) keep the charges down, (ii) avoid tax, (iii) diversify. BTL isn't diversified - you'd be putting a large chunk of your wealth into one or a few properties. Do you have any advantage in that field? Trade skills, legal skills, a source of good tenants? The latter might be particularly valuable. Also, here's a thought. Move to a bigger house and then let out the current house. At least you are thoroughly familiar with the strengths and weaknesses of the current house. If you find you don't like being a landlord then sell the current house: at least you shouldn't have much or any Capital Gains Tax to pay. And if you are going to pay cash for the new house rather than be in a "chain" you might have useful bargaining power. Get a full structural survey, of course.
    Last edited by kidmugsy; 15-09-2017 at 12:11 PM.
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 1:18 PM
    • 19 Posts
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    Davethepioneer
    • #6
    • 15th Sep 17, 1:18 PM
    • #6
    • 15th Sep 17, 1:18 PM
    Ok this is going to sound bad but I don't mean it to. Yes my priority is my family and making sure we are all going to be financially secure. Now I'm not saying it's going to happen but both my wife and me have been in failed realationships before. I'm not saying it's going to happen with my wife and myself but you just never know so why would I put money into her pension when if something did happen which touch wood it doesn't that would be money lost. I also have her brother who is hinting at me to give him money so he is mortgage free. I've taken risks with my life to get this money and I just don't want to be stupid with it
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 1:21 PM
    • 19 Posts
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    Davethepioneer
    • #7
    • 15th Sep 17, 1:21 PM
    • #7
    • 15th Sep 17, 1:21 PM
    For instance we have seen a property in our area, 1 & 2 bedroom apartments the lowest is £100,000 and the same properties are being rented out for £500 & £600 per month it a good area with good schools etc we thought this may be a good idea as it's only a small chunk of the money and we do want to diversifie and have the money in different things
    • fiisch
    • By fiisch 15th Sep 17, 1:24 PM
    • 201 Posts
    • 78 Thanks
    fiisch
    • #8
    • 15th Sep 17, 1:24 PM
    • #8
    • 15th Sep 17, 1:24 PM
    Ok this is going to sound bad but I don't mean it to. Yes my priority is my family and making sure we are all going to be financially secure. Now I'm not saying it's going to happen but both my wife and me have been in failed realationships before. I'm not saying it's going to happen with my wife and myself but you just never know so why would I put money into her pension when if something did happen which touch wood it doesn't that would be money lost. I also have her brother who is hinting at me to give him money so he is mortgage free. I've taken risks with my life to get this money and I just don't want to be stupid with it
    Originally posted by Davethepioneer

    It's more tax efficient to spread across you and your wife - for example, ISA's have a limit of £20,000 input per year, and likewise for pensions if you earn more than £22,000 annually from your pension or if you exceed the £1m lifetime allowance (very possible if you invested a large proportion of the money coupled with your army pension).


    However, you are dead right that you will not have a claim against any of the money in your wife's name, and I can understand you being cautious in that regard.


    It's a balance between what is tax efficient and what you are comfortable with.
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 1:33 PM
    • 19 Posts
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    Davethepioneer
    • #9
    • 15th Sep 17, 1:33 PM
    • #9
    • 15th Sep 17, 1:33 PM
    I'm just honestly thick when it comes to stuff like this because I've never had an interest in it. I worked in Iraq in private security and I'm a live for today kinda guy but now I have two young boys I want them to have a great upbringing where we can have nice things and also for them to be ok for the future if any of that makes sense
    • Malthusian
    • By Malthusian 15th Sep 17, 3:27 PM
    • 3,294 Posts
    • 5,004 Thanks
    Malthusian
    Ok this is going to sound bad but I don't mean it to. Yes my priority is my family and making sure we are all going to be financially secure. Now I'm not saying it's going to happen but both my wife and me have been in failed realationships before. I'm not saying it's going to happen with my wife and myself but you just never know so why would I put money into her pension when if something did happen which touch wood it doesn't that would be money lost.
    Originally posted by Davethepioneer
    No it wouldn't. Unless you've been married for a short time it would be taken into account in deciding how to split the assets of the marriage and the default would be a 50/50 split between you. Same for your ISAs.

    Her brother sounds worth crossing the road to avoid. Why on earth is it your responsibility to pay his mortgage?
    • AlanP
    • By AlanP 15th Sep 17, 3:34 PM
    • 958 Posts
    • 678 Thanks
    AlanP
    To start with if the adviser you saw was talking about things that went over your head you probably do not have the right knowledge at the present time to make the most sensible decisions about what to do with such a large sum.

    Find an INDEPENDENT FA who you can build a relationship with and who will take the time to explain things in a way that make sense to you.

    Whether you DIY or use an IFA you need to consider the whole situation and that includes your wife and children. Think about what your family objectives are.

    Get State Pension forecasts for both of you, and get up to date forecasts from your 2 existing pensions, that will at least give you (or the IFA) an indication of the level of retirement income you have "in the bag".

    What is your wife's pension situation / prospects?

    NS&I for the cash in the meantime with the treasury protection as said already.

    An IFA is unlikely to suggest BTL property as it is outside their field of professional competence.

    Leaving the sum in cash will mean it dwindles in value over time as inflation eats away at it.

    If inflation was only 1% higher than the return you got from a cash savings account it would lose 1/4 of it's value over about 30 years - NOT GOOD.

    Investments of some kind is what you need to have any chance of preserving it's buying power, probably in a mixture of:

    SHORT TERM / EMERGENCY CASH + S&S ISAs + PENSIONS (maybe + BTL).

    You say you "own a business" - Is it a Ltd company? If it is the company can contribute to your pension (and your wife's if she is an employee / director) rather than you paying into a pension form your "wages".
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 4:44 PM
    • 19 Posts
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    Davethepioneer
    Her brother has somekind of mortgage where it's offset towards his savings or something like that and his parents gave him their £30,000 savings so he could use it and he gives the something like £60 a month and that's why he wants me to give him some so it's more off set or something like that. I have been married 10 years and no sign of trouble I was just thinking out loud.

    No I don't have the knowledge at all. I'm only going to get one shot at this with this amount of money and I don't want to mess it up for my family. The advisor that came last night was an advocate of diversity and was on about putting some in bank accounts and some in stocks and shares and even buy to let, he himself said he had two properties he rents. I'm worked out of the uk for 10 years so would have to top up my NI payments to get a state pension so that will be something to look at. My wife's pension has been running a few month if that and as far as I know she doesn't have anything else, she was a hair dresser. I'm not a Ltd company but have it registered at companies house if I want to be Ltd in the future but it's not a huge turn over company, it was never designed to £14,000 at the most when it makes profit, I could push it more but I don't really need to if that makes sense
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 5:02 PM
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    Davethepioneer
    So far I should be looking at this?

    ISA for both of us £20,000 each per year

    Stocks and shares

    Look into Ns&I with treasury guarantee

    Maximum pension deposit a year £3600 per year

    Possible BTL

    Rainy day nest egg

    Pay mortgage and loan and CC off
    • Malthusian
    • By Malthusian 15th Sep 17, 5:05 PM
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    • 5,004 Thanks
    Malthusian
    Her brother has somekind of mortgage where it's offset towards his savings or something like that and his parents gave him their £30,000 savings so he could use it and he gives the something like £60 a month and that's why he wants me to give him some so it's more off set or something like that.
    Originally posted by Davethepioneer
    Right, but you're not his dad. In fairness, it probably is a good deal for his parents as it means they get 2.4% on what is essentially instant access - however it requires absolute trust in the person you're giving the money to. In other words, it requires you to completely ignore, and take no reward for, the risk that he never pays back the money. (Plus, I hope they have provided for the possibility that he goes under a bus, in which case the £30,000 would be distributed to his heirs and not the parents, if they don't have the loan in writing.)

    For you it would be a bad deal as you can get close to 2.4% per annum with virtually zero risk to capital in fixed rate bonds, and much better than 2.4% per annum with much much less risk to capital in a diversified stockmarket investment.

    Your adviser's advice sounds very sensible.
    • Voyager2002
    • By Voyager2002 15th Sep 17, 5:19 PM
    • 11,647 Posts
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    Voyager2002
    Difficult to know where to start...

    Pension: if you can increase your State pension by 'buying' extra years of NI contributions, then that is a no-brainer. Since you are now self-employed you might get an even better deal;

    It is almost certainly sensible for you to begin a personal pension, which could be a Stakeholder pension (cheap and simple) or a SIPP (self-invested personal pension). In each case the maximum amount that you can invest each year is the greater of; your taxable earnings in that year, or 3660 if you have no earnings. And you might consider doing this for your wife as well: the cost is very small in relation to the total sum available to you, and the benefits to her and so to your relationship greatly outweigh that cost;

    As for the rest: you will have to invest or face the certainty of losses from inflation. Either you can find an IFA you trust and just rely on her/him, or you can teach yourself. One resource you could use is this online course from the Open University, which you can watch at any time. If you get stuck or confused at any point, there are plenty of people here who are happy to help.
    https://www.futurelearn.com/courses/managing-my-investments
    • Davethepioneer
    • By Davethepioneer 15th Sep 17, 5:24 PM
    • 19 Posts
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    Davethepioneer
    Thank you all for your input I have a lot of thinking to do that's for sure
    • Eco Miser
    • By Eco Miser 16th Sep 17, 2:54 AM
    • 3,176 Posts
    • 2,940 Thanks
    Eco Miser
    So far I should be looking at this?

    ISA for both of us £20,000 each per year
    Originally posted by Davethepioneer
    Yes, £20000 S&S ISA for you, £4000 S&S LISA (to get the £1000 government bonus) and £16000 normal S&S ISA for her. Repeat after April 6th each year.
    Stocks and shares
    Originally posted by Davethepioneer
    Yes, each of you can have up to £2000 dividends each year tax free, and £11300 realised capital gains free of CGT from S&S not in ISA or pension. Each year you could each sell £20000 worth of unwrapped S&S CGT free (probably) and put it into your ISAs.
    Look into NS&I with treasury guarantee
    Originally posted by Davethepioneer
    Don't just look into it, as soon as you get the money put most of it into NS&I until you decide exactly what to do with it.
    Maximum pension deposit a year £3600 per year
    Originally posted by Davethepioneer
    or your earnings if higher.
    Possible BTL
    Originally posted by Davethepioneer
    but note all the caveats given.
    Rainy day nest egg
    Originally posted by Davethepioneer
    This could be 'high' interest accounts, but the high interest is on only a few thousand per account. Again, one for you, one for your wife and one joint, with each bank offering such accounts, to maximize the interest. Or you could just consider part of the NS&I amount as your rainy day fund (easier but lower interest).
    Pay mortgage and loan and CC off
    Originally posted by Davethepioneer
    Certainly the loan and CC, consider whether investing rather than paying the mortgage early will bring a better return.
    Eco Miser
    Saving money for well over half a century
    • Alexland
    • By Alexland 16th Sep 17, 7:28 AM
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    • 422 Thanks
    Alexland
    Investing is shares might eventually give a better return than paying off the mortgage however given the OP is risk averse and the mortgage is only a small proportion of the lump sum I would suggest clearing the mortgage at the earliest opportunity just be careful of early repayment penalties.

    The ups and downs of the investments will be easier to mentally accommodate if the OP knows they are completely safe in their home. Think of it as ballast in the portfolio to limit the overall volatility of your wealth. I keep the weekly Zoopla valuation (yes it's not perfect) in my wealth tracker spreadsheets so that even when there are big stock market falls the number at the bottom has only moved by a smaller percentage and it makes me less likely to make a behavioural investment reaction.

    I can understand the aversion to contributing to the wife's pension however a small token might be both tax efficient and show goodwill. The wife's pension would be considered in a divorce anyway.

    In addition to the OP putting 2880 into their pension each year for the government boost to 3600 is it also worth doing this for the 2 children? What about putting a couple of years of 4,128 (this year's limit per child) into Junior ISA investments to help with uni or house deposits in future?

    Are there any other family (perhaps not the brother), friends or good causes you would want to gift small sums to?
    Last edited by Alexland; 16-09-2017 at 7:58 AM.
    • Davethepioneer
    • By Davethepioneer 16th Sep 17, 9:34 AM
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    Davethepioneer
    That right there is how I need things to be set out in a breakdown list, do this and do that.

    No I have no family members and I give to charity through my business a certain percentage of everything I sell as I have a corporate partnership agreement with them.

    we did have an advisor come to the house who deals with stocks and shares etc but am I best to speak to a few different ones first before making any decision like you would if you were getting a quote for something?
    • AlanP
    • By AlanP 16th Sep 17, 10:15 AM
    • 958 Posts
    • 678 Thanks
    AlanP
    That right there is how I need things to be set out in a breakdown list, do this and do that.

    No I have no family members and I give to charity through my business a certain percentage of everything I sell as I have a corporate partnership agreement with them.

    we did have an advisor come to the house who deals with stocks and shares etc but am I best to speak to a few different ones first before making any decision like you would if you were getting a quote for something?
    Originally posted by Davethepioneer
    Yes, but to my mind the £value of the quote is not as important as the working relationship.

    The £value part has to be sensible admittedly, but it's not like getting a quote to have your house painted or something. If that goes wrong you can pay an extra couple of thousand to redo it, if this goes wrong it could take a long while to recover the situation.

    Meet as many as you need to meet so that you are comfortable.
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