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  • FIRST POST
    • Potok
    • By Potok 15th Sep 17, 10:27 PM
    • 1Posts
    • 0Thanks
    Potok
    Small inheritance and pension.
    • #1
    • 15th Sep 17, 10:27 PM
    Small inheritance and pension. 15th Sep 17 at 10:27 PM
    I have received a £60k inheritance from my father and need to do something with it. I had a heart attack last year and this combined with caring duties for my elderly parents has meant that I have had to give up work.

    I am a 59 yr married woman, my husband is still earning but will retire in 3 years' time. My personal income is £2500 a year (mostly rent from a small house). Next year I will start receiving £600 a year from a small private pension (pot about £19k)

    I have no debts - the mortagage is paid off, thank goodness. In addition to the rental property I also have a foreign property, which I am considering selling and investing the proceeds (est. 50k).

    I have two other pensions, both small - one stakeholder pension annual income £450 per annum (pot 13k) and one local government pension worth £3500 per annum. These will start in 6 years time. I currently have 32 years of NI contributions, but my pension statement seems to suggest I only need to contribute for another year (?) which I will probably do by NIC 2 contributions.

    So I need some advice. Is it worth putting money into my stakeholder pension (it was with Friends Life and is being transferred to Aviva)? Or is there a better way of investing it? I am not paying tax and am unlikely to do so in the future.

    Thank you.
Page 1
    • Alexland
    • By Alexland 15th Sep 17, 10:42 PM
    • 247 Posts
    • 128 Thanks
    Alexland
    • #2
    • 15th Sep 17, 10:42 PM
    • #2
    • 15th Sep 17, 10:42 PM
    Yes worth contributing 2880 per tax year (the most you can with your income) into a pension (just check your existing stakeholder fees and investment strategy but this type of pension is usually ideal for this purpose) and the government will top it up to 3600 each year until you are 75.

    Suggest you draw out pensions to maximise the use of your 11500 income tax allowance each year (or less if you give away some to your OH via marriage allowance). You don't have to spend it could go into ISAs or your partners pension. To keep your affairs simple you may want to leave some pots alone until later.

    Your NI contributions under the old system will have built an entitlement that means you probably won't have to have 35 years to get the full state pension.
    • kidmugsy
    • By kidmugsy 16th Sep 17, 12:15 AM
    • 9,628 Posts
    • 6,374 Thanks
    kidmugsy
    • #3
    • 16th Sep 17, 12:15 AM
    • #3
    • 16th Sep 17, 12:15 AM
    I have received a £60k inheritance from my father and need to do something with it.... My personal income is £2500 a year (mostly rent from a small house).

    Next year I will start receiving £600 a year from a small private pension (pot about £19k) ... I have two other pensions, both small - one stakeholder pension annual income £450 per annum (pot 13k) and one local government pension worth £3500 per annum. These will start in 6 years time.
    Originally posted by Potok
    I'm puzzled. Why do you say that your stakeholder pension will start in 6 years time, and why do you say that it will pay income of £450 per annum? Why can't you transfer it to a SIPP (say) and start drawing pension as soon as you like? You could draw £3,250 as a tax-free lump sum and then £9,000 as taxable pension income. But it would pay tax of zero, because £9,000 + £2500 = £11,500 = your personal allowance against income tax in 17/18. Of course there's no need to draw it yet if you don't want to, but you could. Certainly preserving the option to do it seems to me to be far more valuable than £450 p.a. in six years time.

    Similarly "next year I will start receiving £600 a year from a small private pension (pot about £19k)" puzzles me. You could transfer the £19k into the same SIPP and draw it down at whatever rate suits you. In your shoes I'd certainly like to draw the money out in a tax-free way before I became a taxpayer in a few years time when my LGPS pension and state pension become added to my rental income.

    As for the £60k inheritance: I'd consider investing £20k into a Stocks and Shares ISA and keeping the other £40k in cash until the new tax year begins when I might invest again in an S&S ISA. I might, if I had the patience for it, play the game of opening high interest current accounts and regular savers.

    Let's take stock: your assets would - ignoring you own house - be:

    S&S: SIPP worth about £32k; ISA worth £20k, total = £52k.
    Rental property in UK, worth £??
    Property abroad, worth £50k.
    Cash £40k.

    That's a usefully diversified portfolio, albeit heavy in property. Selling the foreign property might not be a bad move in due course. Perhaps if you gift half ownership to your husband you could reduce any Capital Gains Tax you might otherwise need to pay.

    You should, as Alexland said, aim to pop £2880 p.a. into your SIPP each tax year. You would need to check that there's no penalty for moving your two pensions into your SIPP e.g. heavy charges.

    What I am suggesting is that you will have a handy income after you start your LGPS pension and state pension. I therefore recommend that you consider exploiting your personal allowance for the next few years. I recommend that you invest some of your cash into stocks and shares, but perhaps gradually, and only to the extent that you are comfortable with. There's no point losing sleep over your investments, so when you've got as much invested as you are happy with you can keep the rest in cash. Perhaps you will want to spend some of your capital, particularly in the gap between your husband retiring and your starting your LGPS pension and state pension. That would be no crime.
    Last edited by kidmugsy; 16-09-2017 at 12:17 AM.
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