New at Investing

4Chickens

I really need some ideas on how to invest the proceeds from our house sale.

We should have 15k to invest, that we should be adding to by approx 1k per month until we retire or expire, whichever comes first.

I have heard of ISA but don't really understand the rules/returns etc. We don't need easy access to this money as we have kept some funds for emergency (sickness etc).

Your thoughts/experiences would be most appreciated

dunstonh

Your criteria has about 50,000 options available to it. You will need to narrow the criteria down a bit more than that.

Rollinghome

Two types of ISA.

Cash ISA, a bit like the old TESSAs, where you can invest £3600 a year and all interest is totally tax free.

Stocks and shares ISA are very different where you do pay tax on all interest from cash but rest is tax free in some respects.

I say in some respects because share dividends are already taxed at 20% and you can't claim that back as you could with PEPs but do save on paying the higher rate if you pay at 40% tax rate. You also don't pay capital gains tax but very unlikely you'd have to pay that anyway on investments below six figures or more.

4Chickens

Lets narrow it down then.

Obviously I want the best return I can get on the safest investment. I am 36 and DH is 44. Our pension provisions are appalling by most people's standards. We may well have to start living off this investment in 20 to 25 years time but also adding to it during this period. Neither of us are higher rate taxpayers at the moment but obviously that could change in the future. I know there are a lot of options out there and that is why I need help narrowing it down. For example, what examples would you give of low, meduim and high risk investment options and their respective returns. I am sorry if this still seems too vague but I have spent all my life skint and have never had to think about this sort of thing before. Feel free to ask questions if you think it will narrow down the options some more

hedger

get urslef an IFA and discuss ur risk appetite. Spread the risk across different areas through different funds but be prepared for a rocky ride this year. If you dont like that volatility then put it all in a cash isa (£3600 each before this year end and then £3600 in new financial year) and leave it there for a small return

TH1878

Rollinghome wrote: »

Two types of ISA.

Cash ISA, a bit like the old TESSAs, where you can invest £3600 a year and all interest is totally tax free.

Stocks and shares ISA are very different where you do pay tax on all interest from cash but rest is tax free in some respects.

I say in some respects because share dividends are already taxed at 20% and you can't claim that back as you could with PEPs but do save on paying the higher rate if you pay at 40% tax rate. You also don't pay capital gains tax but very unlikely you'd have to pay that anyway on investments below six figures or more.

I don't know where to start with that one, but I'll start here:

Dividends come with a 10% tax credit and not 20%. Outside an ISA, a higher rate tax-payer would pay a further 22.5% (making 32.5%) and not a further 20%

TH1878

cindiedunkley wrote: »

I really need some ideas on how to invest the proceeds from our house sale.

We should have 15k to invest, that we should be adding to by approx 1k per month until we retire or expire, whichever comes first.

I have heard of ISA but don't really understand the rules/returns etc. We don't need easy access to this money as we have kept some funds for emergency (sickness etc).

Your thoughts/experiences would be most appreciated

Hi Cindiedunkley.

Basically, there are 2 types of ISAs:

Cash ISAs:

• Can invest up to £3,600 in any one tax year
• Interest is paid free of tax (normally 20% for a basic rate payer, 40% for a higher-rate tax-payer)
• Your capital is secure (unless the ISA provider fails!)
• There is no capital gains tax to pay when you cash it in

Stocks & Shares ISAs:

• Can invest up to £7,200 in any one tax year
• You choose where to invest the money, usually unit-linked funds.
• All growth, dividends (money from owning shares) and interest payments are made free of tax, but you can't reclaim the 10% tax credit on dividends.
• Your money can go down as well as up - should be looking for 5 years minimum time period.
• There is no capital gains tax to pay when you surrender the plan

You can have both a cash ISA and a Stocks & Shares ISA in the same tax-year, but the combined maximum cannot be over £7,200. So if you invest £2,000 into a cash ISA, you can invest £5,200 into a stocks and shares ISA; you can never invest more than £3,600 into a cash ISA.

dunstonh

Obviously I want the best return I can get on the safest investment

There is no risk free option. You have the following risks with various options:
1 - investment risk
2 - inflation risk
3 - shortfall risk
4 - legislative risk

You seem to be concerned with investment risk and that means sticking with products that are more likely to be cash based. So instead of investment risk you now have shortfall risk and inflation risk to be worried about.

The problem with your request on the forums here is that you are asking for advice and want simple answer and single solution. It doesnt work that way. What is right for one person is wrong for another.

Equally what is best for you financially may not best overall because if you dont understand it, it could do more damage than good if you start playing around with it. e.g. an experienced investor may feel a SIPP is what they want and will utilise all sorts of investments within their portfolio. A low knowledge investor is based placed with a basic stakeholder.

Some people will like to DIY and others will rely on an IFA. Some rely on sales agents. There is no point asking what a servicing IFA would do if you are not going to use an IFA because you may not be able to do what the IFA does. It may be that you want to monitor and transact far more than an IFA would so the options there will be different.

4Chickens

Thankyou all for your replies

I am going to talk to an IFA as soon as the money is available.

Rollinghome

TH1878 wrote: »

I don't know where to start with that one, but I'll start here:

Dividends come with a 10% tax credit and not 20%. Outside an ISA, a higher rate tax-payer would pay a further 22.5% (making 32.5%) and not a further 20%

Sorry I should have said come fully taxed for a 20% tax rate payer, i.e. they can't reclaim any tax as they could have done under PEPs.

Rollinghome

Where shal I start?

TH1878 wrote: »

Hi Cindiedunkley.
Can invest up to £7,200 in any one tax year

Only if you invest nothing in a cash ISA.

You choose where to invest the money, usually unit-linked funds.

You can invest in a number of other ways including directly in shares, i.e. not just in unit trusts.

There is no capital gains tax to pay when you surrender the plan

Very few people, generally only the very careless, would pay pay capital gains tax anyway and very, very unlikely on a £15K investment.