Retirement Lump Sum - What should I do?

sdsessex

I have got about 70K to save and just looking to see if anyone has got any out of the ordinary ideas on what to do with it. Dont mind locking it away but minimal risk.
Just one more thing. I have an outstanding morgage. Should I pay it off? That money would not come out of the above.

dunstonh

What you are ask is way too specific for any forum to answer. Especially given the lack of facts available. With the criteria given it could be hundreds of thousands of options and variances.

We need more info to go on.

jamesd

Here's a list of funds sorted by yield (interest and dividends combined).

Funds like Artemis High Income (8.3%), Newton Higher Income (7.3%), Invesco Perpetual Monthly Income Plus (7%) and Invesco Pepetual High Income (3.9) are commonly recommended as part of low to medium risk mixtures, with the proportions of each and in cash determining the overall risk (up and down movement) level. Both capital value and yield vary.

If there's a willingness to see part of the mixture of ways of using the money have the capital value move up and down by 10% or so, better 20% or so, then it's possible to get better returns than savings accounts. But it does take being willing to accept some capital value variation.

So, how much variation is minimal when accepting some variation means you get more income from your money?

If you stick to savings accounts, paying off the mortgage can often be a good idea. If you're willing to accept capital value variation from investments thenpaying off he mortgage probably makes you poorer long term, because investments can be expected to pay more than the cost of the mortgage interest.

Since this is a retirement lump sum, you can also recycle some of it back into a pension and take another chunk of tax relief on it, then take a lump sum from that. The anti-recycling limit is 1% of the lifetime allowance for the lump sumbeing recycled. That means it's £18,000 in 2010/11. However, there's also a 30% of lump sum rule and if 30% is higher than £18,000 you can use that higher limit - not applicable in your case. You can't get tax relief beyond 100% of your taxable earnings in the year, so that may also limit you. You should read the HMRC pension recycling pages, particularly the examples.

sdsessex

Thank you for this. Will take a look at the recycling page.