best way to invest a large sum of money..

Geopulse

Approaching an IFA is not always the best policy. You need some preparations from your side too. Whatever is the situation, you can use the rule of Thumb while investing. It is a very good method for proper asset allocation.

frosty

saverjustice wrote: »

Your husband is on 40% and has no pension?

I would start using his allowance. If you need a decent IFA I know a few hundred I would trust and thousands I wouldn't.

Hi, he has only been in poorly paid jobs so we couldnt afford to pay into a pension.Then about 5 years ago he got a job off shore on the oil rigs.So we decided to pay off our debts and mortgage,we have quite a bit saved aswell.

frosty

dunstonh wrote: »

What happens when he no longer has a job and is retired?

You have no assets and no pension and living a lifestyle of a higher rate taxpayer. Yet when it comes to retirement you will drop down to a basic state pension of £5000 a year. That is going to be one hell of a bump.

You seriously need a proper analysis.

Hi,our house is worth about £240.000,we have no mortgage,so we could downsize and release money that way.
This is why I want to invest the money so we have a cushion to fall back on.thanks.

dtsazza

Asides from the lump sum, you should definitely consider investing some of your husband's income in a pension.

Regardless of the performance of the assets contained within, the government will top up his contribution by 67% of that amount (due to his being a higher tax payer). You aren't going to find anything near that performance in any other asset.

Oh, and if his employers are prepared to match contributions, then every £100 he puts into the pension will instantly* become £267. That's a ridiculous amount of free money to pass up. (And for a similar reason I disagree that poorly paid jobs "can't afford" to pay into pensions; people ignore the effect of tax rebate, matched contributions and decades of compounding. But that's not relevant right now.)

As for the lump sum, you have three broad options: cash, stocks & shares, and "other" (e.g. property). At this stage in your lifes, the two of you should be planning very specifically for your retirement. Work out how much income you'll need to support the lifestyle you want, and then plan how you'd go about achieving it. Depending on how much shortfall you have to make up, and how many years until you intend to draw on your retirement funds, you may be happier with the safer investments of cash and bonds, or you may wish to invest in equities for greater amortised income with greater variance. And whether or not you invest in something like property is a personal question, which depends on whether you feel like going into business as a landlord, with all that that entails.

Either way, you definitely need to get a clear idea in your head about how retirement is going to work financially. It might sound like a lot, but £170,000 is a pretty small pension pot (especially for two people) and you might be surprised how little it gets you. If you don't feel confident working this out yourself then I second the suggestions to make an appointment with a (good) IFA.

By the way, if you have a house worth £240,000 then when you stated "no assets" earlier, that's the kind of thing people were thinking of as an asset.

*OK, the second 20% of tax relief isn't usually instant and needs to be claimed back in a tax return or similar. But that's semantics.

jimjames

frosty wrote: »

Hi, he has only been in poorly paid jobs so we couldnt afford to pay into a pension.Then about 5 years ago he got a job off shore on the oil rigs.So we decided to pay off our debts and mortgage,we have quite a bit saved aswell.

If you have savings then you do have assets.

It would definitely be worth seeing an Independent Financial adviser not one from a bank that can only recommend limited products. There may be ways to ensure you have a more comfortable retirement although the time is now quite short for investments to be able to grow much by the state retirement age.

Downsizing property can free up some money but you will still need somewhere to live. When you are used to living on £40k per year, it will come as a shock to have such a small income unless you take some action.

dunstonh

,our house is worth about £240.000,we have no mortgage,so we could downsize and release money that way.

Lets say you lose £20,000 on the costs of moving. How much do you want to downsize by?

I house that is worth £240k doesnt give you much scope for downsizing. How much do you think you could realise? Plus, I think you may underestimate what downsizing entails. It is not as easy as it sounds.

Pension does stand out as one of the key options. The higher rate tax relief would be daft to ignore. The lump sum of £120k may seem large but if you left it in savings accounts it wouldnt last long in real terms. Premium bonds, if you get the average are losing your money.

There are a number of options but more detail needs to be known. You are looking at this back to front. You are asking what you can do with the money without knowing what you need in future and how you are going to achieve that.

You probably need some "training" as well to give you a basic idea of how the suitable options work. So, be prepared to put some time into it or have someone explain it to you.

frosty

Hi dtsazza,when I answered lisyloo....I was asked what assets we had apart from the house,thats why i put no assets.:)I will check out the company pension.My husband used to earn £800 a month:eek: by the time the mortgage was paid,bills ect,we didnt have much left so couldnt pay into a pension.Now he is coming out with £3700.00 a month,we are saving a large amount each month and this should help when we retire.The house we have has a section built on that could easily be turned into a two bedroom flat so maybe we could look at bringing an income in that way.Thanks you have given me quite a few ideas to think about.

frosty

dunstonh wrote: »

Lets say you lose £20,000 on the costs of moving. How much do you want to downsize by?

I house that is worth £240k doesnt give you much scope for downsizing. How much do you think you could realise? Plus, I think you may underestimate what downsizing entails. It is not as easy as it sounds.

Pension does stand out as one of the key options. The higher rate tax relief would be daft to ignore. The lump sum of £120k may seem large but if you left it in savings accounts it wouldnt last long in real terms. Premium bonds, if you get the average are losing your money.

There are a number of options but more detail needs to be known. You are looking at this back to front. You are asking what you can do with the money without knowing what you need in future and how you are going to achieve that.

You probably need some "training" as well to give you a basic idea of how the suitable options work. So, be prepared to put some time into it or have someone explain it to you.

Thanks,I am taking onboard everyones advice and thinking about it.

Loughton_Monkey

I think you are attacking it all from the wrong angle. OK, it's easy to highlight a 'spare' £175K and ask 'what's the best thing to do'... but that's the wrong question.

Just forget the money for now. Look at household income. Look at household expenditure. So how much do you require to 'live on'? Once you have taken that out, how much do you have 'spare'. Work this out cumulatively until the date you both retire.

NOW ask yourself what you want to spend. The answer - pretty categorically - should be "the very same as now - except inflation proofed".

After this, ask yourself how much the household income will be when you retire. It will be state pension (for both of you), plus any private pensions either of you have, plus what you can 'manufacture' from current cash resources and future cash resources. If you do as I have indicated, you will easily discover if the cash you have, and save in the future, will provide enough income for you.

Hopefully it will, given a 'fair wind' on the investment front.

Only then do you get into the nitty gritty of what to do with current and future cash surplus. To go to an IFA with £175K and ask for the 'best' advice is, quite frankly, a waste of time unless you have a 'pretty good' feel for your overall cash, income, spending, needs, and rough projections of income needed in retirement.

Almost certainly the 'solution' will (should) include pensions in a big way. To be paying 40% tax without alleviating any (let alone all) of this by pension contributions is literally burning money every single tax year that passes. If your husband were to do nothing (age 55) for 10 years to retirement and only then think about living from your cash - however well invested - he can spend his retirement calulating a figure - probably into 6 figures - of what it cost him by not avoiding 40% tax completely by the simple action of investing spare money within the pension tax free wrapper.

frosty

Loughton_Monkey wrote: »

I think you are attacking it all from the wrong angle. OK, it's easy to highlight a 'spare' £175K and ask 'what's the best thing to do'... but that's the wrong question.

Just forget the money for now. Look at household income. Look at household expenditure. So how much do you require to 'live on'? Once you have taken that out, how much do you have 'spare'. Work this out cumulatively until the date you both retire.

NOW ask yourself what you want to spend. The answer - pretty categorically - should be "the very same as now - except inflation proofed".

After this, ask yourself how much the household income will be when you retire. It will be state pension (for both of you), plus any private pensions either of you have, plus what you can 'manufacture' from current cash resources and future cash resources. If you do as I have indicated, you will easily discover if the cash you have, and save in the future, will provide enough income for you.

Hopefully it will, given a 'fair wind' on the investment front.




Only then do you get into the nitty gritty of what to do with current and future cash surplus. To go to an IFA with £175K and ask for the 'best' advice is, quite frankly, a waste of time unless you have a 'pretty good' feel for your overall cash, income, spending, needs, and rough projections of income needed in retirement.

Almost certainly the 'solution' will (should) include pensions in a big way. To be paying 40% tax without alleviating any (let alone all) of this by pension contributions is literally burning money every single tax year that passes. If your husband were to do nothing (age 55) for 10 years to retirement and only then think about living from your cash - however well invested - he can spend his retirement calulating a figure - probably into 6 figures - of what it cost him by not avoiding 40% tax completely by the simple action of investing spare money within the pension tax free wrapper.

Thanks,you have certainly given me something to think about.:A