investing my pension

theglen

What should I do with 130k lump sum?

dunstonh

What do you want to do with it?

jem16

theglen wrote: »

What should I do with 130k lump sum?

1. Spend it
2. Save it
3. Invest it
4. Give it away

I'm sure there are more ideas but that will do for starters.

JoeCrystal

I found it curious that theglen find a need to get £130,000 in lump sum from pension scheme and yet have no idea what to do with it! Surely, would it be better to opt for better pension income if you have no need for that amount of money.

dunstonh

JoeCrystal wrote: »

I found it curious that theglen find a need to get £130,000 in lump sum from pension scheme and yet have no idea what to do with it! Surely, would it be better to opt for better pension income if you have no need for that amount of money.

That is true. The decision on what you should do with the lump sum, or even take some or all of the lump sum, is something that should be made prior to retirement. Doing it afterwards means you have eliminated one of the potential options and one that can often be better.

Gracchus_Babeuf

theglen wrote: »

What should I do with 130k lump sum?

That's a bit like asking: how long is a piece of string? It all depends on your personal circumstances, age and priorities.

Right now, if I had this windfall I would spend a good deal in moving to a nicer house in a better area. With what's left I would buy myself a nicer car, anything left over put in my savings.

theglen

Thanks for the information given. I had to take my pension as my place of work closed down and not to take it would have meant I would lose a proportion of it. I have a good house, I have good cars, I'm 58 and will get an annual pension of 15500, so the lump sum needs investing to generate some money - my question was: where's the place to put it?

atush

Ok, so now we have more info as needed.

You have a pension of 15,500 until your state pension kicks in after which it will increase (we dont' knwo how much as we dont' know if you are married etc). Can you live NOW on this amot or not? Does your pension rise with inflation or is ti fixed? Do you have other savings and assets? Do you have a mtg? Do you have dependants?

All this would impact what we would tell you.

From fixed rate cash deposits to index linked savings to equities etc. It is hard to say unless we know the answers to the above Q's? As a start you could go to the savings and investments board where on the top you can see current best savings rates (around 3% for easy access) so you can figure that your 130K will get you nearly 4K income before tax (which you will pay unless you have a spouse's extra personal exemption). You can get more on longer deposits, and bonds and equities (some good blue chips are paying 5-7% in dividends) but these have some risk to equity.

gadgetmind

theglen wrote: »

What should I do with 130k lump sum?

Are you married? If so, what will your spouses income be?

Options -
1) Dividend paying Investment Trusts or funds - tax efficient.
2) Interest paying funds if you can avoid tax by putting in name of spouse.
3) In combination with the above, ISAs, as fast as you can.

mania112

theglen wrote: »

Thanks for the information given. I had to take my pension as my place of work closed down and not to take it would have meant I would lose a proportion of it. I have a good house, I have good cars, I'm 58 and will get an annual pension of 15500, so the lump sum needs investing to generate some money - my question was: where's the place to put it?

You don't need to 'invest' it to generate income.

Here are the options:

1) ISA's. You can have £5,340 per year in a Cash ISA, £10,680 in a Stocks and Shares ISA (invested in funds) or you can do £5,340 in both.

obviously this will leave some money (plus you might already be doing that) so:

2) Income Drawdown

A pension which is invested in funds and can pay out an income if you wish. This is good if you're happy to have investments (and therefore the chance to increase your fund size)

3) Annuity

There are many Annuity options. But essentially you are BUYING an income. Once you've bought it, you will no longer have your lump sum, but instead an income and some death benefits.

At your age and with the current gilt rates, i believe Drawdown will offer a marginally better income than a standard annuity - but don't hold me to that.

Obviously an Annuity is final - and Drawdown can be converted to an Annuity at a later date.

But, as always, seek professional advice.

EDIT: obviously these aren't ALL the options,. you can buy property, art, classic cars etc etc

Gracchus_Babeuf

theglen wrote: »

Thanks for the information given. I had to take my pension as my place of work closed down and not to take it would have meant I would lose a proportion of it. I have a good house, I have good cars, I'm 58 and will get an annual pension of 15500, so the lump sum needs investing to generate some money - my question was: where's the place to put it?

I assume the annual pension is not inclusive of the state pension, so maybe you'll get £21-22k including that?

As for the 'good cars' and 'good house' you may need to consider trading down to reduce your outgoings when you no longer work.
With £130k you have plenty of options - you could consider buying a flat and renting it out. Rental income is around 6% so that would give you an extra £8k or so a year. In short, you should be OK in retirement, assuming that your partner also has some form of private provision.