Help needed with savings and investments

pestopasta_2

Hi

Hoping for some thoughts and advice regarding what to do for the best. Apologies for the length of this post.

We have downshifted in order to be able to take better care of my elderly parents - a process that has led to us selling our London home and relocating to the Midlands. We have now bought a property which we intend to stay in for the forseeable future - easily big enough for our family.

I took redundancy from my old job and our current income (lower paid work) matches almost exactly with our expenditure. I am therefore a lower rate tax payer and my wife (who is a stay-at-home mum for our four year old and two year old children) is a non-taxpayer. I'm 47 and will receive my pension from my previous employer at age 60. This together with our state pension (whenever that materialises) should fund our lifestyle in retirement.

As a result of the equity in our property and my redundancy payment we now have between £200k and £220K to save/invest.

I'm about to ask some very basic questions which reflect the fact that this is a new position for us. An obvious suggestion is to get some advice from an IFA. Unfortunately I have not had good experiences in the past and from asking our new friends and my family members they have only been able to tell me of IFAs to avoid. For now the money is sitting in various easy access building society accounts (Newcastle, Santander etc) earning some interest while I research the most sensible way forward.

I'm not looking to be spoonfed - any suggestions of further reading gratefully received. I've looked at the Candid Money and TrustNet sites (as well as MSE of course) as a starter - any further suggestions?

Right, the questions.

(a) What split should I sensibly be considering between cash, equities and other investments? I'm prepared to take a moderate amount of risk with part of the portfolio if there is a realistic prospect of out-performing the best fixed rate deals. And I'm prepared to spend (a proportionate amount of) time to manage my investments. In short, should I just simply put 100% into cash?

(b) Candid Money seems to strongly favour trackers over managed funds on the grounds that the performance is often similar but the charges much less. Is this a well-founded view? If so, which kind of trackers should I be looking at and which is the best way of investing in them?

(c) If not trackers, then how do I go about identifying suitable managed funds and, again, how do I best invest in them.

(d) My Bank (HSBC) were keen to sell me their Premier Investment Management Service - no initial charge, 1.5% + VAT annual for a £150k investment. I'm very wary of this as it would feel like putting most of our eggs in a single basket. It feels like a bad idea - any thoughts?

I'll have other questions but these are a good start. Apologies if this has all been covered elsewhere on this forum - I've read a few other threads but have not found them entirely relevant to my circumstances or have become too complex for me to understand.

Thank you for reading

redmalc

Pestopasta,I have a number of investments with Hargreaves Lansdown ,Fidelity and Skandia [ 250K ]to name a few,i read books ,magazines and keep my eyes on these type of forums and over the years done very well without an ifa.I also bank with HSBC and they are always offering me their investments,i have 70K with them in cash Isa,s to keep my Premier banking status,a service which i like and have always had a very good service from.

atush

Stay away from your bank. Use Unbiased.co.uk for an IFA.

I am concerned with your pension planning. Having an old pension is good, but is unlikely to fund you completely in retirement esp if you lifet before age 50. Unless you continue a pension and unless you start one for your non working spouse as well. what is the fund size of your old pension- or if FS what is the current no of years?

Then you need a min if 6 months salary in cash, preferably easy access and ISAs. So fill your ISAsx2 now if you haven't, and open another 2 in april.

Then you need to look at equity savings incl opening a new pension (unless your new employer has one in which case join it. Dont forget to incl savings for your children. And I assume your non working spouse will go back to work when the youngest is in school?

xylophone

Have you and your wife used your ISA allowances in full for this tax year? I think that it is worth using them even for a non tax payer because the allowance is use it or lose it - your wife may become a taxpayer when the children are older. http://www.moneysavingexpert.com/savings/best-cash-isa

Over and above this, as your wife is a non-tax payer it is a good idea for all cash savings to be in her name - see also http://www.hmrc.gov.uk/tdsi/ten-per-cent-guidance.htm re 10% guidance, remembering to put the correct allowance figures for the year in question into the examples.http://www.hmrc.gov.uk/rates/it.htm

As you and your wife are at least twenty years from retirement you have time to invest in the stock market. Again, use the ISA allowance first. The amount increases from 6th April. http://www.hmrc.gov.uk/isa/rule-change-april08.htm

You have a wide choice of investments but if you are using funds, it is usually cheaper to use a discount broker http://www.moneysavingexpert.com/savings/isa-discounts#best

psychic_teabag

xylophone wrote: »

You have a wide choice of investments but if you are using funds, it is usually cheaper to use a discount broker http://www.moneysavingexpert.com/savings/isa-discounts#best

That article says it was last updated in 2008 - bit old now !
See also https://forums.moneysavingexpert.com/discussion/3153942 which is an up to date list of discount brokers.

One often-recommended book on here is "Smarter Investing" by Tim Hale. That also tends to advocate passive rather than active.

Another site you could look at is the Motley Fool, though I think they tend to look at investing in individual stocks rather than funds.

pestopasta_2

Thank you for all of the very helpful responses so far - further responses very welcome!!

Things I've picked up/further questions that arise:

(1) I've got 27 years (27/80) in my Final Salary scheme. Typical public sector scheme, so 1.5 x pension as tax free lump sum and 0.5 x pension for my wife should I die first (likely as I'm five years older). Understand the point about considering whether this is adequate. I'm now self-employed (which allows me more flexibility in terms of caring for my parents). The first few months have produced a steady, if lower income and I will need to invest in my pension. Not sure whether this should be from the amount I currently have to invest or from ongoing income. Most likely the latter, for now.

(2) Have not yet used this year's ISA allowances so intend to use them in Feb/March (once it's clear what the improved offers for cash ISAs look like) and then those for 2012/13 in April. I'm currently thinking of using half the allowance in cash and half in S&S for both years - assuming that I've worked out the best way to deal with the S&S portion by then.

(3) Already have some investments accrued from our savings in the years before our life change which help with emrgency cash needs - about 45k in cash ISAs and fixed rate savings bonds. We also have some S&S ISAs totalling around 25K - bought at a high point in the market a few years ago and so not performing well when compared to fixed rate savings (hence my concern to ensure that I don't make similar mistakes with the amount we now have to invest).

(4) I'm in the process of reading the links forwarded - many thanks. I'm not sure that I've understood the savings tax allowance of £2560. Does this mean that any interest above £2560 is taxable at 10% (and then any above £7475 at 20%)? Or is that the £2560 is taxed at 10% if the interest totals more than £7475. I think it's the latter but would like to be sure.

(5) I've started reading the article on discount brokers but need to read it again once I've researched what I want to invest in. From what I've read this would be the alternative to an IFA, once I've established which are the most suitable funds for me.

(6) What does listing on unbiased.co.uk imply? That you can be trusted to provide impartial advice? if so, how does the site monitor this?

Again many thanks for everyone's help

psychic_teabag

pestopasta wrote: »

I'm currently thinking of using half the allowance in cash and half in S&S for both years - assuming that I've worked out the best way to deal with the S&S portion by then.

You can transfer from cash ISA to S&S ISA, so it should be fine to start with max cash component for now, and then if you decide to change the ratio, you can do so. (You can't go back from S&S ISA to cash ISA, though.)

Also you can do a partial transfer of previous-year's cash ISA, so you could drip-feed into S&S ISA to avoid going all-in at another peak.

http://monevator.com is an interesting read - blog of a passive investment advocate.

xylophone

Regarding 10% band, look at this example (which I am assuming fits your wife's case) - I think this will clarify (but be sure to use your wife's tax band for year in question. http://www.hmrc.gov.uk/tdsi/example22.htm.