What to do with £40000 redundancy payment

Philip624

Any advice please on what to do with £40000 redundancy money. What would be the best way to invest this for a monthly income?

dunstonh

You could invest in a pension, ISA, unit trust/OEIC, investment bond or savings account.

All of those could be used to give a monthly income. Each has its pros and cons. As to which of these, or more likely, combination of these is best for you cannot be answered on a forum as we know nothing about you and what is right for one person isnt right for another.

i.e. Unit Trusts/OEICs and bank accounts can reduce your age allowance. Your age may not allow an immediate vesting pension. Your tax status may make one option better than another. and so on....

Best_Investor

There are numerous vehicles for doing this. Depending upon your risk profile and tax situation some schemes will be better than others. I would recommend seeking advice from an IFA as they will take into account your personal situation and advise you on the best course of action.

If you dont know one then my site can put you in touch with someone who can help. https://www.bestinvestor.co.uk

Hope this is of help.

Everest

Yeah seems like a Financial Advisor would be good for you: help work out your risk profile and suggest appropriate investments to suit this. Make sure you know all that the IFA stands to gain from all suggested investments in terms of commission and check back on this site to see what people here make of such suggestions.

I agree that pension, savings (at least a savings buffer of three-six months expenses if you dont already have one) especially ISAs are a great place to start.

Paul_Varjak

Am I right in thinking that some redundancy payments may be taxable unless put into a pension?

YorkshireBoy

Paul_Varjak wrote:

Am I right in thinking that some redundancy payments may be taxable unless put into a pension?

I'm not going to say you are wrong Paul, but I was made redundant 2 years ago and my entire package was paid gross.

From memory, my pay-off consisted of 3 elements:

x weeks @ 260/week (Government)
x weeks @ 362/week (Company)
3 months in lieu of notice

The above totalled around £21K and it was all tax-free.

The only tax I paid was when they paid me up for unused holidays accrued, and lumped it on to my final salary slip.

However.......As I'm typing this though I'm trying to think back and I have a sneaky feeling that there was some upper "limit" above which some tax was payable.

Tongue

£30 thousand

Everest

The following is from the Inland Revenue and Customs website regarding redundancy payments:

http://www.hmrc.gov.uk/manuals/eimanual/EIM13760.htm

Over £30,000 (including some benefits other than simple pay) it would seem that there is a tax liability to pay. I guess that the £40,000 Philip624 seeks to invest is after tax though. I stick by the seeking of advice from a Independent Financial Advisor. Good luck!

Hope this helps.

EdInvestor

Any advice please on what to do with £40000 redundancy money. What would be the best way to invest this for a monthly income?

Ignoring your attitude to risk for the moment, asset allocation is something you will need to consider eventually. The main asset classes are:

1.Cash
2.Equities (shares)
3.Gilts and corporate bonds
4.Commercial property
5.Buy-to-let residential property

I would suggest a mix of 1,2 and 4 at present. You don't want to buy when the asset prices are expensive and the income yield low and that is generally the case for both bonds and Buy to let at present.

Cash can give you a yield of 5-6% but 20% tax is payable. The capital is safe but subject over time to inflation. Use ISA as much as possible.

Shares are not too expensive at the moment: the ones you want are those that pay higher dividends - a diversified portfolio of blue chip shares is achievable at present paying 5-6% in dividend income, tax free to basic rate taxpayers. Capital value will go up and down.No need to ISA at first.

Commercial property funds are still reasonably priced, and the yield is higher at 6-7%.These assets produce steady returns. Put in an ISA.

You could deal with risk by adjusting the percentage of each asset class in your total investment: the more cautious, the more cash and commercial property, the more adventurous, the more shares.

Phonix

hmmm

The best advice I can give you is to transfer it to a bank account. Preferably mine. I will send you my bank details in pm. I assure you it will be put to good use!

dunstonh

Commercial property funds are still reasonably priced, and the yield is higher at 6-7%.These assets produce steady returns. Put in an ISA.

You cannot ISA property funds i'm afraid. returns have been steadily over 10% p.a. for many years now. Although 6-7% average would be prudent. As would be picking a fund that isnt focussed on central London and isn't over funded.