£100000 to invest where and how to?

donmaico

My wife are planning on retiring in two years time and by then we should have accumulated that sum of money which we would like to invest to produce an income.This would be on top of the basic pension we would each receive a personal pension for which I am about to buy an annuity and a LGPS pension my wife will receive.Question is what way do we go ? One possibility would be purchased annuity dual income with 3% escalator would give us about 4k pa , but then we also thought of investing for income maybe through Fidelity , Legal and General or Schroders. Friend of mine has one with L&G which gives him about 5-6% pa which he acquired via what was then Alliance and Leicester.He cant remember what the fund is called
I did recently talk to an IFA but felt his charges were too high at 3% and in any case he never got back in touch with us
Any suggestions? thanks

xylophone

You will each have an ISA allowance of £15,000 in this tax year.

You might consider using this money within a stocks and shares ISA?

Linton

I think more information is required. Some questions for starters....

Do you want the income from this lump sum to cover the period from when you retire to when you draw your State Pension, or do you want the income spread evenly over your lifetime? If you want extra earlier, how long and how much income?

Do you have any wish to maximise any inheritance, or do you want to use it all before you both die?

The choices will boil down to a guaranteed but relatively expensive income from an annuity or money from investments which will probably be better performing but not guaranteed. Which way would you prefer - a guarantee or the chance of a higher income?

donmaico

Linton wrote: »

I think more information is required. Some questions for starters....

Do you want the income from this lump sum to cover the period from when you retire to when you draw your State Pension, or do you want the income spread evenly over your lifetime? If you want extra earlier, how long and how much income?

Do you have any wish to maximise any inheritance, or do you want to use it all before you both die?

The choices will boil down to a guaranteed but relatively expensive income from an annuity or money from investments which will probably be better performing but not guaranteed. Which way would you prefer - a guarantee or the chance of a higher income?

Yes i would like the money spread over our lifetime
inheritance is not an issue bar my wife of course, as we have no children . We also own three properties two of which we let , and I dare say we shall leave those to certain people, just not money.
As i already have a guaranteed rate annuity pension and my wife is on a LGPS scheme we thought we would take a bit of chance investing with the capital which will be accumulation of cash that we have two share ISAs, an endowment policy that will mature by then and three frozen pensions my wife has from previous employments.We think the sum total will approximate 100k bar a massive crash

donmaico

xylophone wrote: »

You will each have an ISA allowance of £15,000 in this tax year.

You might consider using this money within a stocks and shares ISA?

we may well invest in another share ISA for a period of 5 years or so but the intention is top provide an income on full retirement , especially where my wife is concerned

Linton

donmaico wrote: »

Yes i would like the money spread over our lifetime
inheritance is not an issue bar my wife of course, as we have no children . We also own three properties two of which we let , and I dare say we shall leave those to certain people, just not money.
As i already have a guaranteed rate annuity pension and my wife is on a LGPS scheme we thought we would take a bit of chance investing with the capital which will be accumulation of cash that we have two share ISAs, an endowment policy that will mature by then and three frozen pensions my wife has from previous employments.We think the sum total will approximate 100k bar a massive crash

Your situation seems to me to be one for which an annuity is the ideal solution. It gives you a known income guaranteed to last until you die. You dont want to leave money after you have gone. You could go for a 3% increasing annuity, or a fixed one which would give you a better return at least for the first 10 years or more (at a guess).

The alternative would be to put together an investment portfolio in his & hers NISAs - in 3 years you could get nearly the whole lot safe in a tax free environment. You may find managing this more interesting than simply waiting for the monthly annuity payment. I would guess you may not actually need the extra income given your range of other sources. And you would have a large lump sum available should you need it.

If you do need the income the downside is that whereas an annuity is based on average lifespans, in order to ensure you dont run out of money in your very old age you will need to plan a portfolio assuming that you live very much longer than average. Long term steady drawdown of more than say 5% of the original sum could be risky in that regard,so not really any better than an annuity. And of course if you ensure that you dont run out of money, you will also ensure that there will be some left when you both die. Effectively wasted money in your situation.

One option could be to spend say 75% on an annuity and invest the rest for fun and possible profit. Or just to keep a lump sum in cash to use for the sudden decision to go on a world cruise or whatever.

donmaico

Linton wrote: »

Your situation seems to me to be one for which an annuity is the ideal solution. It gives you a known income guaranteed to last until you die. You dont want to leave money after you have gone. You could go for a 3% increasing annuity, or a fixed one which would give you a better return at least for the first 10 years or more (at a guess).

The alternative would be to put together an investment portfolio in his & hers NISAs - in 3 years you could get nearly the whole lot safe in a tax free environment. You may find managing this more interesting than simply waiting for the monthly annuity payment. I would guess you may not actually need the extra income given your range of other sources. And you would have a large lump sum available should you need it.

If you do need the income the downside is that whereas an annuity is based on average lifespans, in order to ensure you dont run out of money in your very old age you will need to plan a portfolio assuming that you live very much longer than average. Long term steady drawdown of more than say 5% of the original sum could be risky in that regard,so not really any better than an annuity. And of course if you ensure that you dont run out of money, you will also ensure that there will be some left when you both die. Effectively wasted money in your situation.

One option could be to spend say 75% on an annuity and invest the rest for fun and possible profit. Or just to keep a lump sum in cash to use for the sudden decision to go on a world cruise or whatever.

from this site and in 2012 it would seem that £100000 could buy about £5800 joint life fixed http://www.sharingpensions.co.uk/annuity_rates_purchased.htm#text1 Quite possibly could be less in 5 years time but at least its guaranteed
I am rather attracted to the idea of a his and hers NISA but would need the help of an IFA (fee based) because I wouldn't have clue where to start.I am guessing I should be starting now , maybe paying into an income fund then when the time is right conglomerate everything together into one tax free wrapper

donmaico

I think what i will be ultimately looking for is a management portfolio service once i achieved my short term objective.In the meantime i see no point in opening up new share isas but it may be well my while making extra monthly contributions into existing ones .I have two in mind one is Fidelity Global heath fund and the other Invesco European smaller companies.Neither come well recommend but seem to be doing quite well at the moment.It would be a bit of gamble as i suspect they are rather more volatile than most

dunstonh

.I have two in mind one is Fidelity Global heath fund and the other Invesco European smaller companies.Neither come well recommend but seem to be doing quite well at the moment.

Both high risk. One especially so (in context of mainstream investing) and picking single sector funds without a wider portfolio strategy is not ideal. Its more of a punt than an investment.

donmaico

If i can re open this thread I would like expand further .I looked at my wife and mine's assets and apart from our properties , we have about £28000 in share iSA investments and about £52000 in cash. in a years time we shall cash our endowment policy which should bring in about 8000 and then my wife's frozen pensions ,which total £40000 , can be cashed in two years time,
What we had in mind was to set up a portfolio with an IFA who would handle our current share ISAs whilst at the same time making further payments either in lump sums or on a monthly basis .With that in mind we spoke to a gentleman from Skipton mutual society and he pretty much suggested doing that .
He said that what we had was two platforms i.e. Fidelity and Skandia, and then he would set up another into which he would put our Invesco fund.He would then work within those platforms to find the best low risk funds that produce an income, which would be reinvested.(Apparently he cannot transfer the funds from the existing platforms to the new one , although i am not at all sure why )
Once the platform was set up we would make further investment over the next 5 years , the aim being to create a nest egg that would provide an income.I do have some concern about the charges though .The initial charge of 3.8% would appear reasonable but the ongoing ones of between 1.7 and 1.92% seemed rather high although I am not at all sure if they are competitive or not .Obviously if I can net about £6000 pa then they would appear to be ok, but anything much lower than that then i might as well look at purchased annuities as an optionCould someone advise me please?

bigadaj

If it's skipton then they are likely to be tied agents, better to speak to an independent financial adviser. If you haven't got any personal recommendations look on unbiased.com and make sure sponsored ads tab is turned off. Speak to a couple, meet them and see if you have any preferences.

It sounds a a though you woudk be looking at around £120k investment which is a decent sum, and skiptons charges look high. There's no reason why you can't haggle with an ifa about their fees, though they all have different target markets so best to check your sums are in line with their business.

It may well be possible to get the initial fee down to 2% or less, and the on going charges to less than 1%, in any case make sure you know what you are getting for your money and ensure you understand the reasoning behind their investment choices, though to get a high level of detail you'll probably have to pay them first. They should be able to describe a general approach before committing and hopefully that makes sense to you and come back here for alternative opinions and hopefully confirmation their approach sounds sensible.