£150k to invest/medical issues

Stumped63

Hello all

Long time observer but new poster looking for your collective wisdom.

Unfortunately, due to a serious illness (which I prefer not to dwell on), I have taken my full final salary pension and have £150K to invest.

Background
I am a single female aged 52 with one adult child (not at home). I live in a house with no mortgage, have 2 buy to lets producing a healthy income which I can live of for some time depending on interest rates.

In addition, I have £60k in cash isas @ 2% and 50k ISAs with BestInvest using their managed portfolio with global funds; I know they are not the cheapest but prefer not to move. I will keep my tax free investments with them and will be fully invested in the NISA as at 1.7.14.

I also have around £40k sitting in a business bank account which I use to top up day to day living and an endowment approx £30k due to mature in 2018 which I was going to use towards 1 of the BTl mortgages.

I currently have the £150k sitting in the best paying cash accounts and have opened an account with III to invest separately from BestInv for investments outside tax wrappers and to spread risk.

Despite my health condition, because I have a good source of cash funds, and hoping I will recover, I would like to invest in Investment trusts and an index tracker.
I have read various sites at length and thought I had solved where to place funds but again hit analysis paralysis.

I want a simple portfolio which requires little monitoring and was therefore looking at setting up the following portfolio with divis reinvested for 2-5 years and then taking an income:

£50k Vanguard lifestrategy 60/40 - already invested £10k
£50k Investment trust possibly City of LONDON but would welcome your suggestions.
£50k Invest in future isas?

My home and properties also do not require any updates and I have a fund set aside for BTL property repairs. I have catered for holidays, buying cars etc

Really grateful for any ideas or do you think my approach is too simplistic/risky?

Many thanks

Stumped

gadgetmind

I can see a lot about your position but not much about your goals.

Your future is clearly full of uncertainty, but given the various scenarios, what do you want from this investments (and TBH your others).

Stumped63

Thanks Gadgetmind didn't think of that.

I live a fairly simple life but in terms of financial goals, I am looking to
have an:
*income of around £13k pa rising with inflation
*growth for my fund of £150k to ensure that it still acts as a pension. I am concerned that I no longer have a pension and want to make sure this fund works for me.

bigadaj

I wouldn't want to pry about your particular condition but my understanding is that you've taken a FS pension as a lump sum, and so don't have the FS pension anymore? Or is this the lump sum element?

Taking that money out of the pension environment exposes it potentially to tax which makes things a little more complicated.

Looking at your target income and ignoring the buy to lets, which I think you are, then the rest of your assets excluding your home, need to be looked at in their entirety.

This means you potentially have £300k, ignoring the endowment, from which to generate £13k per year, presumably net?

That woudk translate as a return of 5% per year, which should be attainable from a diversified equity investment. Some of this is or will be in isas which removes the tax problems for that element at least.

Your proposals look fine in terms of something like a lifestratgety or blackrock consensus fund thought he equity portion woudk have to be high to probably get the growth you want. Alternatively investment trusts could do the job, though I'd personally want this spread around a few, whether this is in conjunction with or on its own.

Unfortunately your future needs, which may well be conditional upon your health, will impact the investment options; whilst long term investment is good for equities, then it also begs the question why would you take money from a db pension as this would be an unwise thing for most people to do.

Stumped63

Thanks for taking the time to look at my portfolio and welcome any other views. I have answered your questions in bold.

bigadaj wrote: »

I wouldn't want to pry about your particular condition but my understanding is that you've taken a FS pension as a lump sum, and so don't have the FS pension anymore? Or is this the lump sum element?

No tax was payable due to health issue
Yes, I have taken the full lump sum and no longer have a pension.

Taking that money out of the pension environment exposes it potentially to tax which makes things a little more complicated.

Looking at your target income and ignoring the buy to lets, which I think you are, then the rest of your assets excluding your home, need to be looked at in their entirety.

This means you potentially have £300k, ignoring the endowment, from which to generate £13k per year, presumably net? yes looking at net income

That woudk translate as a return of 5% per year, which should be attainable from a diversified equity investment. Some of this is or will be in isas which removes the tax problems for that element at least.

Your proposals look fine in terms of something like a lifestratgety or blackrock consensus fund thought he equity portion woudk have to be high to probably get the growth you want. Alternatively investment trusts could do the job, though I'd personally want this spread around a few, whether this is in conjunction with or on its own.

Unfortunately your future needs, which may well be conditional upon your health, will impact the investment options; whilst long term investment is good for equities, then it also begs the question why would you take money from a db pension as this would be an unwise thing for most people to do.

I took the pension based on my state of health. I would also like to pass the portfolio onto my child, should the worst happen.

Do you think that 50k is too much in Vanguard? Thanks for advice about spreading around various ITs any recommendations?

atush

What will be the IHT position of your total estate (as now you have 150K that was out of your estate but now in it)?

Do you have a spouse who has died, so you have a 2x nil rate band?

Do you expect to live for 7 years from now?

bigadaj

I'm just finding it difficult to understand your motives, which might be contradictory. You talk about generating a good long term rate if return, which would best be served by retaining the db pension. This is particularly the case when you have property, cash and equity investments elsewhere providing good diversification.

Anyway what is done is done.

Your original thoughts look fine, but given your need for income then selecting a few good equity income funds might be good, as unit or investment trusts or both, have a look on the monevator site and the motley fool forums, there is reference to high yield portfolios which might suit your needs. Drawing down an income of 5% whilst growing the capital to negate inflation is possible, though there's always risk in terms of hitting a stockmarket crash at a bad time, particularly early in the process.

You can speak to an ifa about setting up a portfolio, though it will cost you money, but may take away some worry about whether your selections are right.

Stumped63

atush wrote: »

What will be the IHT position of your total estate (as now you have 150K that was out of your estate but now in it)?

Do you have a spouse who has died, so you have a 2x nil rate band?

Do you expect to live for 7 years from now?

I don't have a partner and due to property prices, I will be hit by Inheritance tax but have put a life policy in trust that I hope will cover this.

Stumped63

bigadaj wrote: »

I'm just finding it difficult to understand your motives, which might be contradictory. You talk about generating a good long term rate if return, which would best be served by retaining the db pension. This is particularly the case when you have property, cash and equity investments elsewhere providing good diversification.

Anyway what is done is done.

Your original thoughts look fine, but given your need for income then selecting a few good equity income funds might be good, as unit or investment trusts or both, have a look on the monevator site and the motley fool forums, there is reference to high yield portfolios which might suit your needs. Drawing down an income of 5% whilst growing the capital to negate inflation is possible, though there's always risk in terms of hitting a stockmarket crash at a bad time, particularly early in the process.

You can speak to an ifa about setting up a portfolio, though it will cost you money, but may take away some worry about whether your selections are right.

Yes I can see where the contradiction lies but I am trying to remain positive and trying to create a new pension of sorts but failing this a long term fund for my child.
I've looked at those sites and come to the vanguard and IT approach.

Thanks for all your views I will contine with Vanguard for part of the funds and will split parts between ITs. I am thinking of splitting perhaps £25k between:

City of London
Temple Bar
Foreign and Colonial
Witan

Just my initial thoughts but open to your recommendations/experience of these funds.

Many thanks again.