Investing retirement lump sum

WW1

Hi all. I'm looking for some advice for my mum regarding investing a lump sum of £40k. From my initial research, it seems like £15k can go into an ISA but what do you recommend doing with the rest (approx £25k). The £15k isa will remain untouched for 4 yrs but there will need to be access to at least some of the other money.

Any suggestions? We're new at this! Thanks in advance.

jimjames

Do you mean investment or savings?

Money in investment ISAs is accessible with a few days notice but cash ISAs may be fixed rate with set terms of say 2 years etc.

You can put £15k each year so by next April you'd get £30k inside an isa.

Really depends what her aim is for it, long term income or best income now? For best now you can get 5% outside an ISA so the £25k would be perfect for that. Long term it may be worth having at least some invested so she gets inflation protection.

WW1

Thank you for your reply. I appreciate it.

I imagine she'd be much more comfortable with savings rather than investment. I'll have a look at the best rates available with a view to putting £15k into an ISA and moving more of it to an ISA in April. In the meantime I'll have a look at finding savings accounts with the best return I can for the £25 k.

Thanks again

kidmugsy

WW1 wrote: »

In the meantime I'll have a look at finding savings accounts with the best return I can for the £25 k.

I'd start with interest-bearing current accounts at TSB, Nationwide, Lloyds, Santander, BoS, Tesco Bank ....

There are lots of threads on the forum.

badger09

Is your mum currently a taxpayer? If she isn't, and is not likely to become one, then forget about cash ISAs.

Start by looking at the current accounts mentioned by kidmugsy. Some have a few 'hoops' to jump through, but can all be automated once set up

WW1

She's just retired so has paid tax this year. I guess she won't be paying much in the future though. I'll definitely look at the current accounts you've mentioned. Many thanks for your advice.

bowlhead99

If you haven't actually taken the £40k just yet and you are going to wonder what to actually do with the money when you get it, an option might be to take a smaller lump sum and have access to a larger pension from your pension provider.

If you've taken the sum and it's burning a hole in her pocket (she only needs access to 'some' of the money), something that can be very worthwhile is deferring her state pension. For example if she was going to get £5k a year of state pension, but already has a £5k surplus in her own cash account, she can tell DWP she doesn't want it, and just spend the cash she already has in her account. This will give her either a lump sum bigger than the £5k she gave up, or a larger state pension for life - more money the longer she can afford to defer it.

That would be one of the lowest risk options, particularly if she is looking for a return better than cash and doesn't know exactly how long she can leave it for, so isn't keen on investments that she doesn't understand.

Of course if she is not of state pension age it is a non starter for now, but at some point she will be, and it is always worth considering (even though the terms and relative attractiveness compared to other market investments might change over time).

kidmugsy

For interest-bearing current accounts see also The Budgeting & Bank Accounts Board.