Investment Advice.

BostonR

I have £30K I would like to invest, I would appreciate some advice on the best short and long term options.
My situation is that my wife and I are in our mid 50's, house almost paid for (value £800K), both working with very good incomes, two boy's at uni in second year.

We have savings of £100K in the bank and not doing much, hence looking to invest £30K from that pot.

Any advice would be welocme.

Regards
BostonR.

colsten

BostonR wrote: »

I have £30K I would like to invest, I would appreciate some advice on the best short and long term options.

If it is short term, it is saving, not investing. Long term is 7-10 years plus. Which one is it you are after? What level of risk are you prepared to take? What tax rates are you on? What is your mortgage rate, what if any options are there for early redemption? What are your pension provisions? What tax rates are you both on? What if any ISAs do you have?

Nobody on here can give you advice, just suggestions. But you need to provide a lot more information for anything sensible to be put forward. You can get proper, paid for, advice from IFAs.

RickyC_IFSWP

Colsten has asked some great questions, and answers to them would narrow down the options for you.

To clarify things, I presume you meant that the £30k is for long-term investing, and the remaining £70k on deposit is short-term savings.

For the long-term investing, the common approach would be ISAs or Pensions. The benefit of one over the other would depend on factors such as your income tax rate and when you'd like access to the money (i.e. purpose of investing). If you're leaning towards ISAs, then coincidentally the £30k will be able to maximise both your ISA allowances and you should be looking to invest in investment funds for diversification, as opposed to direct share holdings. I'm sure there's plenty of info on the forums to cover this in depth.

For the short-term savings, this could involve the current account promotions and some fixed-term deals. If you may need this money for your children's university fees and/or any major expenditures, then incorporate it into your overall planning.

BostonR

Thanks for the responses - here is some additional information:

What level of risk are you prepared to take? I am not risk adverse.

What tax rates are you on? Both 40%. My salary and bonus is £100k and my wife is £65K.

What is your mortgage rate? Fixed at 2.4% for 3 more years and currently paying 10% off each year. Balance is circa £100K.

What if any options are there for early redemption? Can only pay-off 10% on present deal and will be looking for another option in 3yrs.

What are your pension provisions? I have various pensions and am currently on 14yrs service on a final salry scheme. My wife has a small superannuation pension only.

What tax rates are you both on? 40%

What if any ISAs do you have? None.

vectistim

Both in your 50s, 40% tax payers, £30k to chuck around.
You've got to be looking at pensions - the taxman will magically change that £30k into £50k, before considering any growth that it might achieve.

RickyC_IFSWP

I'm favouring pensions for your wife as she only has a small pension - she would benefit from the 40% tax relief (as would you...) but also be able to draw the income post-retirement to use up her personal allowance. If you personally exceed £100k income p.a., then top up your pension to bring your income down slightly (this would stop you losing your personal allowance for income tax).

If that's not your cup of tea, ISAs are still good given that your non-ISA savings have 40% tax on the interest received.

BostonR

Thanks for all the advice - really appreciated.

gkerr4

vectistim wrote: »

Both in your 50s, 40% tax payers, £30k to chuck around.
You've got to be looking at pensions - the taxman will magically change that £30k into £50k, before considering any growth that it might achieve.

this is good advice! - put it in a self select SIPP and the tax man adds some for you and a little more when you do your tax return at the end of the FY.

you can remove 25% of a SIPP value when you are 55, but the rest must be used like a regular pension.

its certainly what i'd do - but i guess you can value internet advice based on what you pay for it!;)

RickyC_IFSWP

gkerr4 wrote: »

this is good advice! - put it in a self select SIPP and the tax man adds some for you and a little more when you do your tax return at the end of the FY.

you can remove 25% of a SIPP value when you are 55, but the rest must be used like a regular pension.

its certainly what i'd do - but i guess you can value internet advice based on what you pay for it!;)

This is true up until April 2015, when the new pension rules kick in and effectively any amounts (no upper limit) can be withdrawn from pensions... making pensions more attractive! Of course 25% of withdrawals will be tax-free and the remaining 75% will be taxed at marginal income tax rate.

guymo

One thing to keep an eye on if you are making additional pension contributions is the annual allowance. At present you can only contribute £40k gross per year to a pension without having to pay tax. It gets complicated for final salary pensions: the amount of the annual allowance used up by the final salary scheme each year is calculated as 16 times the increase in annual pension benefits.

So if e.g. you are on a DB scheme that accrues 1/80 of final salary per year, then each year you use up (16 * 1/80 * your salary) of your annual allowance. So in your situation, you'd be using up about £20k of the AA via the final salary scheme, meaning you can only contribute another £20k to pensions without paying tax.

It's slightly more complex than that in fact --- the increase is reduced to account for inflation --- and if you get a pay rise then you'll use up even more. But to mitigate this, you can carry over unused allowance from the last three years. More details:

http://www.hmrc.gov.uk/pensionschemes/annual-allowance/pension-input.htm#3

gkerr4

RickyC_IFSWP wrote: »

This is true up until April 2015, when the new pension rules kick in and effectively any amounts (no upper limit) can be withdrawn from pensions... making pensions more attractive! Of course 25% of withdrawals will be tax-free and the remaining 75% will be taxed at marginal income tax rate.

ah yes - this is true! - i'd forgotten!

and yes - increases the attraction somewhat