How to save a large sum of money for retirement.

IOMGIRL

I live on the Isle of Man. My UK house has just sold and I am wondering what is the best thing to do with the money to get me through retirement, which will start in 2-3 years time.
I believe an annuity is not an option if you have not been paying into a pension pot. Is this correct?
I do not want to buy another house, but need the money from the house sale to work for me, as I shall have no other income in retirement other than my state pension.
I need to be able to release the money gradually.
Any ideas?

Linton

I assume that you own a house on the IoM and that you now have a large lump sum ( > £100K) to support yourself for the rest of your life.

Devising the right strategy for long term income from a large sum of money is not a trivial job as it depends on complex considerations and your detailed circumstances. You wont get a simple answer you can trust from an Internet forum - you should in my view consult a regulated Independent Financial Advisor. I have no idea whether the UK regulation scheme applies to the IoM, so you will need local advice on this.

But to give you the basic options.....

1) You can buy annuities with non-pension money. I think these are known as (edit) Purchased Life Annuities - try Google. As they are bought with taxed income there is less tax to pay on the money received, at least in the UK. The IoM may be different. They are less frequently used than pension annuities and so you would need local specialist advice. As an annuity they have the advantage of guaranteed income for your lifetime but the disadvantage of you losing the lump sum. Providing an index linked guarantee is expensive and so you may get higher but less secure income in other ways. A fixed annuity will give you a better return, probably higher than you can safely drawdown from investments, but you run the risk of inflation seriously reducing the value over the long period you hope to be retired.

2) The other option is to arrange an income from investments. There are many ways of doing this, but if you have little experience of investing I would say that its a job for a professional.

IOMGIRL

Thank you for your thoughts Linton. It is all very helpful. I don't expect full answers from the forum and will take financial advice locally, but it is useful to know what others think and have done, too. It will help me to frame the questions.

Vortigern

Linton wrote: »

You can buy annuities with non-pension money. I think these are known as Immediate Life Annuities - try Google.

I think you mean Purchased Life Annuities? An Immediate Needs Annuity is usually suggested for care home funding.

xylophone

http://www.gov.im/categories/benefits-and-financial-support/social-security-benefits/retirement-and-pensions/pensions-news/single-tier-pension-frequently-asked-questions/

might be of interest if you reach state pension age on or after 6 4 2016 and will receive the IoM Retirement Pension rather than a state pension from the UK.

HarryD

You have so much choice - maybe too much choice. And it depends upon so many things. For example, would the income from this cash pile and your state pension be your only incomes?

Don't be tempted to invest in one or a small number of shares. (I invested in Tesco a couple of years ago thinking what could go wrong with them... Only a small amount fortunately.)

For an investment that's simple and should grow over time you could look at an index tracker unit trust. The charges tend to be very low. And your money is spread across all the companies on the London Stock Exchange. However, even this might be too high risk for you - specially if stock market rollercoaster ups and downs would make you nervous.

But there again, having all your money in cash is not a good idea as by the time you're in your 90s it'll probably be worth diddly squat and the income worth not a lot.

As Linton says, may be worth consulting an advisor but watch out - make sure you know what they are going to charge you and how. And you can always run their advice by this forum to canvas views on it.

omgpop1

id say put some/even most in stock market,
buying index link funds/etfs
as u want to reduce risk of losing money, usa is the best market to buy,
so if u buy this etf; iusa (type in google finance) ISHARES PLC ISHARES S&P 500)
this tracks top 500 usa companies last 5 years 10 -15% up every year last yr17%
low risk as it tracks 500 best companies in usa with best economy
and no tax to buy etfs id use iweb to buy it as low cost $5 to trade, but it is basic but jus buy it and leave it imo sell it if u need money

HarryD

omgpop1 wrote: »

as u want to reduce risk of losing money, usa is the best market to buy,

That is a matter of opinion! The USA could tank, the dollar could fall.

Buying a unit trust or investment trust that invests all around the world, maybe.

jimjames

omgpop1 wrote: »

err look at the gdp numbers and ue numbers, usa =small %growth europe 0% growth japan -ive growth, besy place to invest last 5 years is usa in 5 yrs ftse100 27%up, s&p500 87% up, last yr ftse100 -0.22% sp500 17%

Past performance - need I say more!!

James_B.

omgpop1 wrote: »

err look at the gdp numbers and ue numbers, usa =small %growth europe 0% growth japan -ive growth, besy place to invest last 5 years is usa in 5 yrs ftse100 27%up, s&p500 87% up, last yr ftse100 -0.22% sp500 17%

Speaking as someone paid to trade in the financial markets, I hope to god that you only post this stuff on here, and don't get to play with other people's money.

What you've written there is no better than saying "bet on the greyhound that takes the biggest dump before the race".

You are, I assume, an amateur investing no more than a few hundred thousand?

BLB53

Personally, I would consider investing the sale proceeds in a basket of income producing investment trusts - you can sift through some via https://www.theaic.co.uk

I have a number of such trusts in my ISA - City of London, Murray Intl., Temple Bar, Finsbury Growth & Income, Edinburgh are some I would recommend.

They mostly pay out quarterly dividends. The combined yield is around 4% and this tends to rise each year a little ahead of inflation. So, with a lump sum investment of around £50K the starting income would be £2,000 per year which is roughly double what you get in the average building society cash deposit a/c

For more reading on this, if you think its worth pursuing, have a look at a couple of sites https://www.diyinvestoruk.blogspot.co.uk - check out posts relating to investment trusts, also https://www.johnbaronportfolios.co.uk check out the autumn/winter portfolios

Good luck!