£740k Investments/Potential Redundancy age 50-Income options?

philng

I originally started a thread back in 2011 when our joint investments were £360K and updated 2 years later at £480k.
I have been lucky on the market in the last 2 years benefitting from a large Lloyds share holding circa 40% of our total holdings and also a £50k inheritance.
Our investments now amount to £740k and I will find out if I have got Voluntary Redundancy on 5th May which would amount to around £87k less tax implications. I also have approx another £50k from sale of my late fathers house when we find a buyer.
I am pretty sure this is the time to move on after 31 years working for same company and may look to delay drawing my final salary pension of £20k until NRA of 60-Scheme does allow withdrawal at age 50 but with adjustment for drawing early.
This will mean I will need to set up my investments to provide a sustainable income of bewtwen £2k & £2.5k pa,
My wife also holds a deferred final salary pension of around £7k which she can drawn in 10 years time (she is 55) plus around £90k in Money Purchase.
Any suggestions around my scope to provide the income stated would be appreciated-I know I will need to restructure my current holdings.

philng

Sorry the 2 to 2.5 k should state per month.

Jsscmm

With numbers that size and with the 'once in a lifetime' importance of the decision, it feels like appropriate professional advice may in in order.

TheTracker

Having effectively doubled your investment value in 4 years I'd punt that you have a fairly high risk portfolio. Would you mind sharing it? I imagine previous threads said you should consult an advisor?

On one hand it lends to a course of action where you should reduce the risk level, at least until pension age. On the other, you have a sizeable situation all told and may not need to.

philng

Approx largest parts of portfolio:

Lloyds £250k
RollsRoyce £24k
Compass £15k
AVIVA £11k
Glaxo £12.5k
L & G £11.5k
Shell £16k
Standard Life £14k
TUI £10k
Vodafone £12.5k
City Of London IT £11.5k
L & G Tracker Index £15.5k
First Grp £10k
Cash ISAs £44k

Quite a few smaller investments under £10k plus £50k lump sum built up in pension that can be drawn when drawing pension plus lots of the 3 to 5% current account offerings amounting to around £80k inc £20k in 123 Santander.

Feel that a mix of Investment Trusts would be lower risk but feel Lloyds have come thru there issues and the Div will start to build from here.

Put off by IFA charges on this sort of portfolio amount.

Bazofts_Revenge

Your wife could take her pension now and probably receive 60% of her entitlement. Don't see that as a loss as she will be getting 10 years worth of payments early allowing you to do as you wish. Again with your own work out how much income you will receive if you take it early. Roughly your wife would be in front in her total income until about 80 years old if she took her Pension at 55 rather than wait until 65. Looking at your main savings (£740k) you only need a return of 4% to get what you want in any case.

In 5 years time your Pension (£20k *60% adjusted) £12000 + your wifes (£7k * 60%) £4200 = income of £16200 per annum. Leaving you with just £13800 to make from your investments means you need to just make 1.8% on those investments which is easy.

Your actuarial adjustment may be less if your Normal retirement age is 60. Make your self a simple spreadsheet and work out your breakeven point.

jimjames

If 40% of your portfolio is in one share then that is something I'd be taking urgent action to address.

kidmugsy

philng wrote: »

Voluntary Redundancy on 5th May which would amount to around £87k less tax implications.

I'd consider making a pension contribution to avoid those "implications", if they are at the higher rate.

lamb1102

As Jim James says, 40% in one share is a huge gamble. It may pay off or end in tears when Labour are gunning for the banks.

kidmugsy

For £30k p.a. I'd suggest that for 2016-17 you aim at getting ca £10.6k p.a. interest, plus another £1k p.a. interest if Osborne's tax-free plan is implemented. (Same for your wife if she will not be earning.) Maybe an ETF of short-dated corporate bonds would have a role to play here, plus, of course, as much money as a couple can usefully stow in high interest current accounts. Anyway, make sure that such income is classed as interest so that you'll be due a tax refund on any tax deducted.



Take the other £20k perhaps as dividends or capital. In your shoes, subject to the CGT implications I'd get rid of the rag-bag portfolio and invest in ETFs, OEICs and Investment Trusts. How much of that heap of assets is in ISAs?


One investment I'd consider is putting a large lump into an investment trust that prioritises defending your wealth over increasing it: Personal Assets Trust. Their investments plan would be a convenient way to take a quarterly income.
http://www.patplc.co.uk/sites/default/files/documents/Inv%20Plan%20%28inc%20KFD%29%202015.pdf

Using a platform you could put more into other outfits attempting the same sort of job: Ruffer Investment Company, and the relevant OEICs at Newton and Standard Life.

Also in your shoes I might aim to have 10% of my portfolio in Gold/Silver. What about buying some woodland, or agricultural land? I'd want some assets in foreign currencies (an ETF of US TIPS, perhaps?) and then a global scatter of investments, run to keep costs and taxes down.

bowlhead99

One thing you might not have considered is a capital gains tax bill embedded in the unrealised valuation of your shares. If you held most of those Lloyds shares when they were worth £100k instead of £250k, and they weren't all ISA'd, you may have £150k of gains to pay tax on at 18-28% when you sell them (depending on your marginal tax bracket, availability of annual exemption - presumably easily used up while exiting the other positions - and so on. Or maybe you bought a lot of Lloyds at much higher prices than the current level and are broadly OK in terms of average buy price vs average sell price not being a monster gain.

If not, this may tempt you to defer dealing with some of your holdings to minimise tax. For example, you might 'feel' that Lloyds has come through their issues and will not now go completely down the pan once the government step away, so you might as well keep it for a bit longer and exit using more annual exemptions. But a third of your investible assets in one company is mega high risk and you should make sure you don't let the "tax" tail wag the "portfolio allocations" dog. Similarly not let emotions and the fact the Lloyds shares were "good to you" since 2011, have your heart rule your head.

You're right that a portfolio of investment trusts or funds would be lower risk. With a £750k UK investment fund, Lloyds might perhaps be £10k of your portfolio, 1.33%. In yours it is 33.33%, i.e. 24x too high. And in reality someone wouldn't have all their portfolio in a UK investment fund, because UK is only one country out of plenty in the world. But I don't want to bang on about it too much as you've already acknowledged change is needed

The tax problem may not exist of course if most of these shares are wrapped in ISAs. You mention cash ISAs of £44k - is everything else ISA wrapped too? It sounded like you were making good use of your ISA allowances on your thread back in 2011 and you've had another £127k of allowances between the two of you since then, so maybe more than half of the equities are covered, depending on what has grown where and when. After re-jigging your portfolio this time it may make sense to sweep your cash ISAs over into S&S ISAs to make sure you're making best use of them.

I agree with the first reply that a portfolio of £750k invested for income while maximising tax planning for the two of you plus the interaction of existing pensions sounds like something you could usefully throw £10k at a professional advisor to work out for you. As you probably know from looking at the markets, the paper value of a £750k portfolio can fluctuate by £10k in a single day anyway.

Back in 2011, it was also a suggestion you rejected and went ahead with a pretty imbalanced portfolio, which seems to have done OK as it turns out (some would say 'luckily')... but you recognise that you 'need to restructure'. Forums like this and Fool etc are useful for getting ideas but perhaps their value is in giving you ideas and arming you for a competent discussion with an adviser, rather than telling you explicitly what you should do as a complete DIY solution.