100k planning advice

beancounter1968

Hi Everyone

It's been a long time since I last posted on here so hope everyone is well.

I am about to leave my employment and offload my shares in the company. After all the various taxes have been deducted I am reckoning on having about £120K. I intend to settle the remainder of my mortgage £15K so that will leave me with about 100k to do something useful with. I expect to turn on a self employed income stream in about 6 months time. I am 48.

Any pointers on some of the options avalilable to me?

Thanks for reading
p

Linton

There are a wide range of options. What do you want the money for? Financing the self employment? Living off? Retirement? Give to charity? A pot for your nearest and nearest when you die?

Only once you have some objectives defining when you want to spend your money can we make useful suggestions.

beancounter1968

I guess I am looking to make sure that I never have to worry to much about money in the long term. I don't need any of it for my self employed venture and my wife's job will cover the remaining bills after mortgage has gone. The future income stream should cover any holidays and breaks. I have some savings already and I think I am one of those who doesn't spend a lot but likes to know it's there if I need something.

In terms of charity, I am looking to do some voluntary work over the next few months and maybe one day a week beyond that.

Probably the vaguest response which I apologie for :-)

Robin9

You don't mention pensions

Linton

£100K sounds a lot but unfortunately it's not really life changing. By investing in share and bond funds you could for example get a fairly steady income of say £3.5K from it. Useful, but not a guarantee that money wont be a problem in the future.

What arrangements have you made for your retirement? Do both you and your wife have adequate pensions?

Assuming that I had good pension cover and didnt need £100K for the next say 15 years I would do something like:

1) Ensure that at least 6 months living expenses are available as an emergency fund in an instant access bank account. Say £15K. This leaves £85K.

2) Invest the rest in a broad range of share and bond funds. If you dont have the knowledge to do this £85K is getting towards the amount at which help from an IFA could be justified.

However you may not be happy about doing this. Other alternatives include maxing usage of the currently available high interest current accounts. You would find it hard to use up £85K in this way, and as these accounts are loss leaders for the banks designed to attract new customers I doubt they will last forever. One downside is that interest would be taxed unless your income was very low. With care and good use of S&S ISAs any income from from shares/bonds can be tax free.

colsten

Linton wrote: »

Other alternatives include maxing usage of the currently available high interest current accounts. You would find it hard to use up £85K in this way, and as these accounts are loss leaders for the banks designed to attract new customers I doubt they will last forever. One downside is that interest would be taxed unless your income was very low. With care and good use of S&S ISAs any income from from shares/bonds can be tax free.

Max you can put into interest paying sole current accounts is £50K. You'd probably want to use one or two of these for your £15K emergency fund, so you still need to find a home for another £50K. ISAs only take just over £15K each year, meaning it will take a few years to get all the cash into ISAs.

OP could consider putting up to £40K into a SIPP?

Bottom line I tend to agree, they should be consulting an IFA.

beancounter1968

Thank you for all your suggestions.

In terms of pensions, I have an old final salary pension scheme which froze back in 2001 with about 12 years contributions. Confess I have no idea at this stage what this is worth. I also have my current scheme which had a pot value of about £150K.

Prior to leaving and getting the new cash, we have about 30k in various accounts so more than enough to cover our usual expenditure. When interest rates came down back in 2009, I increased my mortgage payments to a level whereby this accounts for about 50% of current expenditure. Monthly expenditure will be quite a bit lower.

One thing not mentioned was buying a small property to rent out? The property would be affordable in this part of the world and would provide an income stream unencumbered by a mortgage so less pressure during the times it wouldn't have tenants.

kangoora

You're writing about selling shares and various taxes deducted leaving you with £120k. Assuming CGT of 28% on the majority of that it works out circa £30k CGT if you sell all your shares in one year.

It would take a while but you could sell shares and pay no taxes.

You mention a wife in a later post.

Transfer half your shares to your wife, no tax to be paid on transfer. Each of you sell enough shares per year to keep just under £11k profit on those shares. If this results, for example, in £30k cash each year, you do this over 5 years and you can sell all of your shares, pay no tax, and get out £150k over the 5 years.

Gadfium

If the shares were bought as part of a Share Incentive Plan, then you may be able to sell them from within the plan (assuming that they are out of the conditional period). Depending on the plan type then the sale may be CGT exempt.

macman

Between you and your wife you can open 3 Santander 123 accounts (2 sole, one joint) paying 3%. That will take care of £60K without risk and give you a gross income of £1,800.

xylophone

In terms of pensions, I have an old final salary pension scheme which froze back in 2001 with about 12 years contributions. Confess I have no idea at this stage what this is worth.

Deferred rather than frozen.

Contracted out? https://www.barnett-waddingham.co.uk/comment-insight/blog/2014/08/18/what-is-a-gmp/

https://www.barnett-waddingham.co.uk/comment-insight/blog/2012/07/24/revaluation-for-early-leavers/

You don't receive annual statements?

If not, so that it's just a case of keeping the administrator advised of any change of address, have you done this?

You have kept a note with your will that the pension exists?

Had you thought of making the maximum contribution to your DC pension for this year?

https://www.gov.uk/tax-on-your-private-pension/pension-tax-relief