Endowment maturity 25K - investment suggestions please

MrStanners

My 25 year endowment finally matures for about 25k. Worked out it returned about 5% pa. My mortgage is paid off so I'm after some investment ideas. I already have some savings, probably too much in banks & not enough invested elsewhere. I now try to max out my ISA - half cash & half shares (L&G tracker, are they any good?).
In company pension scheme & pay into AVC.
Basic rate taxpayer.
Planning to retire in a few years.
Considered Vanguard LifeStrategy but since I may be wanting the money in say 10 years is this a good idea?
I'm not interested in any more regular saving schemes, I already have a couple on the go and I don't have the spare time for complicated schemes.
Thanks.

Archi_Bald

Pension top up?

MrStanners

I'm in one of the old defined benefits scheme. It closed to new starters a year after I joined it.
As far as I'm aware the company scheme won't accept lump sums.
I pay into an AVC linked to the pension scheme already and I don't think that will accept lump sums either.
Can I make a lump sum payment into another pension scheme at the same time? Would that be a SIPP or something else?

MrStanners

I'm showing my ignorance of pensions here.

On my pay slip I think I pay into my pension and AVC before tax is deducted, so my pension contribution is tax free.
If I make any additional payments into a pension scheme this will be with money that has already had tax paid, so I don't see what the benefit of this is compared to other investments. Unless I have to complete a tax form and can I then claim the tax back, is that the benefit?

chockydavid1983

Don't worry, I didn't know how it worked before I came on here :-).
When you contribute to a SIPP, you autiomatically get basic tax relief added on top, which effectively makes it as if you didn't pay tax on it. If you're a higher rate tax payer, you have to claim the rest of the tax separately. Not quite sure of how you do that (unlikely to apply to me this year) but sure someone else on here knows...

xylophone

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

It is possible to have an occupational scheme and private pension(s).

You need to have regard to annual allowance and lifetime allowance (see above).

If you open a private pension (personal pension/SIPP/ stakeholder), you make your contribution net of tax - the provider claims basic rate tax and you claim higher rate through Self Assessment/contacting HMRC.

http://www.hl.co.uk/pensions/interactive-calculators/tax-relief-calculator

http://www.investcentre.co.uk/Resources/Content/PDF/AJBIC_Summary_of_the_new_pension_freedoms.pdf

BLB53

Considered Vanguard LifeStrategy but since I may be wanting the money in say 10 years is this a good idea?

I like this option and hold it in my ISA - LS60.

I would think 10 yrs is a reasonable time horizon for an investment. There was an article on Monevator earlier in the week which may be of interest
Considered Vanguard LifeStrategy but since I may be wanting the money in say 10 years is this a good idea?
http://monevator.com/using-vanguard-lifestrategy-funds-life/

If you want simplicity, this could be a good option - maybe LS40 or LS60.

MrStanners

Thanks for the suggestions.
1. Regarding the private pension suggestion. If I invest in that, and it then gets topped up with basic rate tax, under the recent pension changes can I get 25% of the funds tax free? Seems to good to be true, where's the catch? Am I misunderstanding it?
2. Regarding the Vanguard LifeStrategy option, since I already invest in a shares ISA any investment in Vanguard LifeStrategy would be outside the ISA framework, would that make it a bad idea?

xylophone

See and read carefully http://adviser.royallondon.com/technical-central/information-guidance/contributions-and-tax-relief/member-contributions-tax-relief-and-annual-allowance/

Is the occupational scheme DB?

With regard to tax relief, remember relevant earnings and annual allowance.

That said, you will receive tax relief at basic rate on contributions to a SIPP - higher rate needs to be claimed through HMRC.

When you access the private pension, there will be the option to take a PCLS of 25% of the value of the pension tax free.

You would use the money contributed to your pension to buy funds/gilts etc ( if you wish - nothing to prevent your holding cash, ) within the pension.

There is also nothing to prevent your holding the same funds in your SIPP as you hold in your ISA.

If you go down the SIPP path, while HL are not the cheapest, their staff are helpful and well trained and can give you information about contributions etc.

MrStanners

Thanks xylophone. I have some reading to do! Yes the occupational pension is DB.

kidmugsy

MrStanners wrote: »

1. Regarding the private pension suggestion. If I invest in that, and it then gets topped up with basic rate tax, under the recent pension changes can I get 25% of the funds tax free? Seems to good to be true, where's the catch? Am I misunderstanding it?

The downsides are that (i) withdrawal of the other 75% is exposed to income tax, and income tax rates might be higher when you come to withdraw, and (ii) your capital is inflexibly tied up until you are 55 - which doesn't matter if you are already 55.

On the other hand, it's a pretty fine investment if you pay a lower rate of income tax when you withdraw because, say, (a) you pay 40% at the moment, or (b) you expect to withdraw when you may have retired before the normal retirement age for your occupational pension.