£56,000 lump sum - advice please

atush

you say you are cautious but are in fact exercising High risk by keeping all the money in cash. So use some to top up your pension (it will get TR on top so will immediately be worth more). What pensions have you got already?

then consider at least half your ISA allowances into S&S isas. If the money is not needed for 5-10 years plus, it will not immediately be subjected to market falls. AS if you reinvest the income into shares, and dont sell during a downturn, it will grow faster than inflation while your cash wont.

Put the rest of yur cash where it gets more than the platry ISA you have it in. In current accts s described paying 3-5%

eskbanker

atush wrote: »

you say you are cautious but are in fact exercising High risk by keeping all the money in cash.

I agree with the rest of the post, and those of others earlier, but would challenge the notion that staying in cash is high risk - inflation risk is certainly a factor that many ignore but on what scale of risk measurement could it genuinely be regarded as 'high'?

atush

Too many eggs in one basket, and inflation risk is not the only risk cash suffers, you forget shortfall risk.

matt748

atush wrote: »

Too many eggs in one basket, and inflation risk is not the only risk cash suffers, you forget shortfall risk.

Not sure I understand atush: Kept as all cash may be low yield if the interest rates are low with regards to inflation, but high risk in what way? With an £85,000 UK protection scheme surely in my situation that's not high risk?

From the advice above, it looks like it's worth my while opening a sole and joint Santander account for the better interest rates, whilst also looking at a S&S ISA for longer term investment of say between 5 and 10 years.

Thanks to all for your advice.

Matt

Archi_Bald

matt748 wrote: »

From the advice above, it looks like it's worth my while opening a sole and joint Santander account for the better interest rates

You realise that the Santander monthly fee will shoot up to £5/mth from January, thereby making the effective interest worth even less than it is already?

The Santander 123 already offers one of the worst interest rates of all current accounts. Whilst it is conveniently taking £20K per account, for a little bit of extra effort you can get a real 3% APR, or even 4, 5 and 6% in other accounts, for at least £30K per person, plus a bit extra in joint accounts.

atush

First of all, there will no longer be 85K protection- it is being lowered.

Then, how long have you had this cash (some or all of it? What has been the inflation figure for that period? Sure inflation is low right now, but it hasn't been low all the time, and even after the crash it took some time to lower. And the facts are, if you keep it in cash and are getting 1% or less, you are not meeting much less beating inflation so your cash is shrinking (in its buying power).

Then, what is the money for? And when? If any of it is for 10 years or more, then you will also suffer shortfall risk. AS it wont grow as it needs to do to fulfill some future purpose incl retirement.

Equities in general (and I am talking funds and trusts and not single shares which are more risky) can be expected to return 4-5% above inflation over long periods of time.

Many funds and trusts return income of 4% or more, and have done for decades. And if you are reinvesting income, and dont need the money for a long time, the rises and falls dont affect you much. In fact, falls early on (esp if you are investing monthly as I tend to do) menas you boy more shares/units for your monthly money so it can benefit you.

I am not saying having cash is bad, I am just saying having ALL in cash, earning very little in interest, and no equities at all isn't a good move. As money for retirement needs to grow, not just hold still.

So consider putting some of your low earning cash isas into S&S isas. Drip feeding if you like. And putting unwrapped cash into current ccts paying better interest as the ISA status isn't helping you there.

And there is no problem if you w ant to put some of it into a new pension or pension for your spouse esp if they are younger.

jimjames

atush wrote: »

I am not saying having cash is bad, I am just saying having ALL in cash, earning very little in interest, and no equities at all isn't a good move. As money for retirement needs to grow, not just hold still.

So consider putting some of your low earning cash isas into S&S isas. Drip feeding if you like. And putting unwrapped cash into current ccts paying better interest as the ISA status isn't helping you there.

That was exactly my point. There is no reason why the whole sum needs to be used in exactly the same way. Even for a cautious investor having some equities would make sense. It's just the proportions that would differ depending on risk profile - but having none brings in a different sort of risk as you explained.

Alpaca

matt748 wrote: »

£114,000 @ 2.04%

Wouldn't it make sense to pay down the 2% mortgage rather than put money into ISAs that pay 1%? Or put another way, unless you can get more than 2% from savings/investments (after tax!) you should be paying off the mortgage instead.

I'd reckon it's definitely worth putting a chunk in p2p lending. It's not tax free, but with returns in the range 8-12% on some of the platforms, even after tax you're still doing a whole lot better than anything in a cash ISA. If it was my pot, I'd want to put £20k+ into p2p (sensibly diversified, of course, both on each platform and across platforms). At least until April when you'll be able to do p2p lending through ISAs. A final reason for doing some p2p is that the cashback deals on new accounts are quite attractive at the moment. There's one platform I know of where you can currently get £150 cashback if you invest £1000. That's an instant 15%!