What to do with 50K?

bouicca21

I have just retired and for the first time in my life have a substantial sum of money. I am fairly sure I can live on my pension as I am used to having to be careful and have used the predicted pesnion as my base budget for a couple of years.

This also means that I have no expectation of having to make any major capital expenditure in the next 5-6 years. I would like to splurge on some travelling, and the cost of that would probably have to come out of capital. I've already filled up several current accounts to get reasonable interest. after filling up a Santander 123, I am left with 30k to put somewhere else and can only think of a cash ISA for this year and topping it up in April.

I am risk averse and I have zero understanding of the stock market, so I wouldn't know how to go about choosing an S&S ISA. My fil used to dabble but the commission he had to pay wiped out any profit and at least one of the companies he invested in went bust (though it did have a very pretty share certificate, that I suspect might have been worth more than the paper it was printed on, if viewed as a work of art).

Futuristic

Can shove it in interest bank accounts if you want to play safe.

http://bankaccountsavings.co.uk

darkidoe

Similar discussion here: https://forums.moneysavingexpert.com/discussion/5367349

General advice would be to maximise Top interest paying current accounts first before considering anything else. That should take care of most of the 50K.

xylophone

General advice would be to maximise Top interest paying current accounts first before considering anything else. That should take care of most of the 50K.

OP would appear to have done this.

I've already filled up several current accounts to get reasonable interest. after filling up a Santander 123, I am left with 30k to put somewhere else and can only think of a cash ISA for this year and topping it up in April.

As she appears to have a good cash cushion, it would not appear to me to be too much of a risk to consider a stocks and shares ISA with £15000.

An equity income fund, or distribution fund might suit?

Eco_Miser

bouicca21 wrote: »

I am risk averse and I have zero understanding of the stock market, so I wouldn't know how to go about choosing an S&S ISA. My fil used to dabble but the commission he had to pay wiped out any profit and at least one of the companies he invested in went bust (though it did have a very pretty share certificate, that I suspect might have been worth more than the paper it was printed on, if viewed as a work of art).

You can drip feed from your 3% or worse accounts into regular savers paying 4%/5%/6%. See https://forums.moneysavingexpert.com/discussion/608697 for details.

Stocks and shares have improved since your fil's day - no upfront loading, small annual charges, and collective investments, "funds", that cover the whole market. See http://monevator.com/ for a lot of information.

atush

xylophone wrote: »

OP would appear to have done this.



As she appears to have a good cash cushion, it would not appear to me to be too much of a risk to consider a stocks and shares ISA with £15000.

An equity income fund, or distribution fund might suit?

I agree with this, being income averse is all well and good, but inflation will rear its ugly head before too much time goes by.

Investing some small amount of the cash, in a fund such as above in a S&S isa would be wise.

You dont have to take any capital, but let it rise and fall with the market. Just take income when you w ant, and reinvest it when you dont.

bouicca21

I rather thought an S&S ISA was going to be the answer. How does one choose a good one. It's not like a cash ISA where you just go for the best interest rate is it?

I have no idea what an equity income or distribution fund is.

Sorry to sound so ignorant but it really is only in the past few years that I have been able to stop counting not every penny but certainly every pound. So suddenly to have this lump sum is quite outside my normal way of thinking. I can probably find another couple of interest bearing current accounts, but I'm still going to have at least £30k going spare.

colsten

An S&S ISA is just a tax-efficient wrapper. Inside the wrapper you can have funds, shares and bonds, many of which are vastly different in what they provide.

You first need to decide which 'things' you want in your S&S ISA. That's called building a portfolio. There's lots of reading to do, and http://monevator.com/category/investing/passive-investing-investing/ is a good place to start at.

Once you have decided what you want to invest in, you can then choose the S&S ISA provider which is most suitable for your needs.

If all this overwhelms, you could go to an IFA. Or you could look into a robo-advisor - a new breed of "virtual" IFA (you can find some discussion about them on the forum).

But even if you go IFA/robo, it is a very good idea to have a proper grounding yourself before you hand over any money.

Going off on a tangent: as you got a firm income for life already, you might also want to put a bit (£20K, say) into Premium Bonds? You are unlikely to win big, but you never know.

colsten

Until you get to 75, you can also make further contributions into a SIPP. You can pay in £2,880 a year, and HMRC will top it up to £3,600. When you close the SIPP, you can draw 25% tax free, and the rest is taxable income.

Like an S&S ISA, a SIPP is a tax wrapper, and you have thousands of investments you can pick from.

This may all change in one of the coming Budgets, but so far still holds good.

Linton

bouicca21 wrote: »

I rather thought an S&S ISA was going to be the answer. How does one choose a good one. It's not like a cash ISA where you just go for the best interest rate is it?

I have no idea what an equity income or distribution fund is.

Sorry to sound so ignorant but it really is only in the past few years that I have been able to stop counting not every penny but certainly every pound. So suddenly to have this lump sum is quite outside my normal way of thinking. I can probably find another couple of interest bearing current accounts, but I'm still going to have at least £30k going spare.

You start off by getting an account with an S&S platform such as H-L,iii, Younvest etc etc. It doesnt matter a great deal which one you go for, as the fixed charges will vary but should be less than £150/year for £30K and the platforms mostly offer the same facilities. What varies is the elegance of the website and the amount and quality of user support.

You can then buy investments - normally individual UK shares or funds which may invest anywhere in the world. The total number of potential investments to chose from is several 1000's. So this is where the real problems start. For a beginner I would recommend starting with one very general fund and then focusing more when you gain experience.

Before you start investing ensure you have sufficient money in cash to cover any emergencies - say 6 months living expenses.

An equity income fund invests in dividend paying shares. Anything above say 3% could be considered an income generator. Companies that pay less may do so because they are rapidly expanding and so a good hope for growth. But of course they could just be duff companies.

An equity income fund just holds equities (ie shares) whereas a distribution fund will hold a significant % in other income generators as well, mainly bonds.

If you dont want to sort all of this out yourself you could pay an IFA to do it for you. However £30K probably isnt really enough to justify this.