Savings V pension

2stixoftwix

I am a 44 year old female who has been left a large inheritance (£350k)
Savings rates are rubbish, i have a personal pension with £45k in it held with legal and general

I don't have any debts
If you were in my shoes would you top up your pension, keep it in savings or a bit of both?

Number75

For that money I'd talk to an IFA.
You don't say how much you earn.
If it's over £45K I'd drip feed from the inheritance into my pension the minimum required to get back my full 40% tax relief.
You also don't say what your housing situation is?

dunstonh

If you were in my shoes would you top up your pension, keep it in savings or a bit of both?

Nobody knows enough to say what they would do in your shoes.

A sum of that size means you are likely to be looking at multiple tax wrappers and not just pension.

2stixoftwix

I run a company so £35k income and own my own home

ischofie1

Personally I would look at getting a large chunk in to your pension.
Not just the amount to keep you out of the 40% bracket as suggested earlier, if that applies to you.
Bear in mind you may be able to put all your salary in the pension & start to live of the £350K for day to day needs. The caveat to this is if your pension is via salary sacrifice, then you can only go down to national min wage.
I'd also make sure you fill up your ISA's every year.
& Yes I'd consider seeing an IFA unless you have the confidence & knowledge to do it yourself.

xylophone

https://forums.moneysavingexpert.com/discussion/comment/72307224#Comment_72307224

You might be well advised to consult an Independent Financial adviser concerning a savings/investment/pension strategy appropriate to your circumstances.

https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser

kidmugsy

2stixoftwix wrote: »

I run a company so £35k income and own my own home

I'll suppose you take £8k as salary and £27k as dividends. So be quick and in 16/17 (i) contribute £6k net (and thus £8k gross) to a personal pension of some sort.

(ii) Take stock of any capital you have in the company; consider having the company contribute up to £32k (being £40k - £8k) for you.

Note that (i) is urgent;your accountant may be able to opine that (ii) is less urgent because of the ability of a firm to carry back and carry forward various transactions. Speak to him as matter of urgency; I imagine that your company tax year ends on 31/03/17.

Do much the same in 17/18 but draw less in dividends because there's no point paying 20% corporation tax within the company and then 7.5% personal income tax on most of the dividends. If you still want to remove dividends stop at the amount that will avoid the 7.5% tax namely (£11.5k - £8k) + £5k = £8.5k. The money left behind in the company would again be contributed to a pension for you. Then in 18/19 that "+ £5k" falls to '+ £2k': adapt the arithmetic accordingly.

Next, ISAs. In 16/17 contribute £15240 to an ISA - because you are in a hurry a Cash ISA with your bank or building society will do; you can sort out long term investments at your leisure. Then at the start of 17/18 i.e. at or soon after 06/04/17 add £20k to that ISA. When you've found an IFA you're happy with he'll discuss with you the long term use of that money.

Before you've found your IFA go ahead and bung £50k into Premium Bonds at ns&i: do it before the end of this month and your money will be in the "draw" in May. Quick, quick. In the current climate of derisory interest rates PBs pay out quite well.

Now, The Big Deal - spread your money around so that you don't have more than £85k with any one building society or bank (this limits the risk to your wealth of a bank collapsing). Or more precisely, don't hold more than £85k with any one group of associated banks operating on one banking licence. Or get round this tiresome restriction by parking much of the money temporarily with ns&i, whose deposits are guaranteed by the Treasury up to some limit too large for you to worry about.

Then catch your breath and set about finding an IFA who suits you. The urgency will have abated. Take your time with making decisions.

2stixoftwix

What an excellent response thanks kidmugsy.
I had never thought about premium bonds. I've got a couple of grand in them but don't think i have ever won anything.
Lots of options. Easy to put my salary straight into the pension. Already thought about the company putting in the pension, i think i have missed it for this year though.

dunstonh

Easy to put my salary straight into the pension.

But should you? Should it be a company contribution instead and you live off the capital instead of drawing dividends?

i think i have missed it for this year though.

No. Still time.

atush

I'd be opening a S&S isa today, and whacking in the full 15K plus. You c an leave it in cash just for the moment, but you need the money in by april 5th and you can do this online (HL or Cavendish online). Open another after april 6th, and put 20K in.

Then yes, I would open a PP or sipp if yours doesnt take new money (or even if, if the charges are high) and put in enough to use up this year PA (40K or your income, whichever is lower). After april 6th, do it again.

That will shelter 105K of it from tax. You can then take your time to hire an IFA as you wont have lost this years allowances and he can then help you invest the money, or you c an use a Vanguard multi asset fund or a global tracker in the meantime.

You will want some money in cash (at least 6 months living costs), and to keep it all safe for now could put it into an NSI account.

Investigate interest paying current accounts and regular savers here, and read up on peer to peer as well.

Just come back and ask us again about anything you are unsure of.