Where to put £100k to beat inflation

microstar

Hi guys and gals
57 y.o. and just taken early retirement. I will receive an indexed linked pension of c.£30k P.A. and also have a SIPP which I'm not doing anything with for the time being. My wife is still working and our costs are very modest (everything bought and paid for, no debt), so my pension is quite adequate for our lifestyle.
Part of my retirement payout is a £100k lump sum. I am unlikely to need to use any of this for the foreseeable future (already have about £50k cash savings for emergencies).
My concern is to protect the £100k from erosion of value due to inflation. Any suggestions as to where I could put it with minimal risk to match or beat inflation?

ColdIron

Minimal risk and inflation beating? This won't happen so pick one or the other. Broadly; to have a chance of beating inflation you are going to have to take on some risk with investments. If you have a secure income and no immediate need of the money this might be a sensible course of action. If you have taken an income from your pension you are limited to contributions of £4,000 pa, or even £3,600 if you have no earnings, into your SIPP. Could you conribute to your wife's pension and gain some tax relief? Perhaps open an ISA and fill it with £20,000 pa for 5 years. For minimal risk you are looking at savings. 2%+ if you lock it away or maybe 1.5% for easy access. Perhaps consider a mix of the above

Audaxer

As your income is covered and you have £50k in savings for emergencies, and have no immediate need for the £100k, I would definitely invest it over the next few years in S&S ISAs for you and your wife. Invested in a low cost globally diversified multi asset fund to your risk tolerance would almost certainly beat inflation over the long term, and you could cash in gains as and when you need or want some extra income from luxuries.

Risk in this case means the level of volatility you can expect. It would be worth your while learning about investing on this forum and sites like Monevator. I'm not talking about investing in individual shares that are risky, but as I say global funds with a very wide and diverse range of equities and bonds. Some examples of these funds are Vanguard LifeStrategy, HSBC Global Strategy and L&G Multi Index funds. There is a lot of information about these types of funds on this forum if you search under these names.

Bear in mind with any investments there will be equity crashes and drops in value at times, but as long as you don't panic and sell when that happens you should be okay.

geoffers4

For zero risk, you've got fixed rate bonds (2.69% currently, minus whatever tax you would pay on interest) and cash ISAs (2.3% currently) - see savingschampion.co.uk for details. Depending on your personal inflation rate (i.e. the things you & wife buy) you might decide those rates are good enough.

Otherwise you're looking at investments, which all involve some risk and some management costs. For my modest investment I went for a Vanguard Stocks&Shares ISA (VLS60) - key point is to keep management costs as low as possible.

kidmugsy

Have a look at post #4 here.
https://forums.moneysavingexpert.com/discussion/5902217/advice-on-lump-sum-pension-portion-please

microstar

Thank you for all the comments so far....
To respond to the various comments...
1. I know that I will need to accept some risk to be able to beat inflation, and I am looking to minimise that risk (not zero risk).
2. I am a few years short of a full state pension, so I will be making some NI contributions but at 57 I think I might leave it a few years.
3. Probably not put any more into the SIPP - good idea or not?
I like the idea of a few years of £20k into SS ISA.

colsten

How much state pension are you likely to get? State pension forecast

If not the max amount, currently around £164 a week, consider making voluntary National Insurance contributions. They are an excellent investment if you expect to live into your 70s, 80s or beyond. Ask on the Pensions board if you need more info/help.

Hardly makes a dent in your £100K - I just thought I mention it

Albermarle

If you were to commit some or all of it to market linked investments , then it would be wise to do this in stages . What you do want to happen is to commit say £50K in one go and the markets then plummet .
A better strategy is to add say £5K every 6 months but keep doing it even if the markets go through a volatile period. In other words keep your nerve even if initially the investments are not showing a profit.

colsten

microstar wrote: »

3. Probably not put any more into the SIPP - good idea or not?
I like the idea of a few years of £20k into SS ISA.

I am a tad older than you but similar circumstances. Personally, I have stopped paying into my SIPP as I am a BR tax payer now, and expect to still be a BR tax payer (just) when I start drawing on the SIPP. I am putting money into ISAs instead.

An S&S ISA is, naturally, anything but zero risk!

kidmugsy

microstar wrote: »

... at 57 ... Probably not put any more into the SIPP - good idea or not?
I like the idea of a few years of £20k into SS ISA.

I don't see why. The same £ contributed is worth about 6.25% more in a SIPP than in an ISA, plus various other advantages such as being tax-free for your nominated successor if you die before age 75.

Also consider pension contributions for your wife.

NoMore

Do you need to take the lump sum or can you not take it and get a bigger annual pension instead ?