Investment Guidance Please - 200k Windfall

BigKaido

Morning everyone

Newbie post. I have always been a forum voyeur in the past and had not expected this very generous 200K windfall that is due to come to me.

Always been very impressed in the past with thread contributors and have taken on some sound pointers re ISA's and Mortgages over the years, which have been very beneficial financially.

Personal circs
Age - 51
Marital status - Married
No children
One Dog
My Tax status - Basic rate taxpayer
Spouse - Higher rate taxpayer
Location - Scotland

The windfall comes to me next month and I was hoping to get some ideas about various options that might be considered sound in terms of investments and tax implications etc.

My wife and I already hold Stocks and Shares ISA's and my intention was to use part of the windfall to max out this year and next year's ISA contributions and just stick to investment in Vanguard Life Strategy 60/40 as I have done in the previous couple of years.

I'm just not sure how best to manage the remainder in the short to medium term so any thoughts and ideas would be very much appreciated.

Many thanks

Linton

What is your pension situation? It could be highly advanatgeous to put more money into your spouses pension to take advantage of the saving in higher rate tax.


Do you have an emergency fund of say 6 months living expenses - if not set one up.


What do you want the remaining money for? If some is for the long term keep £40K in cash, perhaps a 1-2 year fixed term account, to max out the year after next's ISA.


You could set up a 5-year fixed term ladder: put 20% in each of a 1 year fixed rate account, a 2 year account... 5 year account. When each matures reinvest the money in another 5 year account. So each year you will have access to 20% of the money should you need it, otherwise it is gaining from the highest standard fixed rates available.

ColdIron

Gift enough to your spouse to add to their pension to take them out of higher rate tax and claim 40% tax relief?

BigKaido

Linton wrote: »

What is your pension situation? It could be highly advanatgeous to put more money into your spouses pension to take advantage of the saving in higher rate tax.

Do you have an emergency fund of say 6 months living expenses - if not set one up.

What do you want the remaining money for? If some is for the long term keep £40K in cash, perhaps a 1-2 year fixed term account, to max out the year after next's ISA.

You could set up a 5-year fixed term ladder: put 20% in each of a 1 year fixed rate account, a 2 year account... 5 year account. When each matures reinvest the money in another 5 year account. So each year you will have access to 20% of the money should you need it, otherwise it is gaining from the highest standard fixed rates available.

I will have a closer look at the pension element, thanks.

Good advice on the living expenses. We have always been very good savers and our focus was paying off our mortgage in recent years. We will definitely do this from now on.

Hadn't considered the 'ladder' option either. Will have a closer look at this. I had been curious as to how best to keep the money available and with a return but being able to access and use for ISA's in future years.

Thanks for taking the time to post Linton.

BigKaido

ColdIron wrote: »

Gift enough to your spouse to add to their pension to take them out of higher rate tax and claim 40% tax relief?

Thanks ColdIron. I am going to do a bit of research on the pension side.

Alexland

Yes consider the tax advantages of making additional pension contributions. These might be behind if you have been focused on mortgage overpayments.

Filling your S&S ISAs with £40k VLS60 each tax year sounds good. As the value grows with infrequent transactions then iWeb would be cheap. Also consider opening general investment accounts and keeping your capital gains and dividends within your annual allowances.

Also consider keeping money in tax free premium bonds until you can ISA wrap?

Shame dogs are not eligible for Junior ISAs although things might be different in Scotland.

Alex

BigKaido

Alexland wrote: »

Yes consider the tax advantages of making additional pension contributions. These might be behind if you have been focused on mortgage overpayments.

Filling your S&S ISAs with £40k VLS60 each tax year sounds good. As the value grows with infrequent transactions then iWeb would be cheap. Also consider opening general investment accounts and keeping your capital gains and dividends within your annual allowances.

Also consider keeping money in tax free premium bonds until you can ISA wrap?

Shame dogs are not eligible for Junior ISAs although things might be different in Scotland.

Alex

Ha ha. I'm not sure that the Dog wouldn't be eligible, he's too clever by half.

Thanks for the ideas I will have a look at premium bonds again although I had seen some posts recently about that not being a great option due to changes in the payouts and diminishing returns. I always like the idea of tax free returns though which is always nice.

Thanks Alex

Alexland

BigKaido wrote: »

Thanks for the ideas I will have a look at premium bonds again although I had seen some posts recently about that not being a great option due to changes in the payouts and diminishing returns. I always like the idea of tax free returns though which is always nice.

PBs really aren't a great long term option however if it's just a temporary holding position while you fill the Pensions and S&S ISAs over several years that might be fine. You could also consider going a bit more adventurous on your S&S ISAs to compensate (higher equity % in ISAs and thinking of PBs as more bond-like).

Although the evidence is that putting all your money into the market in one go is more likely to give the best results many people like to get in the pool gradually so they are less likely to see early big losses against their original capital. Still it might crash as soon as you have finished ISA wrapping the stuff.

Alex

Wildsound

Something to look at with the pensions is Carry Forward:

https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward

You need to contribute the maximum to your pension (and potentially your spouses pension) in the current tax year in order to be able to start claiming it.

BigKaido

You could also consider going a bit more adventurous on your S&S ISAs to compensate (higher equity % in ISAs and thinking of PBs as more bond-like).

I like the concept of this. Although one of the reasons I liked about VLS 60/40 was taking any thought (or temptation!) away out of the administration side for me. For me it helps to take the human factor out of any active 're-balancing', thus taking the temptation to mess about with sticking to a 60/40 split. I know I pay a slightly higher 0.22% for the pleasure of that but I think it will be worth it in the long run. Having to then calculate what % of the 'bond' element is PB would give me a pause. Not ruling it out. I always like to take a bit of time mulling any options over so really good food for thought.

Thanks Alex