£250,000 to invest

David_66

I am soon to come into an inheritance of £250,000 and would like to invest it in a way that I can take a yearly income from it of around £9500. I have just “retired” early at 52 I have few outgoings, no debts, the mortgage is paid off. I have no other income apart from a £1500 family gift each year at Xmas.
I also currently have £44,000 in an Aviva personal private pension via a financial adviser which I would like to move as I am paying 1% a year ongoing advice charge to the adviser on top of the 0.4% platform charge to Aviva and 0.81% investment charge (I think that is the OCF/TEF fund manager charge).
I am looking for a ready-made fund rather than managing the shares myself for the £250,000 inheritance and a similar ready-made fund for growth for the pension. I presume the £250,000 I should also over time move it £20,000 a year into an isa fund.
Thank you in advance for your help

Linton

Have you given us a complete picture of your situation? No other savings? What will happen when the donor of the family gift dies? What is your State Pension situation. Have you checked the State Pension forecast website? How many NI years have you accumulated?


The point is that what you should do with the £250K depends very much on your full financial position. If you had say £250K in cash ISAs then you could be less worried about the volatility of the values of higher returning investments.



In the worst case if you have told us everything, the £1500 will die with the donor, and you have a minimal State Pension then there could be doubts that you could safely, continuously and sustainably take £9500 inflation linked/year for the whole of the rest of your life from a £250000 pot, especially given your apparent lack of experience. And that is ignoring the question as to whether you could live for the next say 40 years on £9200/year taking into account possible house repairs, replacement of appliances etc.

David_66

Hello Linton
Thank you for your replay. Yes I do also have cash savings of £12,000, I will have to contribute more NI years as I only have 22 complete years so far, I believe it is around £700 to voluntary contribute each year which I have accounted for. (Annoyingly when I look at my record there are a number of years in in the 1990s where I don't have full years, one year I have 51 weeks, but that presumably wont count at all and it is now too late to make it up to a full year).

I have a small works pension which will amount to around £1500 a year if taken at 67 years of age.
When the family member who is gifting the £1500 yearly eventually dies (they are 85) there will be an inheritance from them.

I realise that taking £9500 from the £250,000 for the next 15 years could make it go down in value, but that is ok as when I am 67 I will have the full state pension if I top up my NI contributions, £1500 a year from my works pension and will also be able to draw some from my £44,000 personal private pension and would still have the £250,000 for emergencies or extra income if needed.

For the £250,000 I had looked at the Aviva ready made income funds but wondered if there was something similar but with lesser fees than the 0.4% Aviva charge and 0.73% fund charge.

Thank you

enthusiasticsaver

£10k is 4% on 250000 so not beyond the realms of possibility you could get that in income but of course there is no guarantee of that or that the capital won't be depleted. I have just sold income funds which have produced dividends of between 4% and 5% to move them into ISAs and SIPPs and although the yield was steady the capital was reduced somewhat. I think the AMC was 0.75. Check out Morningstar or trustnet or see an IFA.

I don't think you can rely on inheritance or gifts. My mum gifts us substantial amounts out of her income and is the same age as your relative but I would not count the gift or any inheritance as a given. Your relative could have care costs etc. Incidentally if you have any caring responsibilities you may be able to get NI credits for that if you are eligible for carers allowance.

enthusiasticsaver

You also need to check the tax treatment on dividends, one of the reasons we moved the capital into isas and sipps. £2000 is 0% but above that there are dividend tax rates which are different to PA rates so not sure if you can treat them as earned income within your PA which presumably you are not using if you are retired with no income.

Albermarle

For the £250,000 I had looked at the Aviva ready made income funds but wondered if there was something similar but with lesser fees than the 0.4% Aviva charge and 0.73% fund charge.

Actually 0.4% for a personal pension ( that usually have no other hidden charges ) is a low rate that was probably only available as you got it through an IFA. Typically for an individual with £44K it would be more like 0.8% + the fund charge .
However when you come to invest the £250K , you can go to one the low cost on line financial supermarkets like Hargreaves Landsdown, interactive investor , fidelity etc . Their platform charges are between 0.45% and a flat rate of £120 ?pa They also offer SIPP pensions that you could also transfer in to at some point although sometimes the SIPP is a bit more expensive than the non SIPP investments .

David_66

Thank you for all the replies

I Have been looking at the Vanguard LifeStrategy 80/20 for the £250,000 (£20,000 being moved into their ISA version each year) which seems to have attractively low fees (aren't their fees lower than Hargreaves, Interactive investor and fidelity or am I missing something?) and would seem to allow for monthly withdrawals to make up a £9500 yearly income without charge.
Unfortunately they don't yet seem to do pensions (though it looks like they will soon), so I would need another provider to move my £44,000 private pension into. Any specific recommendations?

From a quick google it looks like any dividend income from the £250,000 fund can be allowed for in my personal allowance. As I am only planning on withdrawing an amount lower than the personal allowance each year, presumably tax wont be an issue.

Thanks

dunstonh

I Have been looking at the Vanguard LifeStrategy 80/20 for the £250,000

There is a big difference between VLS20 and VLS 80. You wouldnt normally mix them.

which seems to have attractively low fees (aren't their fees lower than Hargreaves, Interactive investor and fidelity or am I missing something?)

The funds are no cheaper. VLS is around 0.33% depend on which version you look at (0.22% OCF plus 0.11 TC). However, the platform charge will be different as Vanguard only offer their own funds. The others are whole of market.

Unfortunately they don't yet seem to do pensions (though it looks like they will soon), so I would need another provider to move my £44,000 private pension into. Any specific recommendations?

Why not get a platform that does the whole job and use suitable investments and not tie yourself to Vanguard?

From a quick google it looks like any dividend income from the £250,000 fund can be allowed for in my personal allowance.

That is one way of doing it but its not necessarily the best way. Or most convenient way.

Actually 0.4% for a personal pension ( that usually have no other hidden charges ) is a low rate that was probably only available as you got it through an IFA.

Aviva do a cut ready made version around that price but IFAs would not use that one as the IFA version is cheaper. around 0.20% plus fund charge.

David_66

Thank you for the reply dunstonh

There is a big difference between VLS20 and VLS 80. You wouldnt normally mix them.

Sorry for my confusing description. I meant the VSL80 fund I was referring to it's 80 20 Equity/Bond split by the 80/20.

The funds are no cheaper. VLS is around 0.33% depend on which version you look at (0.22% OCF plus 0.11 TC). However, the platform charge will be different as Vanguard only offer their own funds. The others are whole of market.

If not Vanguard do you have a specific recommendation for the 250k which would be suitable for me to take out an annual £9500 in monthly or quarterly amounts and somewhere to move my 44k pension.

From a quick google it looks like any dividend income from the £250,000 fund can be allowed for in my personal allowance.

That is one way of doing it but its not necessarily the best way. Or most convenient way.

I wasn't sure what you meant by this. I presumed that I will only be taxed on money when I take it out of the fund? and that if I gradually move it £20k a year into an ISA it should then not be an issue in the future. Presumably I should also move the the maximum I'm now allowed to of £3,600 into my private pension.each year (£2,880 plus £720 back from the tax man)

dunstonh

f not Vanguard do you have a specific recommendation for the 250k which would be suitable for me to take out an annual £9500 in monthly or quarterly amounts and somewhere to move my 44k pension.

I am not the best person to ask as I wouldnt use VLS for £250k. (or any multi-asset solution). Its bespoke portfolio territory.

There is nothing wrong with it if that is what you really want. You could do worse.

I wasn't sure what you meant by this. I presumed that I will only be taxed on money when I take it out of the fund?

Yield is one method to provide a regular income. However, total return with sale of units is another. You have a dividend allowance but you also have a CGT allowance. You will use some of the CGT allowance annually but you would need to sell more down to use as much CGT allowance as possible. As you cant buy back the same fund, you could use some of it for that years withdrawal. (or use multiple funds).