Sizeable investment help/thoughts

tmack

This could be a long post and I apologise, however know its best for the forum to know what the goals are and would be interested in anyones take/advice on what I am doing.
My husband died last year Age 49 😢, i am five years older. Full time Mum to our son who is now in first year Uni on a tennis scholarship (aspires to become a pro player but if doesn’t happen , a life in tennis in some capacity). I am 55 now and thinking of myself as semi retired/retired with potential to work part time if necessary but likely at minimum wage. However, I need to secure the future for both myself and my son as no work income or spouses pension.
I am quite Savvy and have time to explore and understand and enjoy the financials. (Doesn’t make me proficient though)
I need to ensure I can live for as long as it is.....
Current Situation: moved back to roots, used life assurance, so no mortgage, sale of previous home ...contracts not exchanged but close. So sales proceeds Expected £265k (April 2019)
I want to invest/provide income for the future but also live for the present.
Current financials: I tend to be a risk taker but worried I may need to scale back and be more conservative
Cash: Banks building Societies £108700 (78k in Marcus)
S&S (breakdown is another question/query) but mostly uk, global and emerging
Inv accts £48530
S&S ISA £50300
P2P £59490 (Kuflink and Twino)
So...I will have £265k approx to invest in next month or so. I know this all feels like a lot of money but it needs to be for life.
I am thinking it may be worth buying a two bedroom flat for my son that he could then rent out a room for another uni player and assuming i live seven years there is no inheritance tax issue
Thanks for potential feedback.
X

xylophone

Have you checked your state pension position?

https://www.gov.uk/check-state-pension

Do you have any private pension provision?

You will move unwrapped investments into ISA as soon as possible?

You already own a property outright?

You intend to give your son sufficient cash to buy a property outright?

Thrugelmir

Lack of pension provision sticks out. Certainly something you need to consider.

P2P £59490 (Kuflink and Twino)

Are you comfortable with such a high exposure to P2P ?

Mr.Saver

A few things stand out:
No pension
40% cash position for "a risk taker"
£59490 (22%) of your overall wealth concentrated in (100% loss potential) P2P lending

bostonerimus

Have you done a budget? How much do you need?

Have you run the numbers for a buy-to-let to see of it is right fro you. ie what will your net income be after all costs and taxes.

Look at the pension and ISA options, until we know the level of income you want/need it's impossible to recommend an asset mix.

tmack

Hi All.
Thanks for the questions.
1. State Pension; I am about 5 years short of full pension based on NI contributtions so at the moment would be around £152 a week based on todays rate and I can take that from age 67 (12 years away)
2. Private pension: very little. An old contracted out one, sitting dormant for 25 years with about £7500 in it and I opened a SIPP in July last year with £2880 As I do not work and not a tax payer. I will do the same for in April 19 to reap the additional £720.
3.I own my property outright
4. Property for my son: I am considering buying it for him, in his name so he has somewhere to live whilst at UNI (i wont then be paying out for rental accommodation) and if its in his name he could rent out a second bedroom to another uni student under the rent a room relief so no tax payable. If i purchased it as a buy to let then I have to consider the extra stamp duty and potential tax payable of renting it(dependent of course if my investments/income go past the £12500.) This one is a dilema.
5. P2P. I dont want to increase how much I invest in these, in fact have been steadily reducing. The majority is with Kuflink and from this month will start taking the interest paid rather than reinvesting. The capital in them both is all short term. I took a risk with them to dip my toes in and learn. So far, I have been lucky with no losses but intend having no more than about £10000 in it in the future.
6. 40% cash position and 22% P2P by Mr Saver: This will be somewhat different with imminent house sale. With approx £265k coming in this would mean around 70% cash and 11% P2P (much less if reduced as in point 5) Does that make sense?
7. bostonerimus: Budget is sticky as my sons tennis is very variable but I think somewhere between £1500 and £2000 a month. Pension and ISA options per above to max out. After that then in high interest savings accounts!! And in general investment account with a mix of equity funds and bonds. At the moment its all in equities with a diversification in geographical and sector. I hope to spread the risk with some more conservative investing with house sale proceeds. I hope that helps clarify a bit. I am interested in finances and happy to be involved with my portfolio. I will also be able to recoup around £9k of extra stamp duty I paid when the house sale goes through.

I hope that covers it. Would love all your thoughts.
Kind regards
T.

Malthusian

£60k is a lot to lose if either or both P2P platforms do a Lendy. And if it is "short-term money" they are totally unsuitable. If you are planning to sell down to £10,000 anyway, why not do it now while new money is still flowing into the platforms?

Sustaining an income of £24,000 a year without working would require a fund of £800,000 on a conservative estimate (allowing for fees and the fact that you are relatively young to retire). Can you afford to subsidise your son at present? Is he not able to sustain himself via student loans etc?

Subsidising him in lieu of student loans carries a high risk of being voluntary tax paid on his behalf. If he's not the next Andy Murray it's very possible his student loan repayments would be low or non-existent.

Mr.Saver

tmack wrote: »

Hi All.
Thanks for the questions.
1. State Pension; I am about 5 years short of full pension based on NI contributtions so at the moment would be around £152 a week based on todays rate and I can take that from age 67 (12 years away)

So, state pension isn't a problem.

tmack wrote: »

2. Private pension: very little. An old contracted out one, sitting dormant for 25 years with about £7500 in it and I opened a SIPP in July last year with £2880 As I do not work and not a tax payer. I will do the same for in April 19 to reap the additional £720.

This isn't looking good. Right now the size of your existing pension pots are second to nothing, and your planned contributions are far from enough for a comfortable level of income in retirement. Will you get back to paid work? It maybe worth considering.

tmack wrote: »

3.I own my property outright

Which is good. Since you mentioned the contract for the sale of previous home is going to be exchanged soon. I suppose you've downsized and will have a surplus of cash once this is done. Is it correct?

tmack wrote: »

4. Property for my son: I am considering buying it for him, in his name so he has somewhere to live whilst at UNI (i wont then be paying out for rental accommodation) and if its in his name he could rent out a second bedroom to another uni student under the rent a room relief so no tax payable. If i purchased it as a buy to let then I have to consider the extra stamp duty and potential tax payable of renting it(dependent of course if my investments/income go past the £12500.) This one is a dilema.

On your side, because you don't have enough pension provisions, you will need source of income from BTL, investments in ISA/GIA, and savings, etc., and gifting a large lump sum will likely negatively impact your retirement income.

Will this affect your retirement life style in any way? And don't forget if you die within 7 years, this may attract IHT. Do you have enough assets to cover the IHT if this occurs? You definitely don't want to force your son to sell the house and use some of the proceeds to pay the IHT in the unfortunate event.

On your son's side. Do you think it's better for him to not get a student loan? A student loan is essentially a graduate tax for the most graduates. It's often cheaper than paying upfront in the long run, unless your son will likely be a very high earner.

tmack wrote: »

5. P2P. I dont want to increase how much I invest in these, in fact have been steadily reducing. The majority is with Kuflink and from this month will start taking the interest paid rather than reinvesting. The capital in them both is all short term. I took a risk with them to dip my toes in and learn. So far, I have been lucky with no losses but intend having no more than about £10000 in it in the future.

Why are you waiting? Is there any penality for withdrawing the fund now? Or you are thinking "nothing has gone wrong in the past, so nothing will go wrong in the future"? Don't. It's not worth the risk. If I was in your position, I'd sell and reduce the exposure to P2P to well below 5% of my portfolio.

tmack wrote: »

6. 40% cash position and 22% P2P by Mr Saver: This will be somewhat different with imminent house sale. With approx £265k coming in this would mean around 70% cash and 11% P2P (much less if reduced as in point 5) Does that make sense?

What are you going to do with the house sale proceeds? Keep them as cash for the long term? Doesn't sound like a good plan. Do you plan to use the money anytime soon (e.g. in the next 10 years or so)? If not, perhaps you should consider investing rather than saving.

If you are going to use the proceeds for your son's first home soon, then you shouldn't count it as part of your liquid asset. Therefore it doesn't change the fact that you are 22% in P2P.

The reason I pointed out the 40% cash position is because you said that you are "a risk taker". I don't know the asset allocations in your GIA & S&S ISA, but likely you have bonds & cash in those accounts too. So your overall exposure to equity (and the high risk P2P loans) is likely below 60%. This doesn't sound like "a risk taker". Although I'd admit that the 22% in P2P is pretty risky.

You should try to either rebrand yourself as a below-average risk tolerant person who has placed a risky bet in P2P, or increase your equity exposure and reduce cash holdings (and P2P). I would recommend the former, because you don't look like an experienced investor, and may not understand the risks involved. If you survived a market crash without selling in fear/panic, you can consider increase your equity exposure after that. (Or better, when the market is down)

Either ways, reducing P2P exposure should be on your priority list.

tmack wrote: »

7. bostonerimus: Budget is sticky as my sons tennis is very variable but I think somewhere between £1500 and £2000 a month. Pension and ISA options per above to max out. After that then in high interest savings accounts!! And in general investment account with a mix of equity funds and bonds. At the moment its all in equities with a diversification in geographical and sector. I hope to spread the risk with some more conservative investing with house sale proceeds. I hope that helps clarify a bit. I am interested in finances and happy to be involved with my portfolio. I will also be able to recoup around £9k of extra stamp duty I paid when the house sale goes through.

I hope that covers it. Would love all your thoughts.
Kind regards
T.

tmack

Hi Again. Sorry, I cant figure out how to use the “” in replies. malthusian and mr saver. Which makes this less cohesive but hopefully you know what parts i am responding too.
To respond.
malthusian:
1. Thanks, yes I am steadily selling them, however some need to go into the secondary market so that takes time and some are finishing within threee months.
2. Unfortunately my son isn’t eligible for a student loan as he is studying his degree part time.
mr saver
1. Re Pensions/Property. I know this is weak, hence my initial post to see thoughts/ideas on what Would be potential ways forward for income from investments etc. I may go back to part time work but no guarantee and unlikely to gain a position with any great salary, so trying to do the best with what I have got.
£265k from house sale will be for investing into S&S to provide an some income but not in the short term as I have cash reserves. Less would go in if I buy a flat for my son or purchase myself as a BTL. If for my son IHT shouldn’t be a problem as I have my late husbands unused allowance carried forward too. However who knows what will happen between now and seven years and it may not be worth the risk and better I purchased it. I am still not sure that if something happened to me in less than seven years whether tax is payable on the gift (PET) as unlikely to go over the IHT threshold.
2. p2P as above, already reducing by a considerable amount.
3. My S&S isa and Gia accounts are all equity based. No bonds and the only cash in them is minimal to pay fees/charges. This is where I need to look at a good risk spread with the capital I have and will have shortly but wanted to work out whether to buy a second property, either for my son to live in or as BTL first, so I would know how much I would be looking to further invest.
4. I didn’t downsize but moved area when my husband died and I deliberately purchased a home where, if necessary to provide income, I could rent a room out, either for students in the Summer, AirBnB or M-F room. Its not something i am intending in the short term but its an option DTL.
5. I would prefer to reduce the P2P and cash and increase equity exposure. As you rightly said, I am a novice but learning all the time and enjoying it too. We haven’t even explored equity options yet �� you will likely think what I have invested is a major car crash ��
Thank you.

xylophone

So, state pension isn't a problem.

The OP is short on years for full NSP and is not working - she may wish to consider voluntary contributions.

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

Mr.Saver

xylophone wrote: »

The OP is short on years for full NSP and is not working - she may wish to consider voluntary contributions.

https://www.royallondon.com/siteassets/site-docs/media-centre/good-with-your-money-guides/topping-up-your-state-pension-guide.pdf

I meant she still has time to do this... Sorry if that leads to any confusion.