How to invest £220k for min 12 years

recruit18

I will soon have £220k to invest. This includes rainy day money. I am maxing out my £40k Pension contributions so that is covered. Hoping to not need any of this money until I retire in (hopefully 12 years when 55). Currently have £55k in Cash ISA, 5 % regular savers, Santander 123 etc...Due to inherit approx £165k in next couple of months.

How would you allocate this amount? Tolerance to risk is say 6 or 7/10

Preference to low cost index trackers...I've set up a Vanguard S&S ISA for us both so that would be a preference, but open to other suggestions of where to look.

Alexland

For lump sum £20k annual ISA contributions (or transfers of previous tax year ISAs) then iWeb would be cheaper and offer more choice than Vanguard Investor.

Do you have a mortgage? Is there an opportunity to contribute to your partner's pension? Could you contribute to any Junior ISA or child pensions?

Alex

Albermarle

Preference to low cost index trackers...I

To be 100% invested in index trackers is quite risky ( 7/10?) even over a 12 year period, and you are fully exposed to any prolonged market slumps.
Perhaps better to have at least some % in less volatile investments and this % should then grow as you get nearer to retirement.

recruit18

Alexland wrote: »

For lump sum £20k annual ISA contributions (or transfers of previous tax year ISAs) then iWeb would be cheaper and offer more choice than Vanguard Investor.

Do you have a mortgage? Is there an opportunity to contribute to your partner's pension? Could you contribute to any Junior ISA or child pensions?

Alex

Thanks but I thought up to £60k that Vanguard 0.15% platform fee was cheaper, especially if you trade monthly? Was planning to drip feed in £1,666/month into an ISA for both myself and my wife. Therefore put £40k per year into the market and keep the remainder in 1.4% Cash ISA and 2-2.5% in fixed rate cash accounts. This is to take advantage of £ cost averaging and to hedge for if the market has a downward correction in the next 3-4 years.

Have asked about wife's pension but she currently doesn't earn enough to pay tax so not sure if it's worth it over ISA's.

Mortgage is paid off

Have a child trust fund for the kids paying 3.25% and my parents have money invested for them in an investment trust in the stock market

recruit18

Albermarle wrote: »

To be 100% invested in index trackers is quite risky ( 7/10?) even over a 12 year period, and you are fully exposed to any prolonged market slumps.
Perhaps better to have at least some % in less volatile investments and this % should then grow as you get nearer to retirement.

Was looking at the Vanguard Lifestyle 60 to roughly match my risk profile and age (ie 40% in bonds for a 42 year old). This would hopefully shield me from the full force of any stock market crash.

I'm planning to keep £60k in cash eg 2 and 5 year fixed rate accounts and make use of both of our £1,000 tax free interest allowances (as although I'm a 40% tax payers, by increasing my pension contributions I'll only pay 20% tax and therefore think I'll get the full £1k allowance?).

This will mean in 4 years time I'll be £60k cash approx £100k shares and £60k in bonds, plus my pension increasing at £40k per year in a Lifestyle type works pension fund that includes stocks, bonds, property and active managed funds.

Although I say 12 years, I would hope I don't need to sell any of the shares in 12 years if they are in a bear period as should have enough cash to cover a few years, or get a part time job etc...therefore the stocks should be in the market for 15 years +

Does this sound like it should match my aims and attitude to risk?

Dazed_and_confused

Have asked about wife's pension but she currently doesn't earn enough to pay tax so not sure if it's worth it over ISA's.

make use of both of our £1,000 tax free interest allowances

Unless your wife has a huge amount of interest or other income (ignoring any dividends) not previously mentioned she isn't going to be able to use the savings nil rate of tax (aka Personal Savings Allowance).

That is because any unused Personal Allowance and the savings starter rate of tax, where up to £5,000 of savings interest is taxed at 0%, has to be used before the savings nil rate applies.

So she's not losing out but the amount of taxable savings interest she can receive and not have to pay any tax on is unlikely to be what you seem to believe it was. And the PSA is highly likely to be of no use whatsoever to her.

recruit18

Dazed_and_confused wrote: »

Unless your wife has a huge amount of interest or other income (ignoring any dividends) not previously mentioned she isn't going to be able to use the savings nil rate of tax (aka Personal Savings Allowance).

That is because any unused Personal Allowance and the savings starter rate of tax, where up to £5,000 of savings interest is taxed at 0%, has to be used before the savings nil rate applies.

So she's not losing out but the amount of taxable savings interest she can receive and not have to pay any tax on is unlikely to be what you seem to believe it was. And the PSA is highly likely to be of no use whatsoever to her.

Thanks hadn't realised that. Just want to ensure I'm understanding you correctly - are you saying that as she earns approx £8k from work (and doesn't have any other income) she can earn up to another £4.5k interest on savings tax free to take her up to the £12.5 personal allowance?

Dazed_and_confused

Not really. Though it all depends on what your definition of "tax free" is.

If she had the £8,000 taxable salary and £10,501 savings interest she would be taxed as follows,

Income £18,501
Less Personal Allowance £12,500
Income to be taxed £6,001
£5,000 x 0% = £0.00 (savings starter rate)
£1,000 x 0% = £0.00 (savings nil rate)
£1 x 20% = £0.20 (savings basic rate)

This all assumes she hasn't applied for Marriage Allowance.

Dazed_and_confused

Have asked about wife's pension but she currently doesn't earn enough to pay tax so not sure if it's worth it over ISA's.

Don't forget "relief at source" pensions such as personal, stakeholder or SIPP's.

From what you have posted she could contribute £6,400, get the 25% uplift and have £8,000 in the pension fund. This assumes she is not paying any pension contributions whatsoever into her employers scheme.

recruit18

Dazed_and_confused wrote: »

Don't forget "relief at source" pensions such as personal, stakeholder or SIPP's.

From what you have posted she could contribute £6,400, get the 25% uplift and have £8,000 in the pension fund. This assumes she is not paying any pension contributions whatsoever into her employers scheme.

She is paying into a council pension scheme. You can get 25% uplift even if you don't pay tax??? Sounds interesting, will look into that!!

Dazed_and_confused

You don't even have to be earning to be able to pay something.

There is a very popular thread on the pensions board all around being able to contribute £2,880 and get £720 tax relief added to the fund even if you have no earnings.

£3,600 being the maximum gross contribution unless you earn more than that