£1,000,000 investment

justjohn

As someone has already said you should be more concerned about inheritance tax and stopping the gov from taking it.

bowlhead99

investa wrote: »

They present you with a pack of info and an invite to see a financial adviser. The money gets paid into account of your choice after a few days. They suggest the NS&I. What I didn't know at the time was that you can put a windfall in a bank with full protection on the whole amount for 6 months. They didn't tell me this.

It's not definitively true that protection on the whole amount is available in a normal bank for a premium bond or lottery win. The concept (which was driven by EU regulation) is that if someone suddenly finds themselves with an unavoidable large balance being credited to one of their accounts, this may be covered (up to account balance of £1m) for a short length of time, but if the bank goes bust you would have to put a claim together with evidence and justify your position and why you have a legitimate expectation that it would be covered.

E.g. you sell your house and the solicitor sends you a million and it's a while before you buy the next house - you don't need to instantly spread it over 12 accounts to urgently get each account below the regular £85k threshold. Likewise if you get the million in a divorce settlement, or compensation for an accident, or an inheritance, or redundancy / wrongful dismissal compensation.

There are a variety of situations that are covered in a non-exhaustive list of life events published on the FSCS website: https://www.fscs.org.uk/your-claim/temporary-high-balances/

However, other things are not explicitly listed as being covered, such as 'getting a big bonus at work', 'landing a lucky contract in my self-employed business', 'winning a prize in a lottery or draw'. If a bank collapsed while holding your million from these sources, you might *feel* that it was a major 'life event' which justified you having all the money in one place until you could sort out where best to put the money, but the FSCS may not feel the same.

So it doesn't seem to me that it's at all definitive that you can put any 'windfall' in a bank and get £1 million protection for 6 months. I would only feel safe with that if it was one of the published reasons on the FSCS website, or within the EU directive which caused them to bring those temporary high balance rules in four years ago.

"Hey I got £x on the premium bonds this month and I wasn't expecting it, great I have this windfall, it will be covered if I just add it to my existing savings account even if that pushes my savings account over the normal compensation limit. It's a temporary high balance."

Does that hold true if the £x is £25, or £100, or £10k, or £50k, £100k, £1000k ? I am sceptical that it holds true at all. Still, if you had seen the financial advisor as they recommended you to do, he could have perhaps clarified the rules.

As the only person that can really clarify the rules is the FSCS themselves, and there is no example of them ever having paid out before in such a situation (i.e. a major bank or building society going bust while holding someone's £1m PB win, since 2015 when the temporary high balance protection rule came in), the prudent thing to do was assume that it would not be protected.

Murphy_The_Cat

investa wrote: »

When you win the Premium Bond jackpot, you are offered a free financial advice consultation but I chose not to take it ......

so you turn down free financial advice via the PB organisation, but you're happy to tap up complete strangers on the internet.


The worlds a funny old place.

Murphy_The_Cat

investa wrote: »

Agent Million (for me) was a nice middle aged woman from Blackpool. She knocked at the door and held some ID up but I assumed she was selling something and so I tried to politely close the door. She seemed adamant that she should talk to me so she came in and told me the news.

Really ? This actually happened ? Colour me cynical.

Malthusian

bostonerimus wrote: »

If helping your children is a goal then I think avoiding 40% inheritance tax is important. So set up a trust
an d invest the money in a diversified portfolio of stocks and bonds and take annual income.

Total non sequitur. Why do you think the OP needs to set up a trust?

The OP says he wants minimal risk. A diversified "low/medium risk" portfolio should be expected to fall by at least 25% in the next crash. Can the OP cope with "losing" £250,000+?

When that crash is going to be is largely irrelevant. If the OP does invest for the long term there will be a crash at some point, and it will feel largely the same whether it's in next year or in 2024.

investa

@ Murphy_the_Cat, if you read my original post, you will note the reason that I didn't take the free advice. Furthermore, to ask a variety of people for their opinion or ideas is different to taking their advice. Finally, I don't care what 'colour' you want to become

bowlhead99

investa wrote: »

@ Murphy_the_Cat, if you read my original post, you will note the reason that I didn't take the free advice.

It was because he thought that he would instead 'come up with' a 'scheme to at least match inflation and keep the money safe', and then realised there wasn't one, but didn't want to invest because he heard there might be a correction.

I don't know why that didn't trigger him following up for the free advice on what to do with it, as that's something pretty sensible to do if you are coming from a place of low knowledge. But hindsight is 20/20 so easier to be critical or self-critical looking back. Most people don't know what to do when they suddenly have investment options and have never needed to build up investment or tax knowledge to know what step to take next.

Likewise it seems a bit illogical to review your actions and think that fears of a crash...

"...combined with a lack of investing knowledge, kept me from ... seeking advice from an IFA."

If one has a lack of knowledge, paying someone who doesn't have a lack of knowledge, to provide suitable advice, sounds like just the ticket

And isn't too late to go back and do now, even if the free version of the service isn't available and you would have to pay for it.

Consider - a million in cash losing 1% to inflation costs £10,000. £10,000 at £200 an hour buys a lot of hours of advice.

Furthermore, to ask a variety of people for their opinion or ideas is different to taking their advice.

The great thing about free opinion and advice is that you don't have to take it.

It's worth getting it before you pay to buy advice because you can put the professionally-recommended solutions into context with all the other options

The slightly less great thing about paid advice is that even if it is higher quality advice, you may feel 'guilty' not taking the advice after paying out £££ to get it, and might end up feeling you are being railroaded into doing something with which you're not entirely comfortable.

Of course, the latter should not really be a problem, if you are burning through £10k+ a year in inflation through using an inadequate solution of your own. if you have a whole million hanging around that you don't immediately need and don't have a good solution to the problem yourself, you can afford to pay several thousands to seek a better solution, even if you do not in the end enact that professionally -advised solution, or only elements of it.

Sea_Shell

Personally, if I won big, after setting myself up with paid for house and car (if I didn't already have those things)

I'd be prepared to take MORE risk with what's left, as it's still money I wouldn't have otherwise had, and I haven't worked all my life to earn/save.

Murphy_The_Cat

investa wrote: »

@ Murphy_the_Cat, if you read my original post, you will note the reason that I didn't take the free advice. Furthermore, to ask a variety of people for their opinion or ideas is different to taking their advice. Finally, I don't care what 'colour' you want to become

Are you sure that it wasn't a representaive of a rich Nigerian Prince who currently resides on the Planet Zog who magically appeared on your doorstep one day, who'd come up with a fun idea to put message onto an internet forum, to while away the time ?

bostonerimus

Malthusian wrote: »

Total non sequitur. Why do you think the OP needs to set up a trust?

The OP says he wants minimal risk. A diversified "low/medium risk" portfolio should be expected to fall by at least 25% in the next crash. Can the OP cope with "losing" £250,000+?

When that crash is going to be is largely irrelevant. If the OP does invest for the long term there will be a crash at some point, and it will feel largely the same whether it's in next year or in 2024.

The trust can be used for tax planning purposes and a stock and bond portfolio is what I would do to grow the money. It is not what the OP asked for, but I don't think the what they asked for is the best approach. I would be looking to use the money to provide multi-generational financial security and so estate planning is the first priority. Obviously trusts and their taxation are complex and they are not as permissive as they once were, but I'd look into them to see if they have any advantages also pensions are a way to pass money on without IHT....it's complex and so i would get expert advice.

Tax is probably the OP's biggest issue and I would get that structure sorted before thinking about investments.