Question re 700K investment

sixpence.

Holy !!!! man. I will reply to other comments tomorrow but I am opening a SIPP now because I had no idea I could do this without a job. This is so great.

Sailtheworld

Are any more of these gifts likely to appear in the future?

If there's a reasonable chance and you'd like £24.5k per year why not just start spending that now. If you invested the fund and managed to match inflation it would last nearly 30 years.

mark55man

sixpence. wrote: »

Holy !!!! man. I will reply to other comments tomorrow but I am opening a SIPP now because I had no idea I could do this without a job. This is so great.

just to be clear - to get the £2880 you can do that without any income whatsoever, but above that however much money you have, you still you need to earn what HMRC view as taxable income (even if you don't pay any actual tax on it) before you can put that much into your pension

londoninvestor

mark88man wrote: »

just to be clear - to get the £2880 you can do that without any income whatsoever, but above that however much money you have, you still you need to earn what HMRC view as taxable income (even if you don't pay any actual tax on it) before you can put that much into your pension

And that means (just to be really clear about what "taxable income" means) even if you don't earn enough to pay tax, you can still make a gross contribution up to the amount of your total earnings, and get tax relief on it.

e.g. someone who earns £7,500pa has no income tax liability, but can still make a £6,000 net contribution and receive £1,500 topup, for a total gross contribution of £7,500.

Previous discussion here, including a reference to the relevant legislation to clarify the confusing language on the gov.uk site:
https://forums.moneysavingexpert.com/discussion/5929270/none-tax-payer

sixpence.

itwasntme001 wrote: »

Very good recommendation here and i too can highly recommend jamesd's work on this forum. I do want to point out a very important aspect to the 4% rule that may or may not have been discussed in the link. It really should be used for those people retiring at traditional retirement ages like 60 or 65. For anyone younger it really should not be used and certainly not as OP's age.

The 4% rule is based on historical returns on investments and inflation data. It says that at least 95% of the time ( using historical scenarios) that your money will not run out as long as you at most use only need 4% (inflation adjusted every year) to draw-down from investments every year. This works for say a 30 year time horizon (i.e. so those who are aged 60 expecting to live to 90). But at OP's age it certainly will not work given the much longer time horizon (presumably).

I am not maths-inclined. I'm bright but I have an English degree and this stuff sometimes ties me in knots. I think I am maybe best, long term, meeting occasionally with an FA to discuss strategy and having passive investments so that I don't need to pay loads in fees.

itwasntme001 wrote: »

This is completely spot on. Although its very much a personal choice what the OP does depending on his/her confidence (and confidence in MSE posters!) and how he/she wants to be involved (extremes being completely passive to completely active).

I am in my mid-30s so not that far off from the OP's age and have a similar wealth amount accumulated mainly through work (outside of my own home). I take a mix between passive and active approach because i like to dabble in single shares (i have a finance background). I do not recommend this approach to everyone and if one is unsure then almost always a passive approach (perhaps including some managed funds) would be my best advice. I would also probably favour pure passive funds especially at OP's age as he/she has a very long time horizon (presumably?) so having managed funds on a buy and hold approach would increase manager risk considerably for the OP as opposed to someone closer to retirement say (who are looking to reduce equity exposure perhaps).


There are so so many ways to do this that the OP should remember the advice from Bostonerimus that it does not need to be complicated - so just keep things simple and clear.

I just want 3% growth (to match inflation) and 3% that I can use for income (whether that is achieved through a growth drawdown or income). I had a peruse of the HL page - these funds look too pricey for me and are obviously managed so not what I am looking for - but they don't seem to even have an option like this?https://www.hl.co.uk/funds/hl-funds/multi-manager-funds

When this is done, how often do people recommend I meet with the FA to touch base? I was thinking I might chat to them for an hour ever six months to go voer how I am approaching things. Is this niave or simply not how things are done?

bostonerimus

If you set up your portfolio with a sensible allocation to multi-asset funds and/or some individual index funds there's no need for you to do much of anything other than monitor your withdrawals and adjust them according to market conditions. I'm retired and I haven't touched my simple portfolio of index funds and a multi-asset fund for over 5 years.

I wouldn't touch those H&L funds in your link...what's wrong with VLS60?

sixpence.

bostonerimus wrote: »

If you set up your portfolio with a sensible allocation to multi-asset funds and/or some individual index funds there's no need for you to do much of anything other than monitor your withdrawals and adjust them according to market conditions. I'm retired and I haven't touched my simple portfolio of index funds and a multi-asset fund for over 5 years.

I wouldn't touch those H&L funds in your link...what's wrong with VLS60?

I am not going to touch them! They look like a lot of pointess faff to me. I might test the HL FA (I have a free consulation with them next week, normal price is £500 but they have an offer this month, so it's free and might as well take it, but will take it with a pinch [bucket] of salt...) by asking him why this is better than a drawdown approach with a VLS, because it costs loads more. I will play dumb(er) though.

Why not a VLS60? So my entire ISA, which is only 60K right now but I intend to maximise my allowance every year and not withdraw until I am 55 unless something happens, is a VLS. So I figure it's a bit... I don't know... un-diverse to have that much in a VLS. Will be worth seven figures one day hopefully, can you really have that much in a VLS? Are there people out there with 2 milion quid in a VLS because that sounds a bit mental to me.

londoninvestor

eskbanker wrote: »

And equally obviously, it would take you 35 years to do so, or even longer if investment growth outperforms ISA allowance increases over that time, so it seems unlikely that this process would form a particularly significant or useful part of your plans, especially if you're already dismissing pensions....

This didn't get much attention but is a very important point. If you start with a 700k cash pot and only put it into the markets at a rate of 23.6k per year (assuming 20k into an ISA and the 3.6k non-earners' max), it will take 30 years to invest it, you'll have a large uninvested cash balance for the long term, and this will eat into your returns. So you should be planning to have money invested in funds in a taxable account for a good few years.

Strategising how to do this is a good topic to discuss with an IFA if you're looking for one anyway.

bostonerimus

sixpence. wrote: »

I am not going to touch them! They look like a lot of pointess faff to me. I might test the HL FA (I have a free consulation with them next week, normal price is £500 but they have an offer this month, so it's free and might as well take it, but will take it with a pinch [bucket] of salt...) by asking him why this is better than a drawdown approach with a VLS, because it costs loads more. I will play dumb(er) though.

Why not a VLS60? So my entire ISA, which is only 60K right now but I intend to maximise my allowance every year and not withdraw until I am 55 unless something happens, is a VLS. So I figure it's a bit... I don't know... un-diverse to have that much in a VLS. Will be worth seven figures one day hopefully, can you really have that much in a VLS? Are there people out there with 2 milion quid in a VLS because that sounds a bit mental to me.

You can spread the money out if you are nervous, but from an asset standpoint VLS60 is very diverse. Some will be in an ISA, some in a SIPP and some in taxable accounts and cash. You can have it in a number of multi-asset funds from different companies along with some sector index funds if you want. The area you need to maybe take advice is taxation if you don't know how to arrange things efficiently.

FYI I have seven figures in Vanguard US Equity Index fund and I sleep well at night.

sixpence.

londoninvestor wrote: »

This didn't get much attention but is a very important point. If you start with a 700k cash pot and only put it into the markets at a rate of 23.6k per year (assuming 20k into an ISA and the 3.6k non-earners' max), it will take 30 years to invest it, you'll have a large uninvested cash balance for the long term, and this will eat into your returns. So you should be planning to have money invested in funds in a taxable account for a good few years.

Strategising how to do this is a good topic to discuss with an IFA if you're looking for one anyway.

Don't worry I'm not that silly! I mean I will obviously use my ISA allowance each year so I will either put cash or siphon this into it. An IFA can def advise on tx - esp as people get a dividends allowance each year etc. I think maybe an accountant could help with this? Although I have never used one (yet).

bostonerimus wrote: »

You can spread the money out if you are nervous, but from an asset standpoint VLS60 is very diverse. Some will be in an ISA, some in a SIPP and some in taxable accounts and cash. You can have it in a number of multi-asset funds from different companies along with some sector index funds if you want. The area you need to maybe take advice is taxation if you don't know how to arrange things efficiently.

FYI I have seven figures in Vanguard US Equity Index fund and I sleep well at night.

So person might reasonably put 2 million pounds in a VLS60? Do other people think this is sensible?
I want to do the simplest and most sensible thing possible tbh. I don't feel the need to own funds for the sake it of although I like the idea of a multi-asset fund. Maybe I could do 50% VLS 60 and 50% other funds: multi-asset, REIT, Asia ex Japan income.
Yes but are you unusual? Would a lot of people put seven figures in a single vanguard?