Investment advice needed

steve00117

Hi all, looking for some advice. Due to leaving a previous job I have around 40k sitting in my bank account.
I am looking to retire in around 10 years, what would be the best thing to do with this lump sum to give me the best/safest return in this time frame?

Alistair31

Best/safest is a bit of a contradiction.

steve00117

Alistair31 wrote: »

Best/safest is a bit of a contradiction.

Helpful advice thanks.

eskbanker

Well it is a bit of a contradiction!

Chances are that the safest thing to do is to keep it in cash form, which protects you from any loss of capital, but this is almost certain to lose real-terms value to inflation.

So the best thing to do is more likely to be some form of investment, but it's impractical to clearly identify what's actually best given the lack of info about your financial situation.

A pension may be a slightly better option than S&S ISA but both are subject to contribution limits, and both are simply wrappers, leaving decisions to be made about what actual investments are to be held within them.

On the other hand, if you don't already have an emergency fund of accessible cash then investing the whole pot would probably be rash.

Or it may make more sense to pay off a mortgage or other debts.

Or perhaps if you're renting it may be worth buying.

Any of the above could be affected by your tax status, existing assets, age, health, dependents, attitude to risk, lifestyle, etc, etc....

bowlhead99

steve00117 wrote: »

Alistair31 wrote: »

Best/safest is a bit of a contradiction.

Helpful advice thanks.

Well seriously you're not giving us much to go on.

Do you want the best chance of a high long term return on investment - for example by using your S&S ISA allowance for 2019/20 and 2020/21 to put the whole £40k into an investment account over the next few months and buy an investment fund which tracks the global stock market? That might average out to 5-10% a year over the next decade or two, maybe more, but with a high risk that at some point the value would drop by half before recovering.

If you don't need the money back until you're in your late 50s you could buy the same sort of investment in a pension wrapper instead and boost the returns with tax relief, assuming you have enough earnings in this tax year (or next) to support a £40k contribution being allowed.

Or you could get a 'safer' return by putting the money in a UK bank account. All the money will still be there when you go back to collect it, but if that's a long time from now it may have lost significant value to inflation. Top instant access accounts pay 1.3-1.4% interest which is no more than recent consumer prices inflation rates.

You can get a higher interest rate by locking the money away in a fixed rate account for one to five years. But you have told us literally nothing about what you intend to do with the money or when.

All we know about your circumstances is that you once had a job, and as a result of it you have £40k and will be retiring in 10 years . That's not going to help us recommend the best Investment from 30,000 options or the best saving account from hundreds of choices. A mixture of savings and investments could be sensible if you might need to dip in to this lump sum at some point over the coming decade or immediately on retirement. And if you need it immediately on retirement and have other income that year you might need to pay higher rate tax to get it all out of a pension if you had put it into one.

steve00117

Sorry, I realise now that I was lacking a little on details.
I am now 55 and after losing my job have taken my pension early which has given me the 40k lump sum.

I now have another job that pays me around £1200 net along with my monthly pension payment of around £500 per month, giving me a monthly income of £1700 which is enough to comfortably live on.

I have another pension due to mature in 10 years when I am 65, this will give me around another £350 per month, then of course my State pension when I am 67.

My aim is to retire from work when I reach 65 and receive the second pension.

Therefore I would ideally like to get the best return on the 40k in around 10 years time when I retire.

Hope this is a little more helpful, and thanks for the advice so far.

SonOf

My aim is to retire from work when I reach 65 and receive the second pension.

What money do you have allocated to fund the gap from 65 to state pension age? (is this £40k going to be part of that or do you have other money)

Therefore I would ideally like to get the best return on the 40k in around 10 years time when I retire.

Are you planning to spend the whole £40k in 10 years time or is there other plans for it?

How much other money do you have? (thinking capacity for loss here as £40k is not a lot)
How did you take your pension? (annuity/scheme pension or drawdown - this may impact on tax wrappers available)
What level of investment risk can you afford to take or be willing to take?

Currently you are asking for solutions without us knowing the scenario. Your snippets held but ultimately, they lead to more questions. There is no one best option. It will depend on your situation and objectives.

xylophone

You are in receipt of a Defined Benefit Pension?

You have joined your current employer's pension scheme?

Pay as much as possible from salary into the scheme and use your lump sum as an income replacement?