What to do with 20K?

YellowSupporter

Hi, first time poster here.

We (I'm married), have around 20K from a recent bequest - whch needs to go somewhere to make money.
I'm close to 60 with not  a lot of a pension pot, an ISA with approx 20K in it and a decent salary, my wife is same age and doesn't work.
I'm planning to work at least 5 more years and we will then likely downsize - house is approx 450K at present - obviously the children all flew the nest a while back and are not going to return, so it would be good to be nearer to them.
So, what's the best place to put approx 20K for at least 5 years & possibly 10, 
Thanks for all your help & advice, any more info, just ask - though I'm only on the forum once a day normally.

Alistair31

A SIPP, get the tax relief and invest according to your own risk tolerance. 

Heedtheadvice

I agree ^^^

If you are short on pension it makes sense to try and maximise your future income. Given that you have a minumum of 5 years (really the shortest period that any investment should be considered!) and possibly 10 (much better to time any exit you might wish to make without it being in a crash) then you can (in general terms) invest a few thousand in a SIPP each year and get tax added onto that investment. If you are happy to give similar amounts to your wife to invest you can each then invest this financial year and the next to good benefit for the majority.

I tend to prefer investment trusts over other collective investments but do hold OICS/ unit trusts too.

I would pick two or three investment trusts to cover the uk and global markets to get good diversification within the medium risk categories with automatic reinvestment of dividends to maximise returns during the investment periods. Others posters will have (often better) ideas such as not putting it all into equities or using ready made vehicles to give a split between equities/bonds (I tend to invest in bonds indirectly via investment trusts), but you have, irrespective of the ideas, also to be comfortable with what you decide!

The remainder of the inheritance can be similarly invested outside  of tbe SIPP until the year after next when they can be sold and repurchased inside the SIPP. That way you get maximum tax addition from the government and can take out some of tha capital tax free if you really need to!

One (!) big caveat!!! You have only given limited financial info; you do not mention any debts, if you already have a cash emergency fund, a mortgage etc., the value of your pension pot, likelyhood of a state pension, If you have any expected or potential liabilities arising, where your ISA capital is saved/invested, your income/marginal tax rate, your joint health prospects, when you forsee selling your property......

All will have a bearing on what could be best for you

colsten

Heedtheadvice said:

The remainder of the inheritance can be similarly invested outside  of tbe SIPP until the year after next when they can be sold and repurchased inside the SIPP. That way you get maximum tax addition from the government and can take out some of tha capital tax free if you really need to!

You are making unwritten assumptions about the OP's income, and potentially existing pension contributions. OP said he has "a decent salary", so it might well be possible that he could invest it all in one go into a SIPP, as the overall limit is 100% of your annual earnings, up to a max of £40,000. We simply do not have enough information to say for certain. In addition, £2,880 could go into a SIPP in the wife's name and attract the 20% contribution from HMRC.

we also don't know whether the OP has a works pension into which he could make additional contributions, and whether such additional contributions would attract additional contributions from the employer.

We also do not have any information about the OP's state pension forecast. He may or may not be set for the maximum state pension amount, and it may or may not make sense for him to make voluntary contributions. The same applies to his wife - what state pension is she due to get, would voluntary contributions for her make sense? 

Lastly, we have no idea about the OP's risk appetite, and his ability and/or willingness to select appropriate investment. Many people will just be completely lost when they hear talk of investment trusts,  collective investments, OICS or unit trusts.

OP, can you supply some more information, specifically

1. what if any works pension arrangements do you have? Can you make additional contributions, would your employer make additional contributions? If so, how much?
   
   
2. how much would you be allowed to put into a SIPP (100% of your salary, up to max £40,000, after any contributions you have already made to any works pension)
   
   
3. are you a BR or HR tax payer?
   
   
4. are you set to get the max state pension (currently £168.60 a week)
   
   
5. is your wife set to get the max state pension (currently £168.60 a week)
   
   
6. how much of the £20,000 would you be willing to lose (as investments in a SIPP, or other investments, can go down as well as up) - anything from £0 to £20,000

YellowSupporter

OP here.

Thanks for the replies so far, certainly some things for us to consider.

To answer the questions above.
Sadly I didn't do any planning early in life, had children and paid them through University plus a large mortgage, so it's only the last few years in which my financial position has become a better place.
I'm due max state pension, I have no works pension sadly but a small private one which I pay into each month approx £200.
My wife has approximately 20 years of NI so won't be due the full state pension (I need to double check the exact amounts) but has some others due from working with local councils (again not worth much sadly). Sounds like it may be worth topping this up?

I'm currently earning 60K+, & expect it to continue to at least 65 - assuming my health holds up. No health issues as yet, but you never know.
We have no debts and a savings pot of approx 10K for a rainy day. No mortgage any more, and we wouldn't sell until I retire so 5-7 years.

Due to my past history with money, I'm fairly risk averse when it comes to savings etc. possibly too much?  However I realise that to get any return some risk must be taken, so I guess I'd be content to risk going down to 15K but wouldn't want any big risks.  I've never invested in the past and have little idea what to do, but I'm a quick learner.
I'm happy to put the money away for 10 years maximum, by which time we'll both be close to 70. I'm also happy to put some/all in my wife's name - whatever makes sense.

Thanks again for the advice above, happy to give more information if it helps

Albermarle

Sorry to be blunt but for someone earning £60K a year , your savings pot is small and it seems your pension provision is pretty small . Appreciate you have no debts , but you are going to get a shock when you retire on a much lower income.
You need a plan  to save /invest a lot more very month, whilst you are still earning good money  . 
At the very least £8K a year into the private pension to maximise the higher rate tax relief. This would be the obvious priority and to do this before April 5th this year and then for the next few years.

colsten

Thanks for the additional info, OP.

I would definitely suggest looking into topping up your wife's SP by as much as possible. The payback period is around 4 years after state pension age (for Class 3 voluntary contribs; a lot less for Class 2 if she qualifies as self-employed), so with the average life expectancy for women now in the 80s, for most people this would be an unbeatable investment. You can use this guide to work out whether it makes sense to top up. She should also check, before making any extra payments, whether she is entitled to NI credits for periods she has not worked, e.g. when bringing up children.

If one of you dies, will there be sufficient income for the surviving spouse? Is your wife named as your beneficiary on your personal pension? (she can't inherit any of your state pension).

Why do you not have a works pension? AFAIK, all employers now must offer - and contribute to - a works pension.

Is there any reason why you wouldn't pay more into your existing personal pension? Aside from enhancing your wife's state pension, this strikes me as the most obvious place for a lot of your £20k, as well as for extra monthly contributions from your salary, not least because you get HR tax relief on pension contributions (at least you do up to 5/4/2020 - - - there are rumours abound that the Budget on the 11th of March will slash tax relief for HR tax payers from next tax year. Mind you, these rumours have been around every year before the Budget).

YellowSupporter

Again, thanks for the responses so far. I'll look into the varoius suggestions, but clearly topping up my wife's state pension is something we need to do.
In response to Albermarle - although I'm now earning very well, this is a recent thing and we have had many yyears of financial difficulty prior to the last 2/3 good ones. This is partly why my pension provision is so poor - which I know I may not be able to dig myself out of. I admit to having my head in the  sand for a long time, due to short term concerns.

Heedtheadvice

You are making unwritten assumptions about the OP's income, and potentially existing pension contributions.

  Thank you Colsten! Pedantically you are correct but I posted to give some food for thought rather than advice (which I am not qualified to give) and get the ball rolling - hence adding the caveat in my post.

With a 'small' pension alluded to by the OP it was  clear that much more pension provision ought be one priority and the SIPP route mentioned by Alistair could be one method to increase. As I expected, thanks to you and Albermarle, better advice has come along with some of the correct specific questions being asked and some answers being elicited!

colsten

Heedtheadvice said:

  Thank you Colsten! Pedantically you are correct but I posted to give some food for thought rather than advice (which I am not qualified to give) and get the ball rolling - hence adding the caveat in my post.

With a 'small' pension alluded to by the OP it was  clear that much more pension provision ought be one priority and the SIPP route mentioned by Alistair could be one method to increase. As I expected, thanks to you and Albermarle, better advice has come along with some of the correct specific questions being asked and some answers being elicited!

I see it again and again on this Forum that people rush to give "advice" (in the general sense), usually based on their own experience and circumstances, without having much detail about a person's circumstances and requirements. I am often guilty of that myself, too, and I am positively trying to stop myself, and others, from doing this. 

Albermarle

although I'm now earning very well, this is a recent thing and we have had many yyears of financial difficulty prior to the last 2/3 good ones. This is partly why my pension provision is so poor - which I know I may not be able to dig myself out of. I admit to having my head in the  sand for a long time, due to short term concerns.

OK well at least you have hopefully at least 5 years to make some progress. In your position it will probably be not a good idea to stop work until at least your State pension becomes payable at 66. In the meantime as well as making more pension contributions etc it could be worthwhile to closely examine your expenditure as a couple . If it can be reduced it will have a double benefit . You will save more and you will find adjusting to a lower income later easier.