Best way to invest a 6 figure sum ?

Hi all,
In these times of low interest rates what are the best options when investing a large sum ( 6 figures ) of money ?

The cliche is to put it in property but I am at the age where having only just been able to become mortgage free I have no intention of getting another one.

Is there a limit on how much you can put in an ISA ? Also, what is the maximum amount covered by the FSA (?) you can have in a bank account ?

Dump some of it in an existing pension pot perhaps ? Is that even allowed ?

Any other ideas ?
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  • El_TorroEl_Torro Forumite
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    Make sure you have an adequate emergency fund : somewhere between 3 and 6 months of outgoings to cover losing your job, house repairs, etc... This needs to be saved rather than invested.

    Put what you can in Stocks and Shares ISAs, this is up to £20k in each financial year.

    Make sure your pension is adequate, how much you can put in and how beneficial it is needs to be taken into account.

    If you still have a sizeable pot left after doing the above then consider seeking the advice of an IFA to help you.

    Step 5: Profit.
  • PrismPrism Forumite
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    Well a 6 figure sum covers everything from 100k to 999k so it somewhat depends on how big is the sum. I general most people would build that kind of figure over many years and so would probably find it would be a mix of cash savings, stocks and shares ISAs, maybe some property and a pension (work or SIPP) invested in stocks and shares.
  • edited 28 June 2020 at 11:22AM
    LintonLinton Forumite
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    edited 28 June 2020 at 11:22AM
    The best options for what you do with your money depend very much on your circumstances and what and when you want the money for.

    For example if you want the money for retirement then simply putting it into your pension (employers or personal) would be a sensible choice.  You can contribute up to your total employment earnings in any one tax year, up to £40K.  But it cannot be accessed until you are 55, so if you want to use it earlier an S&S ISA may be preferable.  At the other extreme if you wanted to upsize your house or take a luxury world cruise next year you should keep the money required in cash.

    For the longer term (5-10 years as a minimum) investing in funds of shares and other assets is probably the best option. In my view investing in property (eg for rent) should be seen as a business opportunity rather than an investment, with the legal and tax implications, effort, and risk that implies.

    In any case, as previously said, ensuring you have an appropriate instant access emergency fund is the first thing to do.

    The FSCS cover for a bank deposit is restricted  to £85K unless it's a larger amount for a short time eg from the sale of a house.  Otherwise you have NS&I (National Savings) where any amount of money is guaranteed by the government.

    If you feel you need professional advice make sure you get it from an IFA (Independent Financial Advisor) where the "I" is essential.  If your 6 figure sum is significantly above the lower end of that range I would suggest you do that anyway as there are possibly complex issues like tax and inheritance planning involved as well as concerns about the choice of suitable investments.
  • AdamBruntAdamBrunt Forumite
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    Thanks for all help so far folks.
    I thought the figures quoted so far were the limits so good to know I am not a complete fool ;)

    It's an inheritance windfall. A large portion of it will be used to pay off my existing mortgage ( freeing up about £650 per month in itself ) leaving about £100k.

    My salary is enough for the 40k pension limit to not be a problem. But is there a risk in dumping such large sums in a single vehicle ? Also, are we sure about the 55 age limit ? Surely, you can retrieve a pension fund until retirement age ?

    I would say that even with this windfall, I am approximately 10 years away from retiring. And in that time our 2 kids ( currently 16 and 14 ) would have gone through university so we are probably looking at something that could possibly be used to help either of them in the future ( student loans, car, house deposit, etc ) as well as ramp up the pension pot come retirement. So reasonably quick access would be required or not something that locks you out for more 5 years.

    Premium bonds is an option but - with regained income from being mortgage free - we are not in any particular need for something that possibly increases monthly income if that makes sense ?
  • LintonLinton Forumite
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    If your pension is invested sensibly it isnt  really "a single vehicle".  It is likely to hold a large number of shares from across the world as well as other things like bonds or possibly commercial property.  If all of those go bust the world will be in a state where your pension wont be at the top of your worry list. In addition a pension is ring-fenced from your employer, the pension manager and the fund manager.  So it is not like a bank account where, when you deposit some money, that money becomes the bank's property and so can be used to pay the bank's debts.

    Yes the legal pension access age is 55 and has no legal link with retirement, though for DB pensions the scheme rules may have restrictions. However withdrawing money  early when you did not need to would probably be foolish. "Retirement" meaning the point at which you stop working can be any time you want and if you have the money the age at which you can start your State Pension or even access your employer's/personal pension may be totally irrelevent.
  • LintonLinton Forumite
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    And on Premium Bonds - you dont have to take th cash, just ask for it to be reinvested.  There is the advantage that PB winnings are not taxed.  The downside is that for 5 year plus investments you can do much better.
  • AlbermarleAlbermarle Forumite
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    My salary is enough for the 40k pension limit to not be a problem. But is there a risk in dumping such large sums in a single vehicle ? Also, are we sure about the 55 age limit ? Surely, you can retrieve a pension fund until retirement age ?

    Non State Pensions are legally accessible at age 55. Your own retirement age or when you get the state pension is not relevant .

    Regarding pensions/investments/savings , I suggest you do some more background reading as £100K is a lot of money and you would benefit from better knowledge. and understand better some of the helpful comments already made. You could start here

    https://www.moneysavingexpert.com/investments/

    https://www.pensionsadvisoryservice.org.uk/

    https://monevator.com/investing-for-beginners-why-do-we-invest/

  • dunstonhdunstonh Forumite
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    In these times of low interest rates what are the best options when investing a large sum ( 6 figures ) of money ?

    Same as it always has been.    It doesnt matter whether interest rates are low or high.   The net interest rate after inflation generally means you gain nothing in real terms by using savings.  Sometimes you may just get over but usually its under.

    Is there a limit on how much you can put in an ISA ? Also, what is the maximum amount covered by the FSA (?) you can have in a bank account ?

    The Food standards agency does not cover anything.   I suspect you mean FCA but they dont cover anything either.  They are the regulator.   The FSCS is what covers it.  £85k in deposits per banking licence.

    Dump some of it in an existing pension pot perhaps ? Is that even allowed ?

    If you under 75 it could be.

    My salary is enough for the 40k pension limit to not be a problem. But is there a risk in dumping such large sums in a single vehicle ? 

    A pension is not vehicle.  It is a tax wrapper.  You can invest much the same in a pension as you can other tax wrappers (or unwrapped).  The only risk is the minimum age of accessibility or picking naff investments (the latter applies to all wrappers)

    Also, are we sure about the 55 age limit ?

    Whilst the act of parliament hasn't included the increase and linking to 10 years less than state pension age, the treasury have repeated that it will be included in a future finance act.   So, we can only go by that.

    Surely, you can retrieve a pension fund until retirement age ?

    No. It wouldnt be a pension then.

    So reasonably quick access would be required or not something that locks you out for more 5 years.

    Hardly any conventional investments lock you in nowadays.   And why do you think you would need £100 in quick notice?

    Premium bonds is an option but - with regained income from being mortgage free - we are not in any particular need for something that possibly increases monthly income if that makes sense ?

    Everything is an option but PBs are easy to eliminate.

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • AdamBruntAdamBrunt Forumite
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    dunstonh said:
    Everything is an option but PBs are easy to eliminate.
    Stupid question but ... why is that ? Is it simply that you need higher than average luck for them to outperform a savings account / ISA ?
  • edited 5 July 2020 at 10:19AM
    unkleunkle Forumite
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    edited 5 July 2020 at 10:19AM
    Premium bonds has a prize pool of 1.3%. Some people will return nothing, some will return anything from nothing to 1000's x their holdings. You may get lucky, you may not.
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