Advice on what to do with the money from our house sale

hayesgirl

We are in the process of downsizing.  Our house was always going to be part of our pension savings.  I am 51 and hubby is 58.  We both have self employed pensions that we are still paying into.   Hubby is thinking about starting to draw his pension from 60?  We are wondering what is the best thing to do with the profit from downsizing?  After clearing the remaining mortgage, paying selling/buying fees, etc, we are thinking that we will have about £150k left to live off of and invest?  I am guessing if we suddenly put a large sum like that into our bank account, that we might get a call from the bank trying to sell us some of their products?  What would be the best thing to do with it to get an income from it and to make it last as long as possible?

AlanP_2

Are you after income now or in retirement?

If for retiremenst the most advantageous option would probably be to cycle it through your pensions if you have the income capacity and / or enough Annual Allowance to do so.

Over the long terms equity / bond investments will provide a better return than a bank account.

How much income and how long is "as long as possible"? £1 a year income means it would last 150 years plus but that is not what you want is it?

Marcon

Might be worth spending some of your cash on advice from an independent financial adviser? Relying on free help based on a couple of sentences summarising your situation isn't going to be anything like as useful as personalised advice.

hayesgirl

Marcon said:

Might be worth spending some of your cash on advice from an independent financial adviser? Relying on free help based on a couple of sentences summarising your situation isn't going to be anything like as useful as personalised advice.

good point, this was just my starting place, to see what our options are

Clive_Woody

AlanP_2 said:

How much income and how long is "as long as possible"? £1 a year income means it would last 150 years plus but that is not what you want is it?

£1/year from £150K would last 150,000 years (that's a big plus) 

tacpot12

I would suggest that you plan to keep 2-3 years of living expenses in the form of cash deposits with a Bank, Building Society and National Savings and Investments. The remaining amount should be invested, via your pensions if you can. 

The investment you buy can either be ones that produce an income, or ones that will grow and can be sold so that you can have an income. Both are reasonable strategies, but the pandemic might well affect income produced by investments for some time especially where the income is obtained in the UK, so overseas investments that will grow are likely to be a better option at this moment in time; but who knows what will happen in future!

You probably do need some professional advice to advice you what to invest in, given that your husband needs to start drawing down some money in the next couple of years. You should obtain a forecast of your state pension entitlement, and collect together details of all the pensions you have currently before seeing an adviser. You should also prepare a budget so that you know how much money you will need to live on once you have downsized and retired.

xylophone

State Pension Forecast for each of you
https://www.gov.uk/check-state-pension

We both have self employed pensions that we are still paying into.  

Consider making the maximum contributions for the tax relief boost.

Hold an income/emergency fund on deposit at the best rate you can get.

Consider stocks and shares ISAs.

squirrelpie

First, when you get the money, split it into two halves and move one half to a different bank/building society, so the money is still protected.

Then decide how and when you're going to use the money. Check your state pensions as xylophone suggests and figure out how much income you will have/need/want/can afford before and after those pensions start. Decide how much you need to keep aside for major expense items (new car, major house repairs, anticipated medical or care bills etc). Once you have a good idea of how much money you'll want to withdraw over the next few years, you can put that in some fairly safe but likely low-paying account - maybe fixed-term investements etc. Put the rest in better-paying but likely riskier investments such as ETFs and investment trusts. Use vehicles such as pensions (as much as possible) and ISAs for this money to minimise tax.

Albermarle

hayesgirl said:

Marcon said:

Might be worth spending some of your cash on advice from an independent financial adviser? Relying on free help based on a couple of sentences summarising your situation isn't going to be anything like as useful as personalised advice.

good point, this was just my starting place, to see what our options are

If you did see an IFA , normally the first chat is free but it will be very general and no free advice as such . You can do with this with more than one to see how you get on with them .
Usually they will want to look after all your non cash/property investments , so they will presumably want to take over the operation of your pensions and any of the £150K invested elsewhere. Usually there is an initial fee ( £1000+) and then a % of your funds each year, probably around 0.75% .
Alternatively you can pay for a one off consultation/analysis/advice where they charge by the hour . This seems to be a less popular option for clients and the IFA's.

[Deleted User]

This money should not be considered in isolation from your overall portfolio. 

First and foremost you need to understand the factors which pose long and short term risks for someone in your position. 

Once you understand the risks, you should select an appropriate asset allocation.
Then you can pick the most tax efficient wrapper and vehicles for your investments. 

And assuming you are happy with your pension investments and its well thought through, you can skip all of the above and simply add to your investments pro rata, without impacting the ratios of each asset.
Failing all that, you wont be too far of the mark by putting it all into VLS50 or similar.