Invest Pension lump sum and risk

onefulham

  I am in the very lucky position to retire soon on a good pension. I should have a lump sum of approx £140k after a few treats we hope to get, we have no mortgage or debts now. My wife is registered disabled and no longer working, she is 13 years younger than me. She has a very low by which I mean no willingness for risk,  so she just wants to keep the money in the bank account, I say this is risky as in unlikely case of the bank collapsing  your only covered for something like £50,000, and  with inflation surely we would be losing money anyway. She also doesn’t trust financial advisors after hearing horror stories of some stealing all the nest eggs of people. 

   What advice would you give us to keep our money safe and available but maybe make a little ? I still believe ask a financial advisor and probably will but are there any safe alternatives?
Thank  you for any advice. 

JGB1955

Up to £85,000 can be safely lodged with any bank covered by the Financial Services Compensation Scheme.  You are correct that inflation will have a negative affect on any interest earned.  How about Premium Savings Bonds for both of you?  You might also want to consider investing £2880 per annum (made up to £3,600 by HMRC) into a SIPP for your wife.  

dunstonh

She has a very low by which I mean no willingness for risk,  so she just wants to keep the money in the bank account, I say this is risky as in unlikely case of the bank collapsing  your only covered for something like £50,000, and  with inflation surely we would be losing money anyway. 

Risks are many.  She appears to be focusing on investment risk.  However, there is also shortfall risk and inflation risk.  Every option has some degree of risk.   Sometimes being solely in cash is higher risk than taking a sensible level of investment risk.

She also doesn’t trust financial advisors after hearing horror stories of some stealing all the nest eggs of people.

She really is paranoid.

  What advice would you give us to keep our money safe and available but maybe make a little ?

But advice on the internet where trolls exist as well as those that try to help is within her risk tolerance?

In many cases, especially DB pensions, not taking as much tax free lump sum and going for the increased income option is better where you cannot handle investment risk.  Sometimes it is better full stop.   If its a DC pension then the general rule of thumb is to not take the tax free cash unless you need it.     And then only take what you need.

I still believe ask a financial advisor and probably will but are there any safe alternatives?

No.  Every option has some risk in some way. 

AlanP_2

As above risk comes in many forms and is rewarded by varying levels of potential return or interest.

Some people don't trust banks so keep their cash at home - they face the risk of a robbery or a house fire.

Some people invest in the likes of Bitcoin, Fine Art, Wines etc - they face the risk of loosing heavily, but if they guess right the returns can be very high.

For most people a moderate amount of risk makes sense and is the only way to try and keep up with or beat inflation so they will have a mix of cash and investments in equities and bonds. The ratios will vary depending on their individual circumstances, objectives and attitude to risk and helping the pair of you to refine your thinking and arrive at a suitable mix is one of the things that an INDEPENDENT Financial Adviser can help you with.

xylophone

Savings rates here
https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

CPI inflation for September was 0.5%

RPI inflation for September was 1.1%.

Have you and your wife obtained  State Pension Forecasts?

https://www.gov.uk/check-state-pension

Even without relevant earnings, up to age 75 you and your wife could each make a contribution of £2880 to a personal pension which would be made up to £3600 after the addition of tax relief.

Even if left in cash and not invested, it is far more than you could earn in interest on that sum.

Example https://www.hl.co.uk/partners/search/self-invested-personal-pension?partners=1&theSource=PCHLS&Override=1&adg=G+HLBS+HLS+NLP&gclid=EAIaIQobChMIrMSLvaPF7AIVmK3tCh0yagF6EAAYASAAEgIAg_D_BwE

You could each consider premium bonds.

You might look for an Independent Financial Adviser - https://adviserbook.co.uk/
You would tick Independent FA and such other areas of expertise as required when the menu comes up.

Moe_The_Bartender

Just because you can take a lump sum doesn’t mean you should. Many people simply take it annually as tax free income.

Albermarle

Before actually seeing an IFA , it would be useful to improve your and your wife's knowledge about personal finance and investing anyway . Especially to get a better view on what 'risk' means . If you want to earn above safe savings rates then some risk can not be avoided but can be managed .
If you stick to mainstream investments , then even high risk ones do not mean you will lose all your money in the event of a market crash . For a medium risk investment it will still go up and down in the short term but in the long term returns of 2 to 4 % above inflation would be expected ( but not 100% guaranteed) . Have a look at these links:
https://www.moneysavingexpert.com/savings/investment-beginners/
https://www.moneyadviceservice.org.uk/en/categories/saving-and-investing
https://monevator.com/investing-for-beginners-why-do-we-invest/

Sailtheworld

If it's cash in the bank or nothing then the lump sum needs to be split so you're fully covered under the FSCS. Then you need to join the merry go round of chasing interest rates.

If ultra low risk is the correct risk level then that's fine but if that risk level is based in some part on bunker mentality and incorrect assessment of risk (i.e. thinking the chances of an IFA running away with your money are anything other than close to zero) then it's needlessly costing you money. 

I'd start with avoiding the news.

steampowered

Your wife needs to understand that keeping the money in a bank account means "inflation risk" - inflation will eat away at the value of that money each year.

Over a long time period, "inflation risk" is a bigger risk than "investment risk". Investing into shares is actually a lower risk approach once we start looking at a long time period. 

Have a play around with the Bank of England's inflation calculator here:  https://www.bankofengland.co.uk/monetary-policy/inflation/inflation-calculator

As you will see, £100 today is worth less than £60 in 2000 prices. To put that another way, more 40% of the value of that money would have been lost to inflation if you kept the money in a current account paying little/no interest over the last 20 years. If you put it in a savings account you would get some interest to offset that but, as interest rates tend to be lower than inflation, you would have still lost a LOT of money. 

You should absolutely open a stocks & shares account and invest the money in a simple, sensible, diversified investment fund. The Vanguard funds are a good start. You do not need a financial adviser to do this, though you can see an IFA to talk through and understand your options. 

Or - even better - leave the money in the pension (where it will be continued investing in stocks & shares, as it has been for the whole of your working life) where it will continue growing. And  only withdraw it when you need it.

AlanP_2

I suspect the OP has a defined benefit pension and it is the lump sum associated with that he is talking about.

If so, then the chances are they have had little or no experience of investments, which will add to the concern.

onefulham

Yes I am one of the lucky ones on a final salary pension
dsbled in shares years ago after Getting the free building society shares but not very successful. So not really in the world of investment