What to do with 200K and where to save to?

snowcat75

I have spent the last 25 years as a self builder working my way up through projects. I have finished what I consider to be our forever home and sold the previous build which is completing on Friday. So I find myself after decades of borrowing and juggling money to work on the next project clear on all debts and will have around £200k lump left over.
As I'm also going to be Mortgage free It should also be possible to Put around £1K away each month even more.

I am 45 married and have 2 dependents, self employed and at the moment just have a couple of small pensions. I am unlikely to have any need for the bulk of the money either short or medium term.

 Would a financial adviser be a prudent step? even so I would like to start to have some idea of my options if anyone can help. 

Cus

Others will be along with more (better) suggestions but fill yours and your wife's pension allowances (plus back dated years possibly), and both of your annual ISA allowances.

El_Torro

Decide how big you need your emergency fund to be and save that. There aren't many / any great options when it comes to saving, see this link: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
Also in the current climate Premium Bonds aren't a bad place for some or all of your emergency fund.

With the rest of the money it would be a good idea to look at investing. As mentioned your pensions and Stocks & Shares ISAs aren't bad places for your investments. You also need to decide how your money is invested.

Your idea of speaking to an Independent Financial Advisor isn't bad, if you're not willing to DIY your investments. 

snowcat75

El_Torro said:

Decide how big you need your emergency fund to be and save that. There aren't many / any great options when it comes to saving, see this link: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
Also in the current climate Premium Bonds aren't a bad place for some or all of your emergency fund.

With the rest of the money it would be a good idea to look at investing. As mentioned your pensions and Stocks & Shares ISAs aren't bad places for your investments. You also need to decide how your money is invested.

Your idea of speaking to an Independent Financial Advisor isn't bad, if you're not willing to DIY your investments. 

I'm somewhat nervous about pension funds having experiences with the horrors of pots disappearing in the 1990s, I take it these days investments are much more stringently managed?
My plan was to fill up our allowances with PB for a start and then start to look at over ways to invest.
 

AnotherJoe

snowcat75 said:

El_Torro said:

Decide how big you need your emergency fund to be and save that. There aren't many / any great options when it comes to saving, see this link: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/
Also in the current climate Premium Bonds aren't a bad place for some or all of your emergency fund.

With the rest of the money it would be a good idea to look at investing. As mentioned your pensions and Stocks & Shares ISAs aren't bad places for your investments. You also need to decide how your money is invested.

Your idea of speaking to an Independent Financial Advisor isn't bad, if you're not willing to DIY your investments. 

I'm somewhat nervous about pension funds having experiences with the horrors of pots disappearing in the 1990s, I take it these days investments are much more stringently managed?
My plan was to fill up our allowances with PB for a start and then start to look at over ways to invest.
 

That was a completely different situation. It wasn't people's personal pots it was their company pensions, which were under the control of companies, and dodgy companies could essentially gain access to that money with few safeguards.
Not to say there's zero danger, Todays equivalents would be a dodgy FA advising you to put your money into obscure investments like vineyards, property development , storage pods student residences airport car parks and so on.but even there if the IFA is FSC registered then if they've put you in some crazy investment like that without your knowledge you can get redress.  If your money is in pooled funds that invest across thousands of companies , and is held in a household name management company , it's exceedingly unlikely that fraud would cause it to be lost. 

The reason for investing in a pension in to gain the tax advantages that come with that, depending on your income they can be substantial. For now there's no rush and I suggest you put it away in PBs and maybe a six month fixed term savings product or two and find an IFA you are comfortable working with. And please find one that will explain what the underlying investments are so you can start to become knowledgable rather than hand off all responsibilities to them and not understand what you are invested  in. 

tryingtogetmyheadaround

I am in a similar place.... just my money has come from inheritance after paying my mortgage off I have £200K as well.
I did see a financial advisor.... not sure he told me anything I didn't know. It seemed he wanted me to invest the money I will use to pay off my mortgage as the return will be better than the 2% interest I am being charged on my mortgage. 
The way the world is at the moment I don't think that's for me.

I did think I want to put some into pensions for myself and my wife and some into stock and shares ISA's. Also going to max out a premium bonds account at £50K (emergency fund) as that will never go down and I may end up with a nice surprise one month, also can get the money out quick.

So with this in mind and never invested before, I have invested last week £1000 in a Vangaurd 80/20 fund and a Nutmeg 8/10 fund, as not sure which platform to use. After 1 week this morning I am down on my Vanguard account to £966.28 (-3.37%) and in Nutmeg £971 (-2.94%)....... now I get these should be long term investments. What I cant stop thinking about if I had invested the full £200K what it would be worth now.

I still want to invest in these types of fund's on one of the platforms as it seems much cheaper than the options my FA told me about. Where I have to pay a % to him of what I invest and then a larger annual fee for the managing of the portfolio. So his recommendation would need to out perform Vanguard / Nutmeg and not sure it would ever be that much of a difference.
The only concern is when to invest. The FA told me its the time in the market thats important not when to invest.... I'm just struggling with the thought of investing today when I think the market will go even lower... over the next few weeks... well at least until there is hope with the out come to covid-19.

So I too am confused of what to do with £200K...... its a great place to be in just don't want to make the wrong decision!
Think i am going down the route of 2 maxed out premium bonds and just different instant access savings accounts with the rest which have pants % growth for the short term, then when there is a change in the covid situation jump at that point into pensions and stocks and shares..... after all have till April to take benefit of this years Tax benefits with Pensions and ISA's

Interested to know what you choose to do with your money. As I am open to ideas as well!!!

stueyhants

Similar situation to you but my inheritance is about the same value as the outstanding mortgage. I’m only pay 1.49% on that so I see no reason to pay it off, although I might just do the standard 10% overpayment this year. 

I’m going to put a large chunk 40k into my company pension to buy added years as I’ve not maxed out my yearly limit over the past 3 years and given I’m a 40% tax payer I get a nice rebate from HMRC.

The rest will be split into ISAs for me and the OH and other non isa investments saving a little in cash as a rainy day fund. In terms of what investments to get I might hold off for a few weeks as I can’t see the current value holding. We are in the biggest mess for years economically and yet the value of the market is where it is. It can’t carry on....can it ?

Alexland

Just remember that any pension contributions (even if using unused allowances from previous tax years) need to be supported by current tax year earnings.

If I was looking to invest more than could reasonably be accommodated within the ISA and Pension allowances you (or your partner) may have available this tax year I would look at going higher risk on the Pension/ISA investments supported by some low risk Premium Bonds (with any leftovers in General Investment Accounts until they can be moved into Pension/ISA is subsequent tax years) such that overall across the 4 different accounts you have a suitable asset allocation balancing your volatility tolerance and growth ambitions.

Without making some sensible investments it will just get ravaged by inflation and its spending power would reduce over the long term.

added thoughts: Over the short term the movements in the markets are almost random and after a while, even with hundreds of thousands invested, you stop worrying about it as you have growing confidence in your investments and asset allocation strategy.

£200k doesn't go very far if you have dependants and your earnings stop so worth ensuring you have adequate life, critical illness and personal accident insurance.

Alex

stueyhants

Alexland said:

Just remember that any pension contributions (even if using unused allowances from previous tax years) need to be supported by current tax year earnings.

If I was looking to invest more than could reasonably be accommodated within the ISA and Pension allowances you (or your partner) may have available this tax year I would look at going higher risk on the Pension/ISA investments supported by some low risk Premium Bonds (with any leftovers in General Investment Accounts until they can be moved into Pension/ISA is subsequent tax years) such that overall across the 4 different accounts you have a suitable asset allocation balancing your volatility tolerance and growth ambitions.

Without making some sensible investments it will just get ravaged by inflation and its spending power would reduce over the long term.

Alex

Premium bonds are probably a good option right now, at least it protects it against the 85k Limit for the moment.

snowcat75

tryingtogetmyheadaround said:

I am in a similar place.... just my money has come from inheritance after paying my mortgage off I have £200K as well.
I did see a financial advisor.... not sure he told me anything I didn't know. It seemed he wanted me to invest the money I will use to pay off my mortgage as the return will be better than the 2% interest I am being charged on my mortgage. 
The way the world is at the moment I don't think that's for me.

I did think I want to put some into pensions for myself and my wife and some into stock and shares ISA's. Also going to max out a premium bonds account at £50K (emergency fund) as that will never go down and I may end up with a nice surprise one month, also can get the money out quick.

So with this in mind and never invested before, I have invested last week £1000 in a Vangaurd 80/20 fund and a Nutmeg 8/10 fund, as not sure which platform to use. After 1 week this morning I am down on my Vanguard account to £966.28 (-3.37%) and in Nutmeg £971 (-2.94%)....... now I get these should be long term investments. What I cant stop thinking about if I had invested the full £200K what it would be worth now.

I still want to invest in these types of fund's on one of the platforms as it seems much cheaper than the options my FA told me about. Where I have to pay a % to him of what I invest and then a larger annual fee for the managing of the portfolio. So his recommendation would need to out perform Vanguard / Nutmeg and not sure it would ever be that much of a difference.
The only concern is when to invest. The FA told me its the time in the market thats important not when to invest.... I'm just struggling with the thought of investing today when I think the market will go even lower... over the next few weeks... well at least until there is hope with the out come to covid-19.

So I too am confused of what to do with £200K...... its a great place to be in just don't want to make the wrong decision!
Think i am going down the route of 2 maxed out premium bonds and just different instant access savings accounts with the rest which have pants % growth for the short term, then when there is a change in the covid situation jump at that point into pensions and stocks and shares..... after all have till April to take benefit of this years Tax benefits with Pensions and ISA's

Interested to know what you choose to do with your money. As I am open to ideas as well!!!

Its good to hear im not the only one with conflicting ideas in where to go.

Before I sold I had a similar conversation from the bank about mortgages they were encouraging me to keep borrowing (keeping money into B&M) rather than having money to invest, But having been down the landlord route its not an option for me anymore, I also like yourself feel that borrowing at this time is best not to have, and my gut is that building plots and property is likely to head in one direction over the short to medium term.
In the past iv had similar experiences with FAs, and have felt that even though any packages have returned poorly they seam to still take a nice % return regardless, This was the main reason I got into selfbuilding in the first place as I liked the tangible nature and the control over the investment

As You say its a good problem to have, Its just at the moment littles inspiring me.. 

HCIMbtw

This is how i'd think it through: 
1. Put aside a cash reserve fund in an easily accessible low risk savings account
2. Maximise ISA contributions (£20k each you and your partner) - personally id put it in S&S ISA, then chose risk based on foreseeable investment period, nice little tax wrapper just to easily get some investment out of the way 
3. Id probably max out NS&I premium bonds just as a tax free way of holding and getting some growth of a chunk of the rest of it (even if any profit is a bit of gamble).. 

That should tie up about £160k 

Then I would look at maximising pension contributions from my salary and living off the cash year 1

Year 2 i'd max ISA contributions again... and that would be the full £200k

I'd keep up with maximising pension contributions in year 2 and withdraw money to live from that held in NS&I premium bonds.. Id use the money in year 3 in my premium bonds to as close to max out my ISA as possible again (aiming for me and partner to have £60k each in there) and whittle premium bonds down to zero

Look I can't say this is the best plan for you or your circumstances.. just how my thought process runs on these things.. essentially just looking at getting as much money into pension & S&S ISA's as quick as possible.. my intention is to use S&S ISAs to bridge a gap to early retirement if possible.