What to do with £140k?

Freddiebump

Hi all. I’m coming into some inheritance and after a few options. I’m currently unemployed due to disability, so will lose some, but not all, of my money when this money hits my account, so could do with investing it somehow to give me an income. 

I’m mortgage free and have no debts. I already have a S&S ISA with a small amount in, and I’m open to putting a bit more in there, plus I have a private pension which I could top up maybe. 

Is property still a good investment, or do all the taxes and costs not make that worthwhile? And if property, what’s best? BTL, holiday let’s etc?

I’m not completely risk adverse, but wouldn’t want to risk the lot as I’d like something to leave my son at some point!

Any ideas gratefully received!

eskbanker

Not many on here would recommend investment properties because of the issues you raise (plus the hassle factors of being a landlord, etc), but it would help to have some sort of idea about how much income you'd realistically need, i.e. whether natural income of a few percent would be enough to live on or if you'd need to be drawing down the capital?  How many years until you access your pensions?

Albermarle

Property investment , BTL etc used to have some generous tax breaks but most of these have disappeared . It seems to best suited to those already in the business, or in something related like building., so renovations and repairs can be carried out at mates rates/cost price.
So probably easier to stick to investments in pensions and S&S ISA's. Could you say how your current pension and S&S ISA's are invested?  and your age would be useful.

Freddiebump

I’m in my 40’s. I have one pension (final salary from a job I did for a lot of years) which I can access at 55, but can’t add into, plus a SIPP which I transferred all my other bits of pensions to and can add to. 

Income wise I could do with £150-200 a month in an ideal world. 

Aceace

You could get £466.66 per month from that sum in Loanpad's 60 day notice account, more if you let some of the interest accumulate. Like all investments, your capital would be at risk, but it's a lowish risk investment in my view. They offer an ISA wrapper. 
Personally I wouldn't want to risk the whole sum with a single provider as it makes it too susceptible to a single point of failure.
Putting some in your SIPP would be more tax efficient, but obviously wouldn't generate the income that you want now. 
Putting £60k in the Loanpad account would generate your £200 per month (even then I'd prefer to spread that over more providers). You could then split the other £80k between your SIPP and a general investment account (some in an ISA).

El_Torro

This is an interesting situation to be in, without a clear way to proceed.

If you want to make £200 a month out of £140k then that's £2,400 per year, which is 1.7% a year. This means that you could probably invest most / all of the money and not run out of cash any time soon, perhaps even never.

The way I would proceed is to put as much as you can in a Stocks & Shares ISA, and keep adding to the ISA whenever you can. This will reduce your tax liability. I would also keep a few years worth of spending in cash so you can avoid selling investments during market dips. Top up the cash when markets are high. 

I have no faith in peer-to-peer lending so I wouldn't put any of the money there. Many regular posters on this forum share this view (some don't of course). Whatever you're investing in could do with being researched by you first, so you know what you're getting into.

You say you have a DB pension you can access from age 55. Is there a penalty to accessing it that early? The penalties tend to be quite big so if you can avoid accessing the pension early that should help you in the long run.

Freddiebump

I’m unsure about p2p lending as I know it isn’t covered by the FCA and that makes me a little nervous! I’m certainly going to do a fair bit of research before I do anything though. There’s no penalty as such for accessing my pension at 55, just a lower amount each month, so I’d prefer to leave that where it is as long as I can. 

Aceace

Freddiebump said:

I’m unsure about p2p lending as I know it isn’t covered by the FCA and that makes me a little nervous! I’m certainly going to do a fair bit of research before I do anything though. There’s no penalty as such for accessing my pension at 55, just a lower amount each month, so I’d prefer to leave that where it is as long as I can. 

P2P is regulated by the FCA, very poorly so in my view, but it's not covered by the FSCS. So you are very unlikely to be compensated for losses if things go wrong. Having said that, in my view, Loanpad is the least likely of the very many I've researched to suffer losses, hence the relatively low return. But, as with all investments, the risk is present, so you're right to investigate thoroughly. 

Xbigman

Given the size of your investment, your being disabled and the low return you need from the money (are you sure that's all you need?) I would definitely be talking to some local IFA's. This is one time I wouldn't DIY. You can come back to this forum and run the IFA's proposals and charges past everyone for a bit of added reassurance.

Darren

Alexland

A globally diversified passive stock market tracker fund such as HSBC FTSE All World or Vanguard Global All Cap will produce around 1.5% dividends although the income can go up or down a bit when things like a global pandemic occur. The capital and income should also go up by at least inflation over the long term if you can cope with seeing the ups and downs of circa 50% whenever the market crashes. Funds have FSCS protection up to £85k.

Or for a more stable income you could invest in a global Investment Trust such as Bankers BNKR at around 2% which use income smoothing to keep paying dividends regardless of if the underlying companies have paused paying them. The capital could still crash circa 50% if that bothers you. You might want to give the portfolio a UK bias where it's possible to achieve around 4% from well balanced investment trusts such as Murray Income MUT. ITs have no FSCS protection but some of them have been going for over 100 years.

For a six figure sum you could use a fixed price platform such as iWeb or Jarvis X-O to gradually "Bed and Isa" the money to reduce tax. Adding money into the pension is also a good idea but that obviously won't help you produce an income for now although I understand that pensions might be disregarded for benefit calculations.

Time4T_Accounts

Definitely talk to an expert.  If you’re going to lose some of your money as a result of the inheritance then it may be possible to structure the inheritance to your advantage through creation of a Trust.  Whether that would work in your case really is one for the experts.