Is a S&S ISA to fund pension shortfall a good idea?

Langtang

We will shortly inherit 2500 Chevron shares from my FIL that are not in a tax efficient wrapper. My plan is to convert 2 of our cash ISAs to S&S ones and to add c1250 Chevron shares to each one, by way of bed & ISA.   

 We are looking at early retirement in a couple of years. We have some personal pensions that we could start to use then and we’re hoping that the shortfall would be taken up by the dividend payments from the shares.

I have a few questions:

1. Is this a good idea? I’ve heard people on here talking about not buying individual shares but rather to diversify with a fund. I appreciate the double tax issue regarding US shares, so are there any other shares that people could recommend, sorry suggest, that do as well in the dividend payment, and that may not have the tax concerns? I only really know about Chevron because my FIL kept saying how well they had performed for him over the years (he got them through a company share scheme)
2. I’ve looked at the history of Chevron paying decent dividend over a prolonged period and have come to the, arguably incorrect, conclusion that this is a good medium/long term way to supplement the shortfall in pension until our SPs kick in - 2029. Is there a better/different way to fund this shortfall, bearing in mind that we have no appetite for great risk? We also have a relatively sizeable inheritance along with the shares that will need to be invested (safely-ish)

Apologies if this reads a little rambling like..

El_Torro

If you don’t have much appetite for risk then having a significant amount of your investments in one company (Chevron) is not a particularly good idea.

Using dividends as a form of income is not very fashionable these days, mainly because many of the best performing companies pay little to no dividends. You’re better off investing for growth and selling what you need to live on. As always with investing any money you need in the short term should be in cash, investments are for the long term.

Alexland

Ask yourself - if you had inherited cash would you have gone out and purchased these shares?

Depending on how early you plan to retire is there an advantage in contributing into a pension rather than an ISA?

Langtang

El_Torro said:

If you don’t have much appetite for risk then having a significant amount of your investments in one company (Chevron) is not a particularly good idea.

Using dividends as a form of income is not very fashionable these days, mainly because many of the best performing companies pay little to no dividends. You’re better off investing for growth and selling what you need to live on. As always with investing any money you need in the short term should be in cash, investments are for the long term.

@El_Torro , Thanks very much for your reply. I am quite risk averse, but my thinking with this particular one was that a. I inherited it & b. The stock has done / is doing / will do* well (* I appreciate the "shares can go down.." etc motto) I was thinking that c£8.5k return on no outlay (of my own) was pretty good!

Is there a better way to get the same return for that outlay, and be able to just siphon off the dividend at no cost (fees etc)?

Does it help my cause in your eyes if I say that the overall inheritance is a little North of £900k (inc shares), and that we have no-one to leave it to?

Maybe I'm searching for some kind of confirmation bias - me thinking my FIL was doing OK getting that kind of return each year?

Thanks again, I take on board everything you've mentioned.

Langtang

Alexland said:

Ask yourself - if you had inherited cash would you have gone out and purchased these shares?

Depending on how early you plan to retire is there an advantage in contributing into a pension rather than an ISA?

@Alexland Thanks for your reply. If it were cash, probably not. Then again, I may have just put the money into an ISA because that is all I have ever known. I've not had any knowledge of share dealing or investing. As my reply above, we do have them, they have a long, proven history, so why not keep them and gain the dividend.

Unless there's another way to generate that sort of income that you can suggest, with that sort of cash?

We are 58, looking to retire at 60. I have a private pension from the late 80s that I still pay into, and a workplace one that is only a few years old. My wife has an NHS one, and a small private one that she no longer pays in to. 

masonic

Langtang said:

As my reply above, we do have them, they have a long, proven history, so why not keep them and gain the dividend.

Big and well known companies do go bust, leaving shareholders with nothing. If you are happy to take the risk that you might wake up one morning and learn these shares have become worthless then you have much better risk tolerance than me! I wouldn't be able to sleep at night knowing I had so much invested in one company. I'd have to diversify.

Langtang

masonic said:

Langtang said:

As my reply above, we do have them, they have a long, proven history, so why not keep them and gain the dividend.

Big and well known companies do go bust, leaving shareholders with nothing. If you are happy to take the risk that you might wake up one morning and learn these shares have become worthless then you have much better risk tolerance than me! I wouldn't be able to sleep at night knowing I had so much invested in one company. I'd have to diversify.

 Thanks for your reply. We do have plans to diversify with the majority of our inheritance. I just thought if it ain't broke, don't fix it. I fully appreciate your comments. Like I said somewhere above, if I had the cash, I wouldn't buy all one company. Maybe I have my answer right there. Thanks again.