Help with £210k

Dance67

Hi,

I have recently inherited some money from a family members estate and after all the taxes etc I have been left with about £210k
I was wondering what to do with it.

I did consider buying a property to let. This way I would get the rent each month, (about £800-£1k a month), and the property itself would of course increase in value.
Others have advised me to put the money into an investment fund, or top up my pension etc.

A bit about me 
62 yrs old, retire in 3 years time, mortgage will be paid off in 5 months, already have a decent pension of about £42k a year.
I don't need the money to live and my pension is fine as it is. 
However, the ISA's that I can have seem pitiful as are the bank savings rate are also dire. I don't want to make huge sums or take much risk but I feel £200k+ should get me a half decent return.

Any ideas/suggestion as to what I should be looking into and what return I should expect? A monthly or bi annual pay out would be a bonus.

Dance67

Forgot to say I have no debts loans to worry about

jimjames

Dance67 said:

Hi,

I did consider buying a property to let. This way I would get the rent each month, (about £800-£1k a month), and the property itself would of course increase in value.

I don't want to make huge sums or take much risk but I feel £200k+ should get me a half decent return.

You really need to think about what you want to achieve and the risks you are prepared to take. These 2 statements above are not compatible as BTL property is not risk free. I guess if you're not aware of the risks you're discounting them but if you have a void period, bad tenant or maintenance issues let alone if the market was to drop. "Of course" property always increases in value except the times that it doesn't. You could say the same for shares if you pick your time periods.

So think about what you want and the risks you are happy with. There is no reason why you would need to do the same thing with all the money, it could be split into different pots but if you are already sorted with pension and have sufficient cash then investing it would seem to be a sensible option as you wouldn't be bothered what the value was on a day to day basis.

Options other than BTL would also be more tax efficient. With the pension you have it will be pushing into the 40% tax bracket so your £800-1000 income is suddenly reduced by 40%. ISAs are completely tax free so any income from investments in those won't affect tax rates.

If you have substantial amounts in cash ISAs already it may be worth moving those into a stocks & shares ISA and keeping the equivalent of the inheritance as cash. That then speeds up the time to get all the investments protected from tax.

So if you have £100k of cash ISAs then moving those to S&S ISA and keeping £100k of the inheritance as cash savings - there is virtually no difference between cash ISA and savings rates. You then have £110k to decide what to do with but can move £20k into ISAs each year.

MaxiRobriguez

£200k is sufficiently large enough that it's worth going to talk to an IFA about.

bd10

One thought reg. BTL. Consider the tax implications; any mortgage interest costs would not be deductible and rental income is of course subject to your income tax rate. So, your net rental yield is likely to be (much) lower than the gross. If you really want to consider real estate, you could look into REITs. They can be held within tax-free wrappers and you get paid gross. (Not all ISA providers do pay gross but those which do not would issue you a tax voucher so that you can claim back the basic rate as part of your tax return).

Another added bonus is that you get exposure to a portfolio of properties rather than just one. Of course buyer beware, in these extreme circumstances in which we find ourselves, I'd be ultra careful to thoroughly investigate any REITs I would consider buying.

Albermarle

already have a decent pension of about £42k a year.

Presuming this is some kind of final salary pension linked to inflation ?Then it is not 'decent' but extremely good . To actually buy a pension like that would cost not far off a couple of Million Pounds .

By most measures ( Which magazine for example ) you can already afford to live a very comfortable retirement, especially if you add the state pension .

I just say this to put your original question  in perspective. It is probably not worth getting involved in BTL or over complicated investment plans, as most likely you do not need this money to live off .

Something simple and relatively safe would probably be better . Or just spend  some or give some to charity.

MX5huggy

Simple answer is retire today! Your pension will I presume take a bit of a hit from missing 3 years, but delay it by a couple of years to off set this. 

My dad retired at 60 healthy and set for long well financed retirement, he had 4months before the cancer symptoms showed then 18month of hell before the inevitable. 

macman

£50K in PB's would be a no-brainer, and £20K in a 21/22 ISA. Unfortunately you've now missed the boat for 20/21, otherwise that would have accounted for another £20K, making up £90K.
Look at a low-cost tracker for some of the balance? Gift some money to family? Any children under 40 and not homeowners? if so help them with a LISA.
You could also use some of it to finance early retirement?

Dance67

Thank you all for your comments they are very much appreciated.

Sorry, I should have said the £42k pension includes the state pension at 66yrs.
Also if I were to buy a small flat etc. I would buy it outright, no mortgage but I get what some of you are saying about higher tax bracket and potential maintenance/tenant issues.

I will look into some of the suggestions above but do feel free to add any other thoughts you may have.

kuratowski

I think most ideas already have been mentioned!

1. Keep it.  Max out annual allowance (pension contributions), max S&S ISA allowances, max Dividend Allowance in GIA
2. Spend it.  Extend and/or upgrade the house.  Or go on some really, really expensive holidays
3. Pass it on.  Lavish money on children/grandchildren, if you have them
4. Give it away.  Donate to local church/charity you feel connected to

JGB1955

If you have children, and don't 'need' the money, why not pass it on directly to them now? As long as it's within 2 years of date-of-death you can make a deed of variation to move your inheritance on without fear of IHT.  

My father died last year and I've passed on 2/3 of my inheritance directly to my children.  They can make far better use of it than me.  I can see them enjoy the money that my 'tight a***d' father would never have spent on them and it takes us back down towards tax free IHT levels ourselves.  Win win!