Where to invest 150k?

Alice_Holt

isayhello said:

AlanP_2 said:

Pension contributions attract tax relief but withdrawals are taxed and a pension can't be accessed until 55 (going to 57).

Does that suit you?


If you want the money before then for something then probably not, but if you have retirement in mind then a pension will have the greatest benefit.

The investments that can be in a pension, a S&S ISA or unwrapped are all the same the pension / ISA is just a tax wrapper to keep them in.


BTL, as in a 2nd property attracts a higher rate of Stamp Duty and the profits are taxable. Depending on your overall income and tax rate this is typically "worse" than it used to be when all mortgage interest could be offset against tax at marginal rate (now limited to Basic Rate). In addition there will be Capital Gains Tax to pay once sold.


We all (mostly) want our pot to grow but many of us have a more specific objective or time frame. If you were 70+ and just wanted your pot to tick over with limited downside you would choose different investments than if you were 40 and were trying to build a pot so that you could retire before say 60.  

If I've never bought a property.... as I live with family or rent sometimes.

       If you anticipate renting (and having a rental liability) in retirement, then I'd certainly consider purchasing a property as your home. 

p00hsticks

isayhello said:

If I've never bought a property is it a better investment then to have a BTL as I live with family or rent sometimes.

You'd avoid the additional 3% SDLT but still be liable for Capital Gains Tax when you sell and income tax on the incoming rent - and you can't offset what you are paying out in rent against it. 

If considering purchasing property, you'd be better off buying yourselve a home to live in, as currently your residence is exempt from CGT when you come to sell.

Linton

isayhello said:

AlanP_2 said:

Pension contributions attract tax relief but withdrawals are taxed and a pension can't be accessed until 55 (going to 57).

Does that suit you?


If you want the money before then for something then probably not, but if you have retirement in mind then a pension will have the greatest benefit.

The investments that can be in a pension, a S&S ISA or unwrapped are all the same the pension / ISA is just a tax wrapper to keep them in.


BTL, as in a 2nd property attracts a higher rate of Stamp Duty and the profits are taxable. Depending on your overall income and tax rate this is typically "worse" than it used to be when all mortgage interest could be offset against tax at marginal rate (now limited to Basic Rate). In addition there will be Capital Gains Tax to pay once sold.


We all (mostly) want our pot to grow but many of us have a more specific objective or time frame. If you were 70+ and just wanted your pot to tick over with limited downside you would choose different investments than if you were 40 and were trying to build a pot so that you could retire before say 60.  

Ah ok thanks, so it seems with a pension the benefits cancel each other out a bit in the end as you are taxed eventually right?

If I've never bought a property is it a better investment then to have a BTL as I live with family or rent sometimes.

Any suggestions for platforms/investment types for 150k?

No - you get 25% tax free from a pension

steampowered

isayhello said:

Ah ok thanks, so it seems with a pension the benefits cancel each other out a bit in the end as you are taxed eventually right?

If I've never bought a property is it a better investment then to have a BTL as I live with family or rent sometimes.

Any suggestions for platforms/investment types for 150k?

With pensions, you get:
- Tax relief when you put the money in.
- 25% tax free lump sum on retirement.
But you do get taxed when you draw down the income in retirement (though potentially at a lower rate if your retirement earnings are less).

With buy-to-let, you don't get tax free anything. But you still pay income tax on the rent ...

LisaC1234

I may be old fashioned and I’m new to forums and little investment knowledge but my initial thoughts are would you be better getting on to the property ladder and pay mortgage rather than rent? Of course this would depend on affordability and area you would want to live but 150k could possibly provide a good deposit. Also renting is ok when you are younger and working but possibly harder to afford later in life when relying on pension income. Of course everyone’s situation is different and you may have other investments and a good pension building up. 

Albermarle

LisaC1234 said:

I may be old fashioned and I’m new to forums and little investment knowledge but my initial thoughts are would you be better getting on to the property ladder and pay mortgage rather than rent? Of course this would depend on affordability and area you would want to live but 150k could possibly provide a good deposit. Also renting is ok when you are younger and working but possibly harder to afford later in life when relying on pension income. Of course everyone’s situation is different and you may have other investments and a good pension building up. 

I do not think owning your own home is old fashioned, and for many people it is the best investment they can make .
I think for  the large majority of regular posters on here about investing , pensions etc,  they already own their own home , or at least have a mortgage on one.

Often it is advised to not overpay the mortgage and invest instead . Also as said BTL is not popular on here , although it can still be suitable for experienced landlords with maybe building and DIY experience.
However owning your own home is still a positive move in most cases  as you say .

Albermarle

, I have a pension already through work which gets added to each month, I haven't ever thought about adding more into it, would that be a better option than investing in an unwrapped account?

Can we presume as well that you have not looked into the investments in your work pension, to see if they are suitable for your objectives/risk tolerance/time frame ? If not , you should start there before worrying where to invest the £150K

Your pension is not a standalone item , whilst you look at ISA's , think about BTL etc . The pension should be an integral part of any plans due to the tax relief and free employer contributions ( presume these are maximised ?) .

Without knowing your full situation , it looks like the £150K might be best spent on a house deposit and some additional pension contributions. 

isayhello

LisaC1234 said:

I may be old fashioned and I’m new to forums and little investment knowledge but my initial thoughts are would you be better getting on to the property ladder and pay mortgage rather than rent? Of course this would depend on affordability and area you would want to live but 150k could possibly provide a good deposit. Also renting is ok when you are younger and working but possibly harder to afford later in life when relying on pension income. Of course everyone’s situation is different and you may have other investments and a good pension building up. 

Thanks, unfortunately the areas I rent in due to work make buying unaffordable for the moment but I am considering buying somewhere in the future that could be an investment and eventually live in.

isayhello

Albermarle said:

Can we presume as well that you have not looked into the investments in your work pension, to see if they are suitable for your objectives/risk tolerance/time frame ? If not , you should start there before worrying where to invest the £150K

Your pension is not a standalone item , whilst you look at ISA's , think about BTL etc . The pension should be an integral part of any plans due to the tax relief and free employer contributions ( presume these are maximised ?) .

Without knowing your full situation , it looks like the £150K might be best spent on a house deposit and some additional pension contributions. 

I have looked into the investments underlying and am using the employers contributions. One question though, an old work pension is currently sitting with the Prudential, is it worth moving this? are there better providers out there? if I did move it would I have to open a SIPP?

As for the house, it wouldn't be something I could afford where I work in London but would you recommend buying a place to let out for now till I eventually decide to live in it myself?

Albermarle

isayhello said:

Albermarle said:

Can we presume as well that you have not looked into the investments in your work pension, to see if they are suitable for your objectives/risk tolerance/time frame ? If not , you should start there before worrying where to invest the £150K

Your pension is not a standalone item , whilst you look at ISA's , think about BTL etc . The pension should be an integral part of any plans due to the tax relief and free employer contributions ( presume these are maximised ?) .

Without knowing your full situation , it looks like the £150K might be best spent on a house deposit and some additional pension contributions. 

I have looked into the investments underlying and am using the employers contributions. One question though, an old work pension is currently sitting with the Prudential, is it worth moving this? are there better providers out there? if I did move it would I have to open a SIPP?

As for the house, it wouldn't be something I could afford where I work in London but would you recommend buying a place to let out for now till I eventually decide to live in it myself?

The pension provider is less important than the investments you hold within the pensions.
So how your Pru pension is invested and how that fits with your other investments is the most important .

Separately you may look at alternative providers in terms of charges / ease of access/choice of investments.
A 'whole of market ' SIPP will offer thousands of funds  and other investments , but that just confuses many people and they will prefer something simpler ( maybe like the Pru pension) . It is really horses for courses .
Also transferring the Pru pension to your current workplace pension is usually an option.