£20k - what to do with it?

rach2008

Daliah said:

rach2008 said:

Daliah said:

rach2008 said:

I would suggest the OP put 2K in a P2P ISA and the remainder in a cash account. 

You're having a laugh, aren't you? 90% of a long term sum in cash? Where your money is guaranteed to lose buying power?

Inflation isn't necessarily bad for everyone. 

Can you explain how cash savings [that you proposed for 90% of the OP's capital] would not be "bad", especially in light of the OP's declared intention to use the money in 25 years time?

Can you guarantee Shares will beat cash over 25 years? If OP works for most of this time, then pay rises will soften the effects of inflation. Also, think about accessibility of funds - cash is much more assessible.

steampowered

jpsartre said:

To answer some of the other questions - my current pension saving basically is the 20k. I've not had a pension contributing income for many of my adult years (relatively speaking) due to postgrad studies and other circumstances. 

This is a key piece of information. You are seriously behind with your retirement savings.

You are currently age 43, and are hoping to retire in your late sixties. Let's assume that you intend to retire at age 67. This would mean:
- You have 24 years left in your working life.
- The average life expectancy in the UK is about 82, so might expect to have 15 years in retirement.
- This means that each year you are working, needs to fund 1.6 years of expenses. 

In your situation, I suggest using the money to top up your pension. You could also consider a Lifetime ISA. MSE has a guide which explains the pros and cons of pensions vs Lifetime ISAs.

You also need to consider longer term how you are going to be able to live in retirement. Check your national insurance record to see whether you will be entitled to the full state pension. Then, think about whether you will be able to live on the state pension, and if not how you are going to start making serious pension contributions.

The old rule of thumb is that you should contribute half your age into your pension, based on when you start contributing. That means you should be paying 21.5% of your salary into a pension. 

steampowered

rach2008 said:

Can you guarantee Shares will beat cash over 25 years? If OP works for most of this time, then pay rises will soften the effects of inflation. Also, think about accessibility of funds - cash is much more assessible.

Yes, you can guarantee this. Real investments like stocks & shares tend to track inflation and provide a return on top of that.

The statistical chance of losing money on a stocks & shares investment (as a stock market tracker) drops to about zero after a 12 year investment period. 

The statistical chance of cash outperforming stocks over a 25 year time period must be less than 0.0001%. 

Daliah

rach2008 said:

Can you guarantee Shares will beat cash over 25 years? If OP works for most of this time, then pay rises will soften the effects of inflation. Also, think about accessibility of funds - cash is much more assessible.

You will be the only person in the world who would choose cash over S&S for a 25 year investment. You are of course free to do so yourself but it's highly irresponsible to suggest to anyone else that they should do so.

Pay rises have nothing to do with the £20k the OP wants to invest now for a period of 25 years. Withdrawal considerations are a red herring as there won't be any issue withdrawing from a pension or ISA 25 years hence - - though if there was any, it would be armageddon and money in any form would be the least of our worries.

sebtomato

steampowered said:

This is a key piece of information. You are seriously behind with your retirement savings.

You are currently age 43, and are hoping to retire in your late sixties. Let's assume that you intend to retire at age 67. This would mean:
- You have 24 years left in your working life.
- The average life expectancy in the UK is about 82, so might expect to have 15 years in retirement.
- This means that each year you are working, needs to fund 1.6 years of expenses. 

Surely, it's funding 15 years of retirements out of the next 24 years of working life.

So not 1.6 years of expenses funded per working year, but 0.6 instead?

rach2008

Daliah said:

rach2008 said:

Can you guarantee Shares will beat cash over 25 years? If OP works for most of this time, then pay rises will soften the effects of inflation. Also, think about accessibility of funds - cash is much more assessible.

You will be the only person in the world who would choose cash over S&S for a 25 year investment. You are of course free to do so yourself but it's highly irresponsible to suggest to anyone else that they should do so.

Pay rises have nothing to do with the £20k the OP wants to invest now for a period of 25 years. Withdrawal considerations are a red herring as there won't be any issue withdrawing from a pension or ISA 25 years hence - - though if there was any, it would be armageddon and money in any form would be the least of our worries.

hardly the only person in the world! There is a lot of debate online if you google. A few years ago people on here were recommending the Woodford fund as as good inflation hedge and look what happened to that. Point is nothing is guaranteed so hedge your risk. I have a number of different investments and give my personal opinion for perspective.

bostonerimus

jpsartre said:

I've come into some money unexpectedly - about £20k. I'd like to invest it for the benefit of my future self when I retire in 25 years time but have no idea what's the best way to go about it. Should I let my bank invest it, put it in a stock and shares ISA, savings ISA, something completely different? Just trying to get an idea about the options and if anything stands out as being obviously the best way to go. I've got zero experience with these kinds of things. Basically I'm looking for:

• a long term investment, 20-25 years.
• something that's low-risk in the long term.
  
• something that requires minimal participation on my part.

jpsartre, you are condemned to search for meaning in a meaningless Universe and create your own essence by your experiences, so what can we do to help?