Still time to benefit from investing?

DigiDave

Hello all,

Brief background may be helpful. I'm in the LGPS with the Pru AVC, my better half has an NHS pension.  Both 52 and health issues mean we would ideally like to retire at 55, accepting the actuarial reductions.

Regretfully, neither of us are that savvy with the financial world. We have been savers and the vast majority is held in cash ISAs, but no investments. I guess we have been 'risk averse' (I think the term is) and perhaps too cautious for too long.

Obviously we're aware of how poor interest rates have been over the last few years, but with the current situation we realise more than ever that our savings are de-valuing as inflation and the cost of living increases.

We are planning to move house within a couple of years or so post retirement so some of the cash will no doubt be swallowed up then.

However is it worth doing anything with any cash that we think can be 'spared'?  For instance we've got approx £55K in an easy-access cash ISA which is probably only around 1% interest at the moment that we hope not to need for the forseeable future, certainly 5 years at least and hopefully much longer.

Is it better late than never and is now a good time to invest this (which would lead to a whole new set of questions!) ?

Or considering our ages and plans, perhaps its already too late to make effective changes?

Thanks for reading.

masonic

You'd be looking at an investment horizon of 10+ years to minimise your risk of failing to make an above inflation return. The longer the better. If there's only a small chance of needing the money after just 5 years or so, then investing could still make sense.

With investments falling this year, and plenty of gloomy news, it is not a bad time to start investing. Investments tend to bounce back in advance of the news turning more positive. What happens in the short term is unpredictable and unimportant, but further drops are certainly a possibility.

There are of course much better cash rates on offer than your 1% easy access ISA, so scope to improve the rate you are getting on your cash.

Albermarle

Don't forget that the Pru AVC will be invested in the financial markets, so you do have some investments already ( unless the AVC is held in cash, which would be unusual)
So one route would be to add more to your AVC, as there are added tax benefits compared to investing outside the AVC.
The short time scale before you retire may not be a problem, if you take the AVC later.
There are some experts on LGPS and associated AVC on the forum, so wait for more feedback. 

In the meantime here is some introductory stuff on investing.
Investing in stocks for beginners: how to get started - MSE (moneysavingexpert.com)

DigiDave

Thank you both for the comments.
Seems like it may be worth looking at investing something then, keeping in mind it's for the long(ish) haul ideally.
Yes of course, the Pru AVC is just with the default 'risk' options so it is indeed investments rather than cash, so I can explore that too.
In the meantime, I do need to look at some of the ISAs we hold as it does look like rates have gone up recently, certainly with the Fixed Rate ones, which raises more questions for me but perhaps that is another question for another post!

Albermarle

DigiDave said:

Thank you both for the comments.
Seems like it may be worth looking at investing something then, keeping in mind it's for the long(ish) haul ideally.
Yes of course, the Pru AVC is just with the default 'risk' options so it is indeed investments rather than cash, so I can explore that too.
In the meantime, I do need to look at some of the ISAs we hold as it does look like rates have gone up recently, certainly with the Fixed Rate ones, which raises more questions for me but perhaps that is another question for another post!

There are a lot of posts speculating on future fixed term interest rates.

Hopefully an LGPS poster will expand on the potential benefits of adding to your AVC.

Voyager2002

Firstly, do a budget for your planned house move and do not invest the money needed for that. It is not a good idea to invest funds that you are likely to need within about five years.

Secondly, think carefully about your attitude to risk. There is no point in getting a highly volatile investment that ends up doubling in value if you spend the next ten years losing sleep because the price keeps going down as well as up. Make sure that you know the difference between stocks and bonds and consider investments that have a reasonably high percentage in bonds.

Thirdly, consider whether the tax advantages of a SIPP would work for you.

Albermarle

OP - You might find this thread interesting. The original question and first posts may not be that useful, but by Page 3 there are posts about the advantages of investing in the AVC part of a LGPS pension.

Some people have no idea how lucky they are LGPS — MoneySavingExpert Forum

Bobziz

If it were me I'd salary sacrifice as much as possible over the next three years into the Pru cash fund, live off savings and then take the entire avc pot tax free when I drew the pension.  

The extent to which you're able to do this depends on the current value of your AVC relative to your pension.