£120K in an unwrapped account - suggestions?

Aminatidi

Apologies I know it's a first world problem.

I have approx £200K in an ISA in a cheap passive global tracker.

I have approx £120K in an unwrapped account that I'm trying to decide what to do with.

Essentially it's cash that I don't plan on accessing but I want the optionality of accessing it.

I'm prepared to take some volatility on it and I'd struggle to put a number on how much other than to say the 15% or so that "wealth preservers" have lost in the past year hasn't impressed me.

Traditional savings accounts pay interest and I'd get taxed at 20%.

Funds/ETFs pay dividends or interest so I'd get taxed on dividends or interest and there are CGT considerations.

Gilts appeal as low coupon gilts are minimal tax and the capital gain is tax free plus there is the optionality of selling some or all of it if I needed to but Mr Market may not give me what I paid for it.

With gilts I think I'd be looking at between TN24 and TN28 in terms of maturity.

Are there any other suggestions that I should be considering please?

artyboy

Well, £50k into premium bonds could be an easy starting point...

Aminatidi

Thank you and I have £20K sat in a bank "savings" account earning sod all that I might be putting in those so you're right it's an option but if I did it would "only" be £30K.

handful

What about pension? Up to your annual earnings or £60k, whichever is lower. Unless you already drawing pension of course!

boingy

Pension is a great call but you can't have it back until aged 55 or 57 (depends how old you are now). However, premium bonds and ISAs are accessible whenever so you could tie some up in a pension.

Are you married? Your spouse may have unused ISA and premium bond space, and/or some spare tax allowance. 

EthicsGradient

I assume you have already used this year's ISA allowance into the S&S ISA. What are your plans for next year's ISA allowance - another £20k into the S&S ISA (from this £120k, or from your income?), or would it be available for some of this cash in 7 months' time? Cash ISA rates looks slightly better than gilts.

Aminatidi

Yeah the rough plan would be to feed the S&S ISA either from income (around £2/K month to save/invest) or sell down from the unwrapped account but that's less necessary if there's no capital gains tax type issues to think about.

There's around £750/month going into a pension and whilst I might open a SIPP I think I'd want to drip spare cash into that as I have an inherent dislike of locking money away though I'm in my late 40's so being able to access it isn't as far away as it might sound

Like I said it's a very first world problem I get that but it's actually annoying how difficult it is to just get a decent safe return without moving money between bank/savings accounts and investment platforms and/or having to think about HMRC stuff.

dales1

You mention CGT issues to think about.

Well I have some global trackers in an unwrapped GIA.

And I make sure I use the CGT allowance every year (to shelter some gains from tax).

Otherwise the CGT allowance is lost and wasted.

(I sell a tranche of one stock and rebuy something similar (eg sell VWRL and buy VEVE)).

Sure, there is tax to pay on the dividends, but again you have a dividend allowance (tax free) which is lost / wasted if not used.

(But don't let the tax dog wag your tail).

Aminatidi

That is an option and I agree about not letting the tail wag the dog

I think it's more if I want something with safe/guaranteed/known returns as a counterweight to the tracker in the ISA I'm struggling to see past directly held gilts as the most efficient (taking into account taxes, one off dealing costs, fees, all of it) way of getting it.

But £120K is a decent sum of money so it's belt and braces being sure and that I haven't overlooked anything else 👍🏻

Aminatidi

Hmm I also find myself looking at FlagStone and wondering if a more traditional savings ladder might be an idea?

Is anyone else doing a "barbell" with a chunk in a tracker and a chunk in something 100% safe?