Where and how to invest £150k? What to do?

GoldmanSachs

Hello all,

First post, so please go easy!

I will outline myself and my wife's financial situation as we would like some advice if possible. 

We currently have £150k sat in an ordinary HSBC savings account at 2.75% AER. My wife rightly says we need to do something better with the money, and we would appreciate suggestions please. People keep mentioning things like putting it into NS&I schemes, but we don't know where to start.

The £150k is rising by around £2000-3000 each month as this is the surplus we have after our bills and spending each month.

We don't have a mortgage, or debt, or car payments to make, or anything like that. We own our home outright.

We don't particularly want to buy a rental property (been there done that, it wasn't much fun).

Neither of us have the time or the knowledge to engage in any form of investment that needs our input in choosing the actual investments, if you know what I mean, we would either want a professional to do the choosing for us, or a simple and safe scheme that we can access ourselves.

Any suggestions are welcome.

Thank you.

born_again

Simple & safe.
£20K each in a isa. Add to each year. 

Below link for better rates on savings.

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

What about your pensions? 
If you are both working, can you increase the amount you pay in?

Exodi

Well I'd say you're wasting an incredible amount of interest by not moving the money. Your wife is totally right.

£150k at 2.75% is £343.75 per month. £150k at 5% (about the going rate for savings accounts) is £625 per month. It's money for nothing.

Generally this forum recommends holding up to £85k within a single account in case the bank goes belly up (as the FSCS only provides compensation for that).

I'd recommend reading: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/ to decide which product best fits your needs. Unless you think you might need immediate access to £150k at a seconds notice, I'd consider more than just easy-access accounts.

Regarding investing, many on this forum invest in global index funds (for example: HSBC FTSE All-World Index Fund Accumulation C) so don't assume it's all people looking at stock price graphs to pick what to invest in, but whether to invest depends on a lot of factors, not least your risk tolerance, time horizon, expectations, etc.

While investing provides the best returns in the long term, you should do research about this beforehand as it's all too common novice investors lose their minds at their first red day and cash out (and on £150k you can expect swings of tens of thousands of pounds). Investments are for the most part set and forget.

Lastly, the responsible question (I probably should have asked this first) - what's your pension situation?

EthicsGradient

Ahh, now I can put "financial advisor to GoldmanSachs" on my CV ...

As both above say, pensions may be the best place to start - how old are each of you, when might you like to retire (is that before state or occupational pensions kick in), would you feel OK tying up money in a SIPP until you reach 57 (whether or not you really retire at that point)? Would your employers add anything extra if you contributed more to work pensions, or would they do "salary sacrifice" (saves on NI)?

Are either of you higher rate (or additional rate) taxpayers?

If it'll be quite a few years (at least 5, ideally more) before you want to access some of this money, then a global index tracker as mentioned above, either in a SIPP or an S&S ISA, could be a good "don't have to analyse" destination for the 2-3k/month. If you'd rather have it easily available, then a cash ISA could be a good place - this may well mean using both of your ISA allowances (40k combined), perhaps some for cash ISAs and some for S&S ISAs - first think what you want easily available (or with a fixed term of a few years), and then we can see whether that should get the ISA allowance or not.

GoldmanSachs

Exodi said:

Well I'd say you're wasting an incredible amount of interest by not moving the money. Your wife is totally right.

£150k at 2.75% is £343.75 per month. £150k at 5% (about the going rate for savings accounts) is £625 per month. It's money for nothing.

Generally this forum recommends holding up to £85k within a single account in case the bank goes belly up (as the FSCS only provides compensation for that).

I'd recommend reading:  to decide which product best fits your needs. Unless you think you might need immediate access to £150k at a seconds notice, I'd consider more than just easy-access accounts.

Regarding investing, many on this forum invest in global index funds (for example: HSBC FTSE All-World Index Fund Accumulation C) so don't assume it's all people looking at stock price graphs to pick what to invest in, but whether to invest depends on a lot of factors, not least your risk tolerance, time horizon, expectations, etc.

While investing provides the best returns in the long term, you should do research about this beforehand as it's all too common novice investors lose their minds at their first red day and cash out (and on £150k you can expect swings of tens of thousands of pounds). Investments are for the most part set and forget.

Lastly, the responsible question (I probably should have asked this first) - what's your pension situation?

Thank you for a comprehensive reply and some useful suggestions.

Yes, she is absolutely right, hence why needing to do something about it.

I'm good at making money (built up a couple of small businesses then sold them, and now working as a consultant) but rubbish at making it work for me, and to be honest, I have no idea about investments and suchlike. I find it confusing and worrying, hence why I tend to do nothing. I guess many people are like that in some ways.

I'm 40 and my wife is 38, and the money we have made has enabled us to make more money in some ways. For example we built a house a few years ago just before building material costs went crazy during/after Covid - Spent £650k in cash buying land and building it. The cash was what we had earned from me selling a couple of businesses, our savings, and also from selling our old house. A few years on, we have ended up with a £1.25m property at the end of it.

So I'm good at rudimentary stuff like that. Spotting an opportunity to buy something for £10,000, sell it for £20,000 etc. But as soon as people mention APR, SIP's, Pensions, FTSE, NS&I, and lots of other acronyms, I bury my head.

I made £70k alone from buying some classic cars over a period of time when I thought they were a good price, then sold them again. That money went into the house. 

I know this isn't a confession session, but here we are!

After we got the VAT back from the house build, plus saved up for a year or so, we ended up back with £150k in the bank and rightly the wife says we can't just leave it there doing nothing.

Wife has a great pension. She has been with the same firm for 17 years, they have a generous scheme (apparently) and she over-pays into it. She's on £48k a year.

My pensions have been patchy due to being self employed, and a self-employed/Ltd Co consultant, and I tend to be distrustful of pensions, I have never paid into them more than the basic that was allowed, and I think I should probably make my own pension via maybe buying other property or some form of investment. Given my age, I only have about 25 years left to do something though.

Some people have suggested I am stupid for not mortgaging my house, as I could take the collateral out of it, and use that money to make more money that what the mortgage would cost, but again, I don't feel comfortable with that as I wouldn't 'own' my own house, and things might go wrong, interest rates can rise, as we have seen.

Albermarle

This and the pensions forum are mainly populated by people who are savers and investors, and fans of pensions. 
So most of the comments will be along these lines, similar as if you were employing a professional financial advisor.
Nobody is likely to really comment much on schemes such as remortgaging your house, or using property as a pension, or buying classic cars, as most of us just like to sit behind a screen switching savings accounts, or watching our pension pots grow ( hopefully ) .
So if you really want help to unbury your head, and learn what all those acronyms mean, then you have come to a good place. However I get the impression it is not really your thing !

kempiejon

There's a tax bill coming your way but if you and SO put £20k each into ISAs and £50k each in premium bonds there's no further tax liability and each month there's a chance of some winnings. If you don't fancy a pension or learning about stock market investing how about spending it on yourselves. Holiday, new car?

If you're also banking a £2k per month surplus this problem is going to escalate. Nice problem to have but you're going to have a tax bill and inflation is eroding your cash gradually. You sound like a smart fella, applying a bit of those smarts to managing your own finances and you could be very wealthy and plough some of your returns into yourselves or direct them to doing even more good. Or if altruism isn't your bag how about retiring early and seeing the world before it's spoilt further.

saajan_12

The key question is what do you want to DO with the money eventually? For example, to fund retirement, splurge, leave to heirs, etc. That determines how much risk you take.

• If you are near retirement or have a particular splurge in mind, then safer but lower return investments mean you'll have enough for those costs. Think high interest savings or government bonds 
• 
  
• If its for a longer term splurge, or just to leave as big of a pot as possible to heirs / charity, then you can afford to be more risky. Think an all world index tracker - that's still a diversified investment so not the most risky and you can largely set and forget, without having to follow individual stocks etc. 

Can also be a bit of both. Then whichver the choice, you can shift 20k each of the pot into an ISA wrapped pot and potentially some into pension pots to give you some tax benefits. However the risk level of the investment is more important, never let the tax tail wag the dog.