General advice for savings and investments of around £500k

What_time_is_it

kempiejon said:

What_time_is_it said:

The  £30k figure is the result of us calculating (in today’s money) what we would need on average over a year for everything, including an “emergency” surplus.

We fully understand that retiring before we draw from our pensions means that we need to make provisions for the years before that… that is exactly what we are trying to do and is kind of the underlying question of this threat! I.e. we are planning for the rest of our lives and understand that we will need to access different pots of money at different times and we want to maximise our income levels that we can get from our current savings.

I suggested you could get a base cost of living, as well as your would-like including emergency £30k. That makes retirement as soon as possible clearer. If you would like £30k per year you're all set from 67 with state pension and DBs.
DBs at 57 give you £16k pa so half way there. You also have £250k so in DCs you to bridge that 10 year gap you can have £30k pa and a bit left over.
At 48 with £500k inheritance and 10 years until DCs your £30k a year leaves you a balance of £200k.
Look out for inflation but doesnt it look a bit like you can retire now?
If th expected £1/200k extra inheritance comes along add that to the mix too

Investing £500k, well here's a handful of thoughts. Between the 2 of you £100k premium bonds. £20k each April leaves £360k at risk of tax so perhaps low couplon gilts could be an idea. I'd rather pay the tax on larger gains and equities are a route for that, like the oft mentioned global trackers. One could balance add some impression of safety with some governement debt bonds or gold. If youd like someone else to do the stokpicking and balancing perhaps a wealth preserver investment trust like F & C Investment Trust or Alliance Witan plc?
Some investors like to harvest dividends (taxed at only 7.5%) rather than sell down and pay capital gains (18%) so a particular fund that thows of an income is nice, Vanguard offer to track a global high dividend index and the Vngrd FTSE All-Wld Hgh Div Yld UCITS ETF VHYL would give about 3% per year to begin with. That's half what you want. Add the extra expected inheritance and you can top that up to £30k for 7 years and check again.

And as a tiny niggle income and capital gains are treated differently for tax and I find is useful to think of capital gains and dividend as different ways of making an income. Savings is what one does with cash - I think of as defered spending. Investing is what one does to generate wealth using income and capital gain, putting your money to work in other assets than cash.

There's a lot to work out but you can retire today if you're careful and try not be unlucky.

Amazing! Thanks so much for this level of detail. It’s so helpful.

One thing that isn’t quite right in your workings is that if we take our DB pensions early then there are early retirement factors. Currently we would get around 60% of the total if we took it at the earliest available time (which I think is pretty good!) but in reality so expect this to be cut before we reach that age so I’ve been working on the assumption of getting about 50%.

Albermarle

Presumably income from investments is taxed in a different way though (CGT?) so it’s a good point and one that we obviously have to consider.

Investments held outside an ISA or pension, can be subject to CGT and dividend income tax.

I was thinking you could utilise any unused personal income tax allowance, by taking taxable income from a pension, but if it is already used up with savings interest then that will not work.

kempiejon

What_time_is_it said:
Amazing! Thanks so much for this level of detail. It’s so helpful.

One thing that isn’t quite right in your workings is that if we take our DB pensions early then there are early retirement factors. Currently we would get around 60% of the total if we took it at the earliest available time (which I think is pretty good!) but in reality so expect this to be cut before we reach that age so I’ve been working on the assumption of getting about 50%.

Don't put to much store in my random thoughts I hope it's a good pointer to do some of your own research. I made a couple of edits to double check.
I think the premise holds even with reduced DB at 57, you could make it happen today.
So back to your earlier point about retiring as early as possible what's your plan for the time now the money is nearly sorted?

What_time_is_it

kempiejon said:

What_time_is_it said:
Amazing! Thanks so much for this level of detail. It’s so helpful.

One thing that isn’t quite right in your workings is that if we take our DB pensions early then there are early retirement factors. Currently we would get around 60% of the total if we took it at the earliest available time (which I think is pretty good!) but in reality so expect this to be cut before we reach that age so I’ve been working on the assumption of getting about 50%.

Don't put to much store in my random thoughts I hope it's a good pointer to do some of your own research. I made a couple of edits to double check.
I think the premise holds even with reduced DB at 57, you could make it happen today.
So back to your earlier point about retiring as early as possible what's your plan for the time now the money is nearly sorted?

Absolutely! Opinion and info from strangers is always, always, a starting point or part of the process, and never the end of the discussion!

Plans for our time? We both love being outdoors as much as possible so we’d love to work on our garden and house and maybe volunteer somewhere in an outdoorsy capacity too. We are also planning to spend more time running, cycling, walking and all the things we love to do while we are still relatively young and healthy. We have seen relatives work themselves silly and make half-baked plans that they never got to realise due to being too old and/or ill at the point where they actually freed up the time to do it. We want to enjoy our healthy years as much as possible. We also aim to simplify our lives and become more self sufficient and self actualising - hopefully without falling in the trap of becoming massively self important too!

Basically it’s about enjoying the simple things in life and avoiding being someone else’s b*tch!

[Deleted User]

Top tip - if you're anything like me, risk averse when it comes to money, and now have your savings in multiple 'standard' savings accounts and ISAs with miserably low interest rates, just don't make the mistake of looking back to see what you could have made. Some years back I used to listen to a tech channel on YT and it prompted me to looking into buying some stock in up-coming companies. I did a lot of research and actually went as far as hovering my finger over the button to invest a few grand before deciding that no, I don't trust these websites and I don't trust the whole process. The shares were Nvidia, and currently my return would be in the region of 40,000% (yes, that's a comma, not a point).

What_time_is_it

[Deleted User] said:

Top tip - if you're anything like me, risk averse when it comes to money, and now have your savings in multiple 'standard' savings accounts and ISAs with miserably low interest rates, just don't make the mistake of looking back to see what you could have made. Some years back I used to listen to a tech channel on YT and it prompted me to looking into buying some stock in up-coming companies. I did a lot of research and actually went as far as hovering my finger over the button to invest a few grand before deciding that no, I don't trust these websites and I don't trust the whole process. The shares were Nvidia, and currently my return would be in the region of 40,000% (yes, that's a comma, not a point).

Great advice.
Just like on Bullseye, never look at what you could have won. Missed out on that speedboat? Maybe. But at least you’ve got your BFH.

MX5huggy

I’ve skimmed through and can’t find it again but early on you asked should you transfer your cash ISA to S&S ISA and think I think you said it’s £90k ish. 

I would say yes do this now then you would have some exposure to equities (15 to 20%). As a starting point. And it better to use your ISA allowance against S&S than cash because the tax liability could be significantly higher for those and tax reporting is more complex than cash interest doing CGT calculations and dividends but when in a ISA you don’t have to think about it. 

What_time_is_it

MX5huggy said:

I’ve skimmed through and can’t find it again but early on you asked should you transfer your cash ISA to S&S ISA and think I think you said it’s £90k ish. 

I would say yes do this now then you would have some exposure to equities (15 to 20%). As a starting point. And it better to use your ISA allowance against S&S than cash because the tax liability could be significantly higher for those and tax reporting is more complex than cash interest doing CGT calculations and dividends but when in a ISA you don’t have to think about it. 

Thanks so much.
Yes, that is something we are weighing up.

we currently have about £65k each in cash ISAs which are at a fixed rate until early May 2025. Once the interest is added that will be about £70k each, and then we would have put 2025/26 allowances to add in May. 

Sounds like it would be a good idea to set up a S&S ISA each for £90k once we have access to the money in May? Or would you recommend acting sooner?

MX5huggy

Presuming you’ve opened / used 24/25 ISA allowance then come April 6th open a new S&S ISA’s with your chosen cheap provider and put £20k each in them in a Global Index fund then do the transfer to those when the cash ISA mature. 

This is presuming your happy to hold for 5 years plus (more like 10). 

I use VHVG fund it’s cheap but not truly global because it is Developed World only the Emerging Markets are missing but you pay extra for these to be included. 

What_time_is_it

MX5huggy said:

Presuming you’ve opened / used 24/25 ISA allowance then come April 6th open a new S&S ISA’s with your chosen cheap provider and put £20k each in them in a Global Index fund then do the transfer to those when the cash ISA mature. 

This is presuming your happy to hold for 5 years plus (more like 10). 

I use VHVG fund it’s cheap but not truly global because it is Developed World only the Emerging Markets are missing but you pay extra for these to be included. 

Thank you. That sounds like a sensible approach.

I’ll check out that company too.