what to do with 350k?

donmaico

my wifes had enough, after nigh on 38 of hard slog she wants out of her high pressure job, get something part time or much lower pressure Thing is we have this lump sum and wondering what to do with it We are both in our middle fifties so not completely ready for retirement yet nevertheless she will be looking for something with much less pressure and with less pay therefore she need to know what to with her lump sum in order to get best return. The best bank accounts offer 5% net approx so its got to be better than that. An annuity would be ok but the ones tied to inflation rate only seem to offer less than £10 k per annum each which is rubbish given that 5 % net would return about 17.5k pa and the lump sum is still there at the end. Any ideas anyone?

EdInvestor

How much risk are you prepared to take with what percentage of the money?

When do you need the income and what's the wife's likely tax position?

Have you used your ISA allowances? What other pensions do you have? What state pension amounts can you expect?

Have you paid off your mortgage?

What's your state of health?

dwileflunker

donmaico wrote: »

my wifes had enough, after nigh on 38 of hard slog she wants out of her high pressure job, get something part time or much lower pressure Thing is we have this lump sum and wondering what to do with it We are both in our middle fifties so not completely ready for retirement yet nevertheless she will be looking for something with much less pressure and with less pay therefore she need to know what to with her lump sum in order to get best return. The best bank accounts offer 5% net approx so its got to be better than that. An annuity would be ok but the ones tied to inflation rate only seem to offer less than £10 k per annum each which is rubbish given that 5 % net would return about 17.5k pa and the lump sum is still there at the end. Any ideas anyone?

Without all your info and investment preferences (ie: what risks you are prepared to take) no-one here can tell you what to do. I suggest a reputable IFA. It will cost but will be worth the money in the long run. This is a lot of money so think carefully before investing.

ManAtHome

Not sure what you're asking - is the 350k the tax-free 25% of a pension fund or have you had this for some time - surprised you don't have an IFA already.

"Problem" on here (quite rightly) is that you can only really get opinions - best bet is to think through what you (think) you want to do over the next 30-40 years then either find an appropriate advisor or do heaps of research.

Dunno about you - I don't expect an IFA to able to forecast super-dooper returns any more than I can, but they (or at leat mine) do know a lot more than I do about investment and taxation strategies if you have reasonable idea about where you're going.

cyclonebri1

donmaico wrote: »

my wifes had enough, after nigh on 38 of hard slog she wants out of her high pressure job, get something part time or much lower pressure Thing is we have this lump sum and wondering what to do with it We are both in our middle fifties so not completely ready for retirement yet nevertheless she will be looking for something with much less pressure and with less pay therefore she need to know what to with her lump sum in order to get best return. The best bank accounts offer 5% net approx so its got to be better than that. An annuity would be ok but the ones tied to inflation rate only seem to offer less than £10 k per annum each which is rubbish given that 5 % net would return about 17.5k pa and the lump sum is still there at the end. Any ideas anyone?

No financial advice from me but in terms of lifestyle, and if you are your mid fifties, consider that maybe doing less of what is you don't enjoy may not be enough, a total change may well be a better option. You don't have to get out the pipe and slippers when you retire.

You don't mention your own work position but maybe an overall view of your joint potential pension options would be in order?

Not trying to sway you but as someone who has recently been forced into retirement at 55, I must say the feeling is of total relief and I can now get round to doing the stuff I never had time to do. Unfortunately my wife has a fair few more years to work yet and as it may be your case, she enjoys her work so for her it's not the preferred option.

CLAPTON

donmaico wrote: »

my wifes had enough, after nigh on 38 of hard slog she wants out of her high pressure job, get something part time or much lower pressure Thing is we have this lump sum and wondering what to do with it We are both in our middle fifties so not completely ready for retirement yet nevertheless she will be looking for something with much less pressure and with less pay therefore she need to know what to with her lump sum in order to get best return. The best bank accounts offer 5% net approx so its got to be better than that. An annuity would be ok but the ones tied to inflation rate only seem to offer less than £10 k per annum each which is rubbish given that 5 % net would return about 17.5k pa and the lump sum is still there at the end. Any ideas anyone?

dont dismiss the lessons from annunities too lightly... the reason they provide a low level of income is because they are inflation linked... its too easy to dismiss the effect of infltion.
Your wife is still very young,
for every £1,000 she gains in interest payments at 5% in only 10 years and assuming inflation a low 3.8% then that 1000 will be worth only £680 and her capital of 350,000 will be worth only 241,000

in 20 years that 1000 will only be worth 474 and the 350,000 worth only 166,000

many people consider inflation much higher than 3.8% which will make the situation worse..

so if she whats to keep the purchasing power of her money intact and to simply save (as opposed to invest) then she shoudl only spend at the rate about 1.5% interest equivalent.

dunstonh

in 20 years that 1000 will only be worth 474 and the 350,000 worth only 166,000

Indeed, if inflation carries on at its current level it could be 10-15 years that we see that sort of decline in real terms.

Inflation is the biggest risk of anyone needing a long term income. Investment risk is a risk but you can take a sensible level of risk and use a combination of things to achieve your goals.

Sticking it in a high interest account and living off the interest is probably the worst thing to do with all the money.

donmaico

ok guys and many thanks for the replies. The situation is I am ok with my job as a selfemployed gardener .Doesnt pay a lot but it suits me. My wife is just had enough of hers and wants change. She hasnt decided what to do although moving to Cornwall seems to be a possibilty( we both like it there).We also thought of buying a house split in two so we could holiday let some of it.
She stands to inherit a house which, if we are lucky, will reach its probate value of 200k. There are also monies involved plus saving which may end up totalling about 350k, I say may because god knows how long this probate will take as we are trying to get a nill band transfer as well and the IR are slow to move.The case isnt a simple open and close one
We also have a house where we live allegedly worth about 300K.
as for investments
Cash Isas totalling about 15k
he mother{ who lives with us) has 21K in cash/bond isas
Share Pep Legal and general European tracker fund about 9k
share Isas-
3.5k Invesco euro smaller companies- maxi one lump sum
4.5k Fidelity euro fund- mini £50 pm payments
3.5 Schroder mid cap 250- mini £50 pm payments
all approximate figures totalling about £40k which is over and above the £350k

Yes I would go and see an IFA and would probably pay a fee thus receiving totally unbiased advice (hopefully)

another option would be to let the house which would realise about £600 pm net but then i keep thinking about the hassles re bad tenants, maintenance etc.
thanks

donmaico

Forgot to mention that my wife is in a superanuation scheme which will be realised when she is 65, I have a small pension to add to the annuity pot again at 65 , and there are 3 other frozen pensions of hers which would also be added by the time she is 65. Also two endowment mortgages which effectively became saving plans as our current mortgage is now repayment with about £6 k to go.
Endowment plan1 ( Alba Life)(should be realised this year at some time.I have no idea what it'll pay as its stopped paying out bonuses about 5 years ago.It was supposed to reach 17k-
Plan 2 (Prudential originally Scot amic) realise in 2015,this one has a target of 13k

jamesd

Will any pensions become available at 55, which seems to be anywhere from already happened to one or two years away? May be 50 for her anyway, instead of 55.

If no pensions can pay out, one option to consider is to contribute an amount equal to her salary less superannuation and personal allowance into a pension to get tax relief. Then at 55 she could take 25% back as a tax free lump sum and buy an annuity (escalating with inflation type) with the remaining balance. This is because pensions are the best way to generate income up to the personal tax allowance and it seems so far that there's no income to use that allowance. So pension first to get that tax break and boost the income.

Limit for tax relief is the maximum of salary or 3600 a year after tax relief so both of you could usefully use that 3600 a year into pensions and then buy an annuity every few years to get that tax relief boost to the income. You get the tax relief on pension contributions even if you don't pay tax in the first place.

Investments in unit trusts, OEICs or similar will be the way to generate ongoing income that won't reduce due to inflation. With the sort of money you're writing about you should use an IFA for this unless you've experience managing your own investments, which does not seem to be the case from what you've written so far. At a minimum you shoudl expect ten or more different investment funds to be used, 15 or more wouldn't be surprising. If someone suggests just one or five or so, they probably aren't doing a proper job - that's just inadequate planning for this sum of money.

First stop for the investing should be using the stocks and shares ISA allowances for both of you every year until all of the money is inside a tax wrapper so you don't pay tax on the income you get.

Now isn't a great time to be moving home but one option might be to sell the current place and plan to rent in a few places for six months or a year each to see which you like best. Then you can look to buy in that area, possibly after prices have dropped further.

No problem to post here about what the IFA suggests and get opinions on it. Good idea just in case you get a bad one.

You should be able to achieve something in the region of 6% of the capital amount as income from investing, plus keep up with inflation. Some of the income from once or twice a year sale of some of the investments that grow in capital value. That's way better than savings accounts, which will only just keep up with inflation, leaving very little left over to live on - maybe 1-2% if you're lucky.

Expect low wages in Cornwall. Jobs tend to be poorly paid while those like you who are moving to the area push propery prices up with the proceeds from the sale of their homes.

donmaico

Must admit she was paying into a prudential AVC scheme but like so many lost confidence in it and stopped paying so its now frozen, Guess she could always restart it but the pot is small so there woint be much for an annuity as yet and 3 years isnt going to make much of a difference i wouldnt have thought
You are right ,my experience in investments is poor and I am very hesitant about using share funds. The vast majority ,I'm told ,do not outperform the trakers.In fact two that were recommended to me went pear shape during the tech bubble crash so I am much more wary.One thing ,though ,our Schroder one is in Skandia so can easily be changed. That one was also recommended, the other two being Invesco European growth ,smaller companies and Henderson Tech funds.I also had a Fidelity health fund which was rubbish so changed it to European fund.
I will really need some convincing by a good iFA( fee based) about going back to unit trusts
I also think we may well stay in the south east for a few more years and move to Cornwall at 60 mainly due to my work considerations.I have plenty here but Cornwall...................