Advice

Davethepioneer · 19 July 2018 at 7:34AM

Ok so I have in cash in my bank HSBC £570,000 broken down into £50,000 in my premier account, £10,000 in each of my sons account (one aged 9 the other aged 6) and £500,000 in my savings account. I am mortgage and debt free (no loans or CC) My out goings are around £2000 per month of which £350 is my car. I have a pension from a company I use to work for and a military one, both of which are small and won’t pay much. I run a small business that is on the verge of making profit (very little) as I’m only just getting back the money I invested. My wife earns around £22,000 per year but does not contribute to my out goings as she covers holidays etc which works great for us. Anyway I’ve been to the bank to see about investing my £500,000 in low risk and they are recommending prudential which will give me around £20,000 per annum I’d like to know peoples thoughts on this please. Would it be a route you would take? Or do you have better ideas?

Thank you

bowlhead99 · 19 July 2018 at 8:06AM

If you see your bank, they will only introduce you to the investment provide of their choice, who will in turn only sell you the products they want to offer.

What you should be doing with your £500k is seeing an Independent Financial Advisor (IFA) who can recommend products from all over the market on an independent basis. The Independent is important: they will include better products from a wide set of providers and a broader range of ideas, for what should probably therefore, be a better result.

In the meantime you should probably stick a lot of your £500k with NS&I who are backed by the treasury and then you don't need to worry about the fact that the amount you have in savings is well in excess of the FSCS £85k compensation limit if something bad were to happen to HSBC's UK operations.

Bravepants · 19 July 2018 at 8:08AM

With that amount to invest you would probably be better seeing an independent financial advisor. I believe you should be able to get a free consultation.

Saying that, if I had £500,000 invested in a Stocks and Shares ISA in a global multi-asset fund (or fund of funds) with a 60/40 equity/bond split I would expect to be able to draw 4% per annum indefinitely (statistically speaking). I would likely spread the capital around across a few fund houses and platforms though, and it would take you some years to feed it into an ISA at the limit of £20k a year. Of course your wife also has a £20k a year ISA allowance, which you could fund also. It of course also depends whether you are comfortable with a DIY approach.. If not the Independent Financial Advisor is the way to go.

But taking into account the 4% drawdown rule the £20000 a year quoted is about right. It depends what's in it for your bank!

How old are you? You could also put the equivalent of your taxable earnings into a SIPP each year, upto a maximum of £40k. You could also do the same in your wife's name? Again, it's the DIY versus IFA approach!

Anyway, more experienced Money Saving Experts will be along in a minute with further sage advice.

MK62 · 19 July 2018 at 8:16AM

Firstly it depends on how old you are and what exactly the bank are recommending you buy from Prudential.
After that there are several other considerations too......attitude to risk, death provision, exact pension provision of both yourself and wife.......and so on.

Wildsound · 19 July 2018 at 8:50AM

https://forums.moneysavingexpert.com/showthread.php?t=5711741

Previous thread from the OP if anyone needs some background.

As other have and will say here, avoid using a bank to offer you investment advice. It'll be far from independent and, like bowlhead mentions, they will just funnel you into their own investment proposition, squeezing more money out of you in the terms of their platform fees, their advice fees and internal fund management charges (likely to be their own funds).

An Independent Financial Adviser is your best point of call and, from reading your previous posts, would probably enjoy going through your circumstances.

Bravepants wrote: »

How old are you? You could also put the equivalent of your taxable earnings into a SIPP each year, upto a maximum of £40k. You could also do the same in your wife's name? Again, it's the DIY versus IFA approach!

Also, not knowing your pension situation in detail, you may be able to use the carry forward allowance (see https://www.pensionsadvisoryservice.org.uk/about-pensions/saving-into-a-pension/pensions-and-tax/carry-forward for info) and be able to contribute more into a pension.

Aegis · 19 July 2018 at 8:58AM

Davethepioneer wrote: »

Ok so I have in cash in my bank HSBC £570,000 broken down into £50,000 in my premier account, £10,000 in each of my sons account (one aged 9 the other aged 6) and £500,000 in my savings account. I am mortgage and debt free (no loans or CC) My out goings are around £2000 per month of which £350 is my car. I have a pension from a company I use to work for and a military one, both of which are small and won’t pay much. I run a small business that is on the verge of making profit (very little) as I’m only just getting back the money I invested. My wife earns around £22,000 per year but does not contribute to my out goings as she covers holidays etc which works great for us. Anyway I’ve been to the bank to see about investing my £500,000 in low risk and they are recommending prudential which will give me around £20,000 per annum I’d like to know peoples thoughts on this please. Would it be a route you would take? Or do you have better ideas?

Thank you

Based on what you are saying, I think they're either recommending a Prudential investment bond (likely an onshore bond - does that sound familiar) or one of their With Profits funds. In either case, I'd have questions, mostly around why those recommendations are suitable (in particular, if it's a bond you should definitely take a step back and get a second opinion, as bonds are likely less tax efficient than unwrapped investments for a basic rate taxpayer).

Assuming you are actually in a position to invest, I would normally expect to see a well-diversified portfolio of assets held in a combination of ISAs and unwrapped investments split between you and your wife. I'd certainly expect to see a number of companies being used rather than just Prudential (if their investment fund was being recommended as the only solution). Ahead of that, I'd expect to see a fairly in depth discussion about your tolerance for risk, objectives and timescales to see how you should be positioning yourself for risk.

I'd also expect to see some discussion on pension funding, as there's no reason you couldn't make use of your own and your wife's annual pension allowances to improve your long-term tax efficiency.

Audaxer · 19 July 2018 at 9:01AM

Davethepioneer wrote: »

Anyway I’ve been to the bank to see about investing my £500,000 in low risk and they are recommending prudential which will give me around £20,000 per annum I’d like to know peoples thoughts on this please. Would it be a route you would take? Or do you have better ideas?

I doubt that a bank with restricted advice could guarantee you an income of £20k per annum from a £500k investment. That amount being a safe withdrawal rate of 4% per annum, may be sustainable if wisely invested via a SIPP or ISA with low costs. However as your investment will not be fully covered by these tax wrappers, you will be paying tax on the income, and you will probably be paying a bigger than normal percentage in charges, so I would doubt a £20k or 4% per annum withdrawal rate would be sustainable. You would be better consulting an Independent Financial Adviser and take it from there.

cloud_dog · 19 July 2018 at 10:52AM

Davethepioneer wrote: »

I have a pension from a company I use to work for and a military one, both of which are small and won’t pay much. I run a small business that is on the verge of making profit (very little) as I’m only just getting back the money I invested.

Are you a (the) director or your company or are you a sole trader?

I know you've said that your company is only now making a small profit but might it be worth considering making cost efficient deposits from the company in to your pension scheme (PP / SIPP), and potentially using some of the cash to supplement your living requirements. This is dependant on it being a Ltd company and there are sufficient capital to make payments in to a pension.
Possibly something to consider going forward.

Davethepioneer · 19 July 2018 at 12:26PM

Thanks for all the replies. I will try to answer all the questions. I!!!8217;m 42 and I!!!8217;m a solo trader, it!!!8217;s just a small business run from home with just me and no employees. It!!!8217;s legitimate and everything goes through the accountant. HSBC fees for investing it in prudential is £5000 he told me that the money I would receive is what I would keep, as in all fees and taxes are paid. He mentioned prudential because I said I wanted low risk. I risked my life for this money and no longer what to take risks if that makes sense. What!!!8217;s putting me off is the fact that there is no diversity, it!!!8217;s all my money in one basket So to speak and many people have mentioned it!!!8217;s best to have a good portfolio. I!!!8217;m not very money skilled so diy route isn!!!8217;t really an option. As for pensions. I had one with the company I worked for which was only 10years and the army one is 5yeara soagain hardly anything. In advice from here we were looking at putting the max in isa for the both of us, and for the children, also a sipp for me, possibly a BTL and the rest invest through a IFA but the bank made it seem hassle free and easy

Davethepioneer · 19 July 2018 at 12:29PM

Looks like my iPhone has thrown a tantrum, sorry for the random numbers

MallyGirl · 19 July 2018 at 12:38PM

Davethepioneer wrote: »

Looks like my iPhone has thrown a tantrum, sorry for the random numbers

there is a setting you can change to stop the random bits. I am sure someone will have the details - something to do with smart formatting

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