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What to do with £120k?

Including Financial Independence and Retiring Early (FIRE)
spiderbill
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What to do with £120k?

#119028

Postby spiderbill » February 19th, 2018, 12:17 pm

With the dust having finally settled on an inheritance I have around £120k to add to my investments and some decisions to make. I'm gradually cutting down my clients (self employed internet consultant) and moving into semi-retirement (will be 63 this year).
I own a house in the UK, a house in Slovenia, and a semi-sheltered flat that my dad lives in. No debts or mortgages.
I have 124k in shares, 46k OEIC, 9k in ETFs/ITs, 140k pension pot, and some additional cash earmarked for home improvements and a new car.

Main options for the 120k are:
1. More shares
2. More ETFs/ITs
3. Add to pension
4. Property to rent out (possibly overseas)
5. Set up a small tourist business in Slovenia (might hep with a citizenship application if Brexit screws up my retirement plans)

or any combination of these.

As a sanity check I'd be interested in anyone else's thoughts on these or any other options. What would you do?

TIA
Spiderbill

swill453
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Re: What to do with £120k?

#119031

Postby swill453 » February 19th, 2018, 12:34 pm

Difficult to say without knowing your full circumstances.

Things to consider might be putting enough into your pension to get you out of higher rate income tax this year, or (potentially) out of paying any income tax at all for the rest of your working life.

Note that "adding to pension" may also involve investment decisions (ETFs/ITs/shares) as well.

Scott.

spiderbill
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Re: What to do with £120k?

#119080

Postby spiderbill » February 19th, 2018, 4:20 pm

swill453 wrote:Difficult to say without knowing your full circumstances.

Things to consider might be putting enough into your pension to get you out of higher rate income tax this year, or (potentially) out of paying any income tax at all for the rest of your working life.

Note that "adding to pension" may also involve investment decisions (ETFs/ITs/shares) as well.

Scott.


Hi Scott, yes of course, and I'm not really looking for detailed replies - once I've decided on the main strategy I can always request more detailed thoughts on other more specialist boards here if necessary - more an overall response that might show me something I'm missing or might make me reconsider my thoughts in the light of current conditions. Hence the use of "saniity check".

As it is, divorced, no kids, and only dad left in the family. One other person to leave it all to or spend it with.

No higher rate tax to consider (though Slovenian tax is a concern if I spend over 6 months in the year over there).
Previous professional advice steered me more to investments than pensions so this is a last chance to consider if a more belt-and-braces revamp has any value. If I were to start/transfer to a SIPP then of course the investments need to be looked at again as you rightly mention.

Thanks
Spiderbill

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Re: What to do with £120k?

#119102

Postby dspp » February 19th, 2018, 6:04 pm

Personally I'd pick some low cost equity index trackers for £100k.

With the £20k I'd go for a quality bond fund, of which Vanguard do some. That almost certainly would allow you to ride out a couple of years of market downturn (in addition to the cash rainy day fund and property rental income I am assuming, plus pensions). Being able to ignore the markets for a couple of years at a time makes one quite risk-proof. At least in a financial sense.

regards, dspp

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Re: What to do with £120k?

#119233

Postby spiderbill » February 20th, 2018, 10:07 am

dspp wrote:Personally I'd pick some low cost equity index trackers for £100k.

With the £20k I'd go for a quality bond fund, of which Vanguard do some. That almost certainly would allow you to ride out a couple of years of market downturn (in addition to the cash rainy day fund and property rental income I am assuming, plus pensions). Being able to ignore the markets for a couple of years at a time makes one quite risk-proof. At least in a financial sense.

regards, dspp


Interesting ideas, particularly the bond fund which I hadn't considered and will now research. Exactly the sort of thing I was hoping for - many thanks.

spiderbill
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Re: What to do with £120k?

#119235

Postby spiderbill » February 20th, 2018, 10:14 am

ap8889 wrote:Max out the ISA and then as you are past age 55 there really is little downside to using the rest of the windfall to boost your SIPP and reduce your income tax liability over the next few years.


Thanks for that. ISA long-since maxed for this year and will be as soon as next year starts, starting with a few bed-and-ISA transfers to reduce the likelihood of straying into dividend tax territory. Will look closely at the SIPP options - previous advisors have been less than forthcoming on those, which is why I haven't adopted any of their other suggestions.

Much obliged

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Re: What to do with £120k?

#119263

Postby kempiejon » February 20th, 2018, 12:00 pm

ISA long-since maxed for this year and will be as soon as next year starts, starting with a few bed-and-ISA transfers to reduce the likelihood of straying into dividend tax territory.


I do this too and I'd concur that for tax advantage depending upon your specific circumstance then filling a SIPP to your maximum relevant income each year and remove you from paying tax is a good wheeze. What you actually buy is a whole other question mind, I buy something to try and replicate the world markets in my SIPP using Vanguard ETFs. You may want any other strategy.

As to which broker I did some simple sums based upon various broker comparison table and products and amounts, I see that is discussed here viewtopic.php?f=26&t=10209&view=unread#unread and I liked the details gathered by Lang Cat but can't find them just now here's a link to their data on Telegraph http://www.telegraph.co.uk/investing/si ... ting-5000/

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Re: What to do with £120k?

#119282

Postby petronius » February 20th, 2018, 1:00 pm

The Slovenian tourist business is an interesting idea too. Is your place in a skying resort?

Having been in Slovenia, though, I would make sure that you are familiar with local legislation and also with the way they do/treat business. There were some rumours of corruption (this was twenty years ago), although I have no idea if they were justified or just spread maliciously by neighbouring Italians (there is some history there).

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Re: What to do with £120k?

#119285

Postby spiderbill » February 20th, 2018, 1:05 pm

kempiejon wrote:As to which broker I did some simple sums based upon various broker comparison table and products and amounts, I see that is discussed here viewtopic.php?f=26&t=10209&view=unread#unread and I liked the details gathered by Lang Cat but can't find them just now here's a link to their data on Telegraph http://www.telegraph.co.uk/investing/si ... ting-5000/


Hadn't seen that thread but will check it out along with the Telegraph data. Many thanks.

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Re: What to do with £120k?

#119290

Postby Dod101 » February 20th, 2018, 1:27 pm

You sound as if you have enough in property so I would drop that. Personally I would would put it into investments of some sort. A relatively young chap like you might find someone else with whom to share the rest of your life and cash is always useful. I would not put it into a SIPP though. I can quite see the points being made (saving tax on the contributions) but do not forget that you need to pay tax on extracting it again to live off. The rules keep changing as well. You see these things from the other side as and when you are drawing down.

Dod

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Re: What to do with £120k?

#119301

Postby spiderbill » February 20th, 2018, 2:05 pm

petronius wrote:The Slovenian tourist business is an interesting idea too. Is your place in a skying resort?

Having been in Slovenia, though, I would make sure that you are familiar with local legislation and also with the way they do/treat business. There were some rumours of corruption (this was twenty years ago), although I have no idea if they were justified or just spread maliciously by neighbouring Italians (there is some history there).


Hi Petrosius
I'm in the Soca valley about 30 or 40 minutes drive from the nearest skiing resort but the summer tourism has been increasing markedly the last couple of years. One of my ideas was based on using quad bikes to give sightseeing and photography tours of the area. I bought one for myself last year and they are great fun and help you to quickly get into areas that would be a long walk otherwise.

While I wouldn't be surprised if there was some dodgy dealings shortly after they got independence, as any that way inclined sought to capitalise on it, I haven't seen any sign of such since I bought my house there three years ago. Indeed the locals I've dealt with have been very honest and are surprised when I add a little extra to any fees to say thanks for good work. And the charges for things like building work or plumbing/heating have been very cheap. However I'll certainly take advice before committing to anything costly. My impression is that they're happy to see any new businesses that would bring money into the area - particularly if it might generate jobs for local people. Of course this is a rural/alpine area - things may be different in the urban areas.

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Re: What to do with £120k?

#119304

Postby spiderbill » February 20th, 2018, 2:17 pm

Dod101 wrote:You sound as if you have enough in property so I would drop that. Personally I would would put it into investments of some sort. A relatively young chap like you might find someone else with whom to share the rest of your life and cash is always useful. I would not put it into a SIPP though. I can quite see the points being made (saving tax on the contributions) but do not forget that you need to pay tax on extracting it again to live off. The rules keep changing as well. You see these things from the other side as and when you are drawing down.

Dod


Thanks for a different viewpoint Dod (and I haven't been called a young chap for a long time!)

Yes I need to do some concrete sums on whether SIPPs make sense for me or whether I need a more flexible approach to further cash and investments should the UK prove to be such a basket case in the next couple of years that I prefer to cut all ties at some stage. Rule changes could very well accelerate in the near future. I just hope I don't end up having to lose the state pension into the bargain at some point.

cheers
Spiderbill

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Re: What to do with £120k?

#119307

Postby kempiejon » February 20th, 2018, 2:37 pm

I would not put it into a SIPP though. I can quite see the points being made (saving tax on the contributions) but do not forget that you need to pay tax on extracting it again to live off. The rules keep changing as well.


Dod I agree things can change and catch you out but that's not restricted to SIPPs. As the poster has filled the ISA why not benefit from the further tax advantages of a SIPP. There is tax relief on contributions going in, even on tax not paid on person allowances, 25% can be removed tax free, dividends and gains are tax free and those shuffling between tax bands in work and non-work get that difference too, SIPPs are also outside of the estate for inheritance planning and the capital is not considered for benefits, insolvency/bankruptcy or care home fees. One gives up some direct control but consider the benefits.

It's not the tax tail wagging the investing dog but consider the advantages too. Most of my investing until a couple of years ago was done outside of pensions as I wanted control but recent changes have given pension holders much of that control back post 55. My unsheltered dividend income will be taxed now and the portfolio has grown such that capital gains tax harvesting is part of my annual planning too problems not encountered with pensions holdings.

Spiderbill - more on SIPP providers https://www.moneysavingexpert.com/savings/cheap-sipps
My SIPP is with H&L, my ISAs with Halifax and Youinvest.

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Re: What to do with £120k?

#119312

Postby petronius » February 20th, 2018, 3:02 pm

Hi Spiderbill, Soca valley is a very beautiful area indeed. Good rivers for fly fishing - that could be a niche market to consider. Plenty of British potentially interested. Dealing with a fellow Brit could be a bonus for them.

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Re: What to do with £120k?

#119334

Postby Dod101 » February 20th, 2018, 4:54 pm

kempiejon wrote:[Dod I agree things can change and catch you out but that's not restricted to SIPPs. As the poster has filled the ISA why not benefit from the further tax advantages of a SIPP. There is tax relief on contributions going in, even on tax not paid on person allowances, 25% can be removed tax free, dividends and gains are tax free and those shuffling between tax bands in work and non-work get that difference too, SIPPs are also outside of the estate for inheritance planning and the capital is not considered for benefits, insolvency/bankruptcy or care home fees. One gives up some direct control but consider the benefits.


As one who lives off his dividends, principally from a couple of largish ISAs (and a certain amount of capital from my annual drawdown from my SIPP) I appreciate the comments you quite correctly make and Osborne's changes have helped but the SIPP rules seem particularly prone to rule changes and I am in fact very slowly trying to run mine down. What is left when I fall off my perch will go to a charity so that aspect does not bother me. I just love the fact that I can draw what is a sizeable income from my ISAs entirely tax free; not to say the rules could not change there as well of course but so far changes have been very positive. Were I to be drawing the same amount net of tax from my SIPP I think I would be in the higher tax bracket! I think therefore that the ability to drawdown is constrained by one's tax position and as you draw the State pension that absorbs quite a lot of the personal allowance even without any other say DB pension.

So I that is why I would be very cautious were I Spiderbill about adding greatly to the SIPP.

Dod

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Re: What to do with £120k?

#119347

Postby hiriskpaul » February 20th, 2018, 6:13 pm

Agree with point kempiejon has made, definitely look into SIPPs. Not necessarily suitable for everyone, but one of the best things my wife and I did was max out our SIPP savings. The fact that everything in them sits outside our estates makes them worthwhile, let alone the considerable income tax, CGT and even NI savings we have enjoyed. Even basic rate taxpayers make at least a 6.25% round trip gain before costs. Put £800 in, get £200 top up from HMRC. Crystallise taking £250, then pay tax at 20% on remaining £750 (£150), giving a total return of £850 on the £800 paid in.

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Re: What to do with £120k?

#119378

Postby spiderbill » February 20th, 2018, 9:26 pm

petronius wrote:Hi Spiderbill, Soca valley is a very beautiful area indeed. Good rivers for fly fishing - that could be a niche market to consider. Plenty of British potentially interested. Dealing with a fellow Brit could be a bonus for them.


Yes, the fly fishing is famous and the rivers are stunning. I've never fished myself but it's been suggested that a friend give me some lessons and then show me some of the best pools. So that could be an additional aspect to such a venture. I'll be making some further enquiries the next couple of times I go over, checking on things like insurance cover for the quads.
One of the other popular sports in the area now is para-gliding - always fancied trying that but may be getting a bit old for it now. Not sure how most of them get up the mountains before jumping off - might be a possible quadbike service too.

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Re: What to do with £120k?

#119451

Postby dspp » February 21st, 2018, 11:27 am

spiderbill wrote:
dspp wrote:Personally I'd pick some low cost equity index trackers for £100k.

With the £20k I'd go for a quality bond fund, of which Vanguard do some. That almost certainly would allow you to ride out a couple of years of market downturn (in addition to the cash rainy day fund and property rental income I am assuming, plus pensions). Being able to ignore the markets for a couple of years at a time makes one quite risk-proof. At least in a financial sense.

regards, dspp


Interesting ideas, particularly the bond fund which I hadn't considered and will now research. Exactly the sort of thing I was hoping for - many thanks.


You might find a dig around the bond funds in Vanguard worth a look at
https://www.vanguardinvestor.co.uk/what ... e-products
e.g.
Global Bond Index Fund
U.K. Investment Grade Bond Index Fund
Euro Investment Grade Bond Index Fund
etc

Let me/us know what you decide to do. Hopefully one day it may become more relevant to me.

By the way I used to climb with a load of Slovenian climbers - fantastic crew.

regards, dspp

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Re: What to do with £120k?

#119529

Postby spiderbill » February 21st, 2018, 7:34 pm

dspp wrote:You might find a dig around the bond funds in Vanguard worth a look at
https://www.vanguardinvestor.co.uk/what ... e-products
e.g.
Global Bond Index Fund
U.K. Investment Grade Bond Index Fund
Euro Investment Grade Bond Index Fund
etc

Let me/us know what you decide to do. Hopefully one day it may become more relevant to me.

By the way I used to climb with a load of Slovenian climbers - fantastic crew.

regards, dspp


Many thanks for the link, I'll have a rummage around. And yes indeed, I'll certainly post my decision once it's made. I'm due to have a second meeting with an advisor from the Bank of Scotland to see what he's come up (they offered an advice session as my current account got the inheritance into it) with and I'll compare that with whatever options I feel are worthwhile from my current deliberations and the suggestions here.

The climbing must have been fun, the Slovenian's do love the mountains. Did you ever climb over there? Fabulous views.

cheers
Spiderbill

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Re: What to do with £120k?

#119540

Postby dspp » February 21st, 2018, 8:26 pm

No we were climbing together in Asia, but they used to send me pictures of their home turf. regards, David


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