Investment thoughts for £300K - Not Mine

[AsleepInYorkshire]

Friends girlfriend has sold her house.

She's now got £300K cash. They aren't married and he has his own home. Both aged approx 60

I don't think either are in 40% tax areas.

Apart from "drip feeding" into an investment what way should they go. I'm thinking pension route because ISA allowance for one is only £20K.

So very roughly I'm sort of thinking pension fund dripped into over 3-4 years and get some tax rebates at 20%.

I'm assuming she will want to keep the money in her name.

Any better or alternative ideas please?

Thank you

AiY(D)

[vand]

I'm not a fan of cost averaging in. All the literature and backtests shows that it is a sub optimal strategy most of the time. If happens to work out better for you then it is because you got lucky.

Ideally, pick an asset allocation you can live with and lump sum it in. Less than ideally, pick an asset allocation you can live with and get it all in as quickly as you can. At current rate of inflation money sitting on the sidelines gets cut in half every 11 years.

(note, cost-averaging is not technically the same as monthly purchasing from your regular paycheque, which is a mistake that is often made. Monthly buying is better described as monthly lump summing with the amount of money that you have available to hand at that particular moment.)

[mc2fool]

Friends girlfriend has sold her house.

She's now got £300K cash. They aren't married and he has his own home. Both aged approx 60

I don't think either are in 40% tax areas.

Apart from "drip feeding" into an investment what way should they go. I'm thinking pension route because ISA allowance for one is only £20K.

So very roughly I'm sort of thinking pension fund dripped into over 3-4 years and get some tax rebates at 20%.

The most she can put into a pension each year (and get tax rebates, and maybe anyway) is the lesser of her relevant earnings (from employment) and £40K -- and that's into all pensions, from all sources.

So, if she's earning £40K or more it'll take her 7.5 years to feed the £300K into a pension -- and that's assuming that she doesn't already have contributions taking up part of the annual allowance, which is pretty unlikely if she's working.

The first port of call should definitely be using the ISA allowance each year, and then pensions, but it's going to take a long time to get that £300K "sheltered".

[kempiejon]

Friends girlfriend has sold her house.

She's now got £300K cash. They aren't married and he has his own home. Both aged approx 60

I don't think either are in 40% tax areas.

Apart from "drip feeding" into an investment what way should they go. I'm thinking pension route because ISA allowance for one is only £20K.

So very roughly I'm sort of thinking pension fund dripped into over 3-4 years and get some tax rebates at 20%.

I'm assuming she will want to keep the money in her name.

Any better or alternative ideas please?

Thank you

AiY(D)

Does she have credit card debits, personal loan or overdraft? Get debt free and then a healthy chunk of cash.
In fact do they have any other equity investments - for those new to stocks and shares it's quite a change in mind set in fact many people will never feel comfortable invested in risky equities. You know the value can rise as well as fall blah blah.

Nothingh wrong with spending money here's a perhaps once in a lifetime chance for an extravagant treat - new car(s), flying lessons or a visit to Machu Picchu, whatever is their boat floater like a cruise. Kids/grandkids or charities will be glad of a few bob no doubt.

For a bit of tax planning if they already have a pension they might be happy to increase that, as other have said the max annual allowance being the larger of £40k or relevant earnings (less any other pension contributions made elsewhere and tax back). £50k into premium bonds and £20k into an ISA each year - you can put that much as cash. Then they need to have a grasp of inflation and that's where equities will come to the fore - over the longer term.
For cash deposits an eye on FCA limits and several providers seems relevant with the amounts quoted.

[Charlottesquare]

Friends girlfriend has sold her house.

She's now got £300K cash. They aren't married and he has his own home. Both aged approx 60

I don't think either are in 40% tax areas.

Apart from "drip feeding" into an investment what way should they go. I'm thinking pension route because ISA allowance for one is only £20K.

So very roughly I'm sort of thinking pension fund dripped into over 3-4 years and get some tax rebates at 20%.

I'm assuming she will want to keep the money in her name.

Any better or alternative ideas please?

Thank you

AiY(D)

What happens re housing for her if he dies would be my first thought given she is possibly not his next of kin. Accordingly not sure captured within a pension would be my first thought unless there is express provision if her "boyfriend" dies to meet her housing needs.

[CliffEdge]

Sounds like a recipe for disaster to me.

[dealtn]

Friends girlfriend has sold her house.

She's now got £300K cash. They aren't married and he has his own home. Both aged approx 60

Where is she living or planning to live? Who owns it, and could inherit it?

[Parky]

As some of the previous answers have implied, the answer depends on lots of things, e.g. whether he or she have children, do they have wills, and what is in them, what other investments do they have, who is paying their day-to-day costs etc. etc.
If I were her I would spend a bit of the money get some proper financial advice regarding investment and inheritance planning, ideally together with the boyfriend, or at least with the knowledge of his financial plans.

[Dod101]

Friends girlfriend has sold her house.

She's now got £300K cash. They aren't married and he has his own home. Both aged approx 60

I don't think either are in 40% tax areas.

Apart from "drip feeding" into an investment what way should they go. I'm thinking pension route because ISA allowance for one is only £20K.

So very roughly I'm sort of thinking pension fund dripped into over 3-4 years and get some tax rebates at 20%.

I'm assuming she will want to keep the money in her name.

Any better or alternative ideas please?

Thank you

AiY(D)

AS always it surely depends what her aims are for the £300,000. Without any consideration of the 'surrounding' circumstances outlined by others and just considering the investment aspect, if she wants long term growth then there is one route but if she wants to supplement her income then there might be a slight modification of that. The real answer or measure is of course total return (income plus growth) I think though as others have said she would be wise to consider the longer term future and all the various scenarios that could apply before deciding what to do.

Dod