Investing a large sum of money ?

[AdamBrunt]

Hi all,

In these times of low interest rates what are the best options when investing a large sum ( 6 figures ) of money ?

The cliche is to put it in property but I am at the age where having only just been able to become mortgage free I have no intention of getting another one.

Is there a limit on how much you can put in an ISA ? Also, what is the maximum amount covered by the FSA (?) you can have in a bank account ?

Dump some of it in an existing pension pot perhaps ? Is that even allowed ?

[cjanderson]

£20k in an isa. I am using rare setter now for my cash isa (it’s not cash isa, it’s riskier)

Pension is an option, depending on your salary, you can stick in max £40k per annum (plus unused 40k allowance for past 3year) but you’d need that much in salary to save the tax and make it a better option than just putting it in savings.

Then you have premium bonds for £50k

Or just put it outside an isa in unit trusts. (And move £20k into the isa each year)

Depends on your future needs really? Saving for retirement? Planning on keeping working and having more income to save each year?


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[Wooglie]

Originally Posted by AdamBrunt

Also, what is the maximum amount covered by the FSA (?) you can have in a bank account ?

£85,000 per person, per financial institution. Financial Services Compensation Scheme (FSCS). https://www.fscs.org.uk/

[AdamBrunt]

Originally Posted by cjanderson

£20k in an isa. I am using rare setter now for my cash isa (it’s not cash isa, it’s riskier)

Pension is an option, depending on your salary, you can stick in max £40k per annum (plus unused 40k allowance for past 3year) but you’d need that much in salary to save the tax and make it a better option than just putting it in savings.

Then you have premium bonds for £50k

Or just put it outside an isa in unit trusts. (And move £20k into the isa each year)

Depends on your future needs really? Saving for retirement? Planning on keeping working and having more income to save each year?


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Originally Posted by Wooglie

£85,000 per person, per financial institution. Financial Services Compensation Scheme (FSCS). https://www.fscs.org.uk/

Thanks - I thought that's what the limits are.

It's an inheritance windfall. A large portion of it will be used to pay off my existing mortgage ( freeing up about £650 per month in itself ) leaving about £100k.

My salary is enough for the 40k pension limit to not be a problem. But is there a

I would say that even with this I am approximately 10 years away from retiring. And in that time our 2 kids ( currently 16 and 14 ) would have gone through university so we are probably looking at something that could possibly be used to help either of them in the future ( student loans, car, house deposit, etc ) as well as ramp up the pension pot come retirement. So reasonably quick access would be required or not something that locks you out for more 5 years.

Premium bonds is an option but - with regained income from being mortgage free - we are not in any particular need for something that possibly increases monthly income if that makes sense ?

[cjanderson]

My premium bonds just rev invest in premium bonds when I win (I have £45kish so have £5k capacity for wins)

Think your pension part is missing a question? Once in there you can’t get it out until retirement age.


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[AdamBrunt]

Originally Posted by cjanderson

My premium bonds just rev invest in premium bonds when I win (I have £45kish so have £5k capacity for wins)

Think your pension part is missing a question? Once in there you can’t get it out until retirement age.

Good spot

It should have said "My salary is enough for the 40k pension limit to not be a problem. But is there a risk in dumping such large sums in a single vehicle ?"

[cjanderson]

There is a risk of dumping money into any non cash investment but pensions have sabe risk of that as picking shares (actually they are better, my shares went down 25% from April 2019 to April 2020 and my pension went down 10% as that is more managed)


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[jockosjungle]

Yeh Premium Bonds are not taxable so pretty good when you've got a few quid to invest, the rate isn't massive but there is no tax. As CJ says, I stuck £40k in mine so no worry about meeting the max really, and if you've got a wife you can stick £40k in her name.

You're not going to get too much in the current climate, depends how risky you want things to be. It's not the worst time to be buying a few shares for the long term, a fair few give fairly steady dividends.

[AdamBrunt]

So Premium Bonds only pay 'interest' if you win a prize right ?

So it is feasible that, for a person with less than average luck, they are worse than putting the lot in a savings account ?

[jockosjungle]

They chuck out the prizes in £25 chunks, there is a premium bond checker somewhere, you could win a million or £500 as my Mother in Law just did, but mostly you're gonna pick up an average of so many £25 in a year. I was doing slightly better than expected for the first 4 months, £75 a month on a £40k investment which would be 2.25% but only got £25 this month.

Martin Lewis seems to have a downer on them, I'm guessing they don't pay click through fees.

Decent savings rates are getting impossible, I cling to about 1.25% on my Marcus but I've been with them a while, don't think a newbie gets that.

Even if you chucked it away for five years, you're not getting much more of a return.

So admittedly you could have terrible luck and win no prizes, but in reality it's designed that anyone with a decent chunk in there is gonna do about right.

[AdamBrunt]

Regarding paying a lump sum into a pension pot ....

As I understand it any pension contributions over £40k ( in a year ) don't get tax relief and are actually liable to Income Tax.

Are there protocols in place so that if you whack, say, £35k in to a work pension at the beginning of the tax year then contributions are stopped, towards the end, so as not to go over the limit ? Or is that something I am responsible for that ?

Also if you have multiple pension pots can you only put the 3 year rollover amount into a pot that you've had for at least 3 years ?

[cjanderson]

how it works with my work one (as its taken from pre=tax income) is that you get the tax relief automatically

THEN you would pay it back IF you ticked the box on your tax return to say you had paid in too much. So yes, the onus is on you to check it.

If you do it via net payments to a non workplace pension, then you claim the extra via your tax return.

I track the £40k per year allowance, 3 year c/f so i knew i was okay if HMRC ever queried the amount. And my pension company did warn me i had paid more than £40k and needed to ensure that was okay.

i think you can put into any pension, even a new one, even using the 3 year ago allowace. the HMRC checker doesn't make any mention of that as a factor.

NB: you would also need to have the salary to be able to get tax relief in first place.

So to get tax relief on £40k you must have earned at least that in the year. and to get the best tax relief you need salary of £50k plus (AFTER PENSION PAYMENT) so it saves tax at 40%.

tax is fun lol

[AdamBrunt]

So, taking a look at the Scottish Widows calculator, it seems at this late stage ( currently 52 with a planned retirement age of 65 ) that overpaying £300 a month will result in just over £1k a year added to my pension pot. Not sure if that is good or not. Mind you - recently I have been trying to get my head round just how much money a mortgage free couple with , hopefully, no dependants actually needs.

My father-in-law mentioned looking into unit trusts. Are they actually much different to ISAs and/or what pension companies put your money in anyway ?

[jockosjungle]

Any idea on sticking money in a pension? Need to lose about £4k from my taxable income, but probably not fussed about adding much more any time soon. Not really needed to do anything outside work before

[AdamBrunt]

Bit of a thread bump ...

Stocks and Shares ISAs are presumably riskier than a normal cash ISA but potentially give far better returns, right ? I assume they are also a lot less hassle (and more successful) than a regular Joe Bloggs doing their own trading ?

[cjanderson]

Yes to both.
Though I am using a rate setter isa to invest now. Better rates than cash but a bit riskier.
I also have unit trust in my isa and I pick my own shares in an isa.
So you can do that in an s&s isa.


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[AdamBrunt]

Ok. Need to some more reading.

Quidco are currently doing £310 cashback with a £20k lump sum investment in a Shepherds Friendly S&S ISA

[basegreen]

Originally Posted by AdamBrunt

Ok. Need to some more reading.

Quidco are currently doing £310 cashback with a £20k lump sum investment in a Shepherds Friendly S&S ISA

FWIW I have invested £100 /mo in a high risk S&S ISA for the last 3-4 years and its probably tripled in value.

But, ultimately it's a massive risk.

[Arthur Fowler]

Originally Posted by basegreen

FWIW I have invested £100 /mo in a high risk S&S ISA for the last 3-4 years and its probably tripled in value.



But, ultimately it's a massive risk.

That's a great return. Well played sir!

[AdamBrunt]

Originally Posted by basegreen

FWIW I have invested £100 /mo in a high risk S&S ISA for the last 3-4 years and its probably tripled in value.



But, ultimately it's a massive risk.

You've probably gon and jinxed it now

But 300% is certainly a lot better than < 1.5%

Presumably there are different S&S ISAs in terms of level of risk in the same way you get to chose the level of risk that your pension payments are paid into ?