Investment Help!

[darumafan]

My parents have both died and left me some money. I have inherited £130,000 which to me is absolutely life changing.

I have some plans for some of the money, I want to pass my driving test and buy a little car, get my son into his own rented place and book a nice holiday.

I am going to be investing £90000 for my retirement. Currently, I have no pension provision. I am 46 and am painfully aware that I need to sort this out.

I am very adverse to high risk investing, my parents worked very hard and this is everything they had.

I have booked an appointment to speak to a IFA but am after some suggestions so that I have something to start with. I have looked at the Prudential Investment Plans but am confusing myself now!

What would you suggest?

I am a financial adviser and I like the Prudential's PruFund range which especially suits some of my more cautious clients who are looking for smooth steady growth potential with low volatility. Using a pension tax wrapper will allow you to benefit from some tax relief on money you invest (depends on your personal tax position and earnings) and growth will be free of capital gains tax and dividend tax. Prudential have just launched a new Retirement Account which may be worth a look.

The Investment Plans that you've been looking at may not be quite what you need as they are investment bonds rather than pensions - still some tax advantages but not necessarily right for your objectives and particular circumstances, whatever those may be. The IFA will help you to identify what those are first, before then considering the most suitable way forward to address those needs and wants.

What frequently happens on a thread like this is that someone will jump in and tell you to invest in property. This is a great solution for some, but doesn't suit everyone and does not come without its own risks, costs and hassles.

Sunseed

Thanks for the information, I am not looking for a pension specifically. I am looking at the best way to invest the money for my retirement. Someone called it a retirement fund!

Investment bonds do seem (with my very limited understanding) to be a good way for a cautious investor to make a start.

I don't have enough money or the drive to buy a property, this isn't something I am going to consider.

With that amount you want a spread of investments, not just one.

Personally I've moved most of my money out of bonds at the moment because interest rates are so low that they've virtually become return-free risk.

Keep a really close eye on fees - when I suddenly had a lump sum to invest after my husband died, the amount of so-called regulated brokers who tried to sell me products with high initial and ongoing fees was appalling. I manage my own investments now as it's the lowest fee way I've found to do it but that might not work for you. But fees vary massively so shop around.

I totally understand you not wanting the hassle of property but there are property funds which would be worth putting a percentage of your investment into. I have about a quarter of my investments in property funds at the moment.

I'm really sorry you've lost both parents.

Do you own a house at the moment, or do you rent?

What would £90,000 buy in terms of housing near you?

OK, I understand what you mean. There are two parts to this really. The first part is to decide what the underlying investments should be, and this depends largely on your attitude to risk. It's about finding a balance between how much risk you are prepared to take and how much reward (capital growth or income) you expect. So cash is very low risk but very low reward (and losing value over time when interest rates are lower than inflation). Corporate debt and bonds come next, then managed and multi-asset investments, stocks and shares are generally medium to high, and then really speculative things like spread betting or venture capital trusts. This decision is known as asset allocation.

The second part is then to decide what is the most tax-efficient way for you to hold these chosen assets. So using an ISA to benefit from no tax on capital gains or income but limited to your annual allowance as to how much you can put in each year. Or using a pension to get some tax relief on the money going in. Or using an investment bond to allow you to make withdrawals of up to 5% a year which are treated as return of capital so don't attract income tax and growth within the fund has favourable tax treatment.

Of itself, an Investment Bond can be as risky or cautious as you want it to be, it is what's inside it - the underlying assets - that counts.