275k and no pension…

[Rossetti47]

I have a lump sum of money from the sale of my house. My world has turned upside down recently because of a relationship breakdown. I am currently training to be a counsellor, so have very little income. Would you guys buy a flat and rent out, or something else? I’ll need money to supplement me for the next few years until I start earning, but then I’ll not touch it for 10 years or so because I’ll be earning (I hope!) I’ve got an appointment with a financial advisor in a week or so, but I’d love an idea as to what might be feasible.

Can you provide a bit more detail about your circumstances? I assume from your post you have somewhere to live, can you cover those costs etc before your earnings pick up? Is it somewhere you own? Do you have children? How much do you think you'll need to dip into these funds? And how old are you?

Lots of questions - but you'll get better advice.

Ah! Thank you! No children, mortgage free property. Tiny little job that just pays my bills (but not food or extras). I’m 52. Hoping not to need to dip into it at all, but you never can tell.

If your job only covers bills but not food or extras, you need to account for the cost of food and extras guest, for the next few years while you train/study. Subtract that sum first.

You won’t get a state pension til 67, so you have 15 years. Do you have enough NI qualifying years?

Could you get a part time job while you train to cover food , living costs? Money dribbles away very fast when there is none coming in. It would be great if you could put most of that money away for retirement. If you get going at the counselling you won't need to stop at retirement age but it does take a while to build up a good reputation

Thanks for the replies. I’m entitled to full state pension when I’m 67. I’ve worked full time since I was 16, stopped just before pandemic to train. But obvs that all went pear shaped… I planned to work for as long as possible when I qualify. I have a part-time job now, but only bring in 900 a month. I was hoping to supplement my income for 5 or so years from investing the 275.

A few thoughts non-expert thoughts from me.

Putting money into a pension would be very sensible - would you be able to get pension contributions from your employer? If so, then that seems a no brainer.

On your investments, in terms of growth the mantra you tend to hear is only to invest for the longer term, say 8 years plus. I've just invested looking at that same sort of time period BUT I'm looking at growing that money so it is there for me later, rather than drawing from it now. Obviously the more you take now, the less you have later (I know that's obvious but worth saying).

I think if it was me I'd try to divide it into different pots - eg one for a pension and therefore not to be touched for now, & an amount to keep you going over the next few years, that you might need to dip into. Purely to illustrate, if you had £150k in that second lot, and got a return of 5%, you'd get £7.5k per year before you had to eat into your original amount.

I don't know if that's any help as a starting point? There are some good podcasts about finance around - meaningful money by Pete somebody is worth googling as he's got some good sessions on the basics.

Ps the enormous elephant in the room here is the rate of return you'd get. I said 5% just because it's easier to calculate - I've done better than that this last year but you just don't know what will happen in future and that will have a key bearing on you if you're depending on these for income - you'd have to take money out of your investments at exactly the point that you shouldn't.

Good luck with your financial advisor.

I think you may want to invest in a pension as you can save on tax this way too.

Pps and then I'll stop - this is worth a listen for the helpful & simple discussion about equities and pensions. The person being interviewed sounds very sensible and I'll certainly take a look at the YouTube channel he's set up.

aca.st/484a3f

With a limited income you'll be limited by how much you can put into a pension.

Property obviously has risks and is very much "all in one basket".

I'd suggest finding a financial adviser who can look at your entire position.

Property on scale is almost always a very safe investment and offers good returns, individual properties less so, due to issues you can have with a tenant that can cost you a lot and take many months to have them evicted. It is worth looking at FTSE bonds and wider shares (managed rather than doing it yourself. Even the 100 offers a yield of around 4.5% per year with capital growth on top.

It is probably only worth putting money into a pension if you are earning. Saving into a pension is the most tax efficient way you can save, but only if you are paying tax on your income and it is even more efficient if you are paying the higher or additional rates.

Contact an independent financial advisor. Or more than one. And see what they say.

Interest rates are not good just now for financial investments.

Tenanted properties can bring a lot in if you get the right tenants, but cost you a fortune if you get the wrong ones and you can’t get them out…

Banks only guarantee savings up to a certain amount in the event they go bust. Is it £70k? Not sure. Just throwing that into the mix in case you want to spread the load around.

@Elieza

Contact an independent financial advisor. Or more than one. And see what they say.

Interest rates are not good just now for financial investments.

Tenanted properties can bring a lot in if you get the right tenants, but cost you a fortune if you get the wrong ones and you can’t get them out…

Banks only guarantee savings up to a certain amount in the event they go bust. Is it £70k? Not sure. Just throwing that into the mix in case you want to spread the load around.

The FSCS protection is £85k per banking license, so if you have an account with Barclays and Lloyds you are covered for up to £85k in each if they go bust. However some names which you know as banks share licenses, they are just a brand of the parent, so in those cases you only get one lot of cover.

www.fscs.org.uk/

Thanks all for your responses, I really appreciate

Would add in to pension to max tax free limit, likely to be earnings if low income. Invest in a low fee pension unless employer has scheme they contribute if you do but otherwise someone like Vanguard. Pensions are protected and not part of 85k limit for protection if firm goes bankrupt. You will then get investment returns plus tax benefits. Can access from 55.

Then with rest I would put 20k in SSISA again with someone like Vanguard as low fees. This is tax free but needs to be for longer term ideally like 5 years plus.

The rest I would put all money you may need until 55 assuming no income from counselling including any expenses on houses etc in cash accounts. None of these pay that much but it gives you access to money with capital protected. After that I would do general investment account but be wary of 85k limit so split between providers.

I am older than you and am not yet entitled to a full state pension as I don’t yet have enough qualifying years . I have worked full time, no childcare time off, and have always earned more than the salary level below which you don’t pay.
The rules changed a few years ago and I have to work more years than I thought i would.

Please actually check via the Government Gateway web site you actually have enough qualifying years.

Everyone should check this annually for themselves and not rely on just thinking it is enough.

@user1471462115 hey, thanks for this. I checked the Gateway site very recently. Was a mid-earner for 20 years, all paid up.

@Silkiescatz I'm currently looking at Vanguard for an ISA. Is there any particular fund you think is a good one? I've got £25k to invest which will have to be split between DH and I

I was thinking of putting £20k in a fund and keeping £5k aside as cash to buy some shares if I find something that seems a like a good buy (not that I know anything about buying shares but want to start learning).

We won't need the money for about 10 years and are looking for growth rather than income.

I checked that site too and at first glance it looked like I was getting the full bhuna.

However on further inspection I noticed it said in smaller script that that’s what I was on track to get!! I wasnt actually getting it at age 67 as I had to work a further three years and pay in to qualify.

I was horrified. The rules had changed and despite having worked since age 16 and only being unemployed for a few months between them and age 47, because of part time work I was not fully paid up.

Shocking.
Check the small print everyone!!

Instead of getting free advice from Mumsnet, it'll be wiser to see a registered financial advisor. Tell them your goals and they can help you lay out a comprehensive financial plan.

Amboseli I opened an ISA with Vanguard in April with 20k and its now at 21.2k, mine in invested half in Lifestrategy 100, then rest split between Global Balanced Fund and ESG Developed World. Global balanced has higher charges and has slightly underperformed others. Lifestrategy is good or their retirement funds, i have a general account with money in their 2040 one doing well. Can be volatile, mine went down before went up but you can access quickly and do lower amount of equities if you want less risk. There are performance figures on their site.

I also checked my state pension forecast and will get full amount by early 50s but as I was contracted out they deduct 25.86 each week which is not that obvious until research it though presume that does not apply here as you would have another pension scheme if contracted out before. You can also buy more years for anyone that might be short or was contracted out.

I chose not to use Vanguard because they only invest in their own products.
Another keeps getting bad comments in weekend finance pages.
I chose a firm which invests in ordinary shares and I can see on line where my money is. It is all spread in small amounts so safer.
Will send name in a pm if you are interested.

@Silkiescatz thank you. I just looked at their website and am leaning towards life strategy 80. Not sure how much to put in there. Are you paying in every month or did you put the whole lot in at once?

I understand it's better to drip feed in every month. And should I split it into different funds like you have?

With the lifestrategy 100, is 10 years reasonable to keep it in there? I know shares are a long term investment and 100 is riskier than 80 but maybe 100 is ok if it's for 10 years?

I would be wary of buying a flat to rent out - simply because there are so many things to think about unless you have money to cover voids or maintenance.

A decent FA I think is the way to go.

Also check you are not owed any more money from NI - - I got 2 years on my clock because I had children at school age and I was not working - this may not work for you. But I think you need to speak to a decent and competent FA before you rush into buying a rental flat.

However it works - I wish you well