How to invest £280,000

[user0507]

We are very lucky to have received an inheritance from a relative. It's £280,000 so a good sum of money.

We are also in a fortunate position in that we own our own house and the mortgage is paid off. My pension is good. DH's is fairly good but he is currently (short term only) a top rate tax payer and so he can't stick extra into his pension due to the pension tapering rules. We are both mid 50s aiming to retire at 60.

What would you do with it? I think we probably need to see a financial adviser but I'm not entirely convinced that they're worth the percentage they take.

You were suggesting earlier in the thread that you thought you should divert most of it to DC but your DH was reluctant. Anyway your money to do with as you wish.

I’d certainly be saving it to help the DC get a leg up. It always baffles me when parents say they need to find their own way like they did. Completely incomparable how difficult it is now for young people. Are they getting student loans whilst you’ve got 240k to play with? I guess all parents are different but i’d be putting it into a short term high interest to help DC buy a home in the future.

I would be focusing on tax planning to avoid as much as possible. Look at trusts but we found it all did was kick the tax can down the road and cost ££ to setup.

I’m afraid we haven’t found financial advisors very good, little/no knowledge on tax. I think a lot of this can be done yourselves esp when you factor in what they cost (unless it’s a one off advice cost of course).

The first things that come to mind are ensuring the children inherit in the event one of you dies and the other remarries and ensuring money is passed regularly to take advantage of the 7 year rule. I’d rather the money go to children than HMRC!

I would look at Rebel finance and wait for the budget. Also a large sum just in a savings account for 6 months, the 85k limit doesn’t apply for a one off large sum from life event, so you have time to consider.

Max out on Premium Bonds (£50K).

@user0507 You can use investments that they cannot touch until 25. You need decent advice. You have to relinquish your interest in it. Plus you really should advise dc on how to look after money! Make a plan with them.

If you are going to give a large sum to your kids, I would not be sharing that info with them, it's likely to alter their attitude to saving and spending, setting up very poor habits for the future.

We have been in actually a very similar situation . Inherited a similar amount and DC slightly older but same financial profile and we are also of a similar age. We did give a little amount to DC to boost their investments and to get them on the path of investing. But majority of it we have invested in our stocks and shares ISAs/general investment account in a global index tracker. We will move £20k over from GIA to the S&S every year for each of us. We are setting ourselves up for Retirement first and will
then over time look to help DC further through gifting. But we are prioritising our ability to retire first. We do still have a mortgage too that we are slightly overpaying - investments have a better % growth than the mortgage % so are not paying that off in bulk. We will look to bring in the term of the mortgage when we renew this.

and forgot to add - also a fan of Rebel Finance School.

It depends on your attitude to risk. You could consider NS Income bonds (safe, but interest is taxable).
If not too late, a deed of variation to pass some on to DC as house deposit in future - they could open LISA and another ISA with decent interest, and maybe put the rest in an interest bearing savings account or premium bonds.
(Deed of variation helps to avoid inheritance tax on your own estate from money you have inherited - may not be relevant if you are relatively young and in good health.)
MSE is always worth reading.

It's not about them needing to find their own way. It's about teaching them the value of money, the need to budget to live within your means etc. At age 19 or 20 their brain isn't fully developed yet. They are still in the learning stage, they are still ruled by impulsivity and a bit of recklessness a lot of the time. When they are at uni they are in a false community - they generally are living with other young people in the same boat as them, not in a mixed community with different age groups, working people who need to get up early, families with young children, old people struggling on pensions, people living on benefits who have to use the food bank etc. They are not yet part of real life and a lot of the time they are living in student accommodation with all bills included. They have no real sense of how many hours they have to work to pay a month's bills, for example. How many times they can accept an invitation from mates to go out to the pub before they realise they have to rein in their spending or they'll have no heating next month.

We are comfortable financially and I am able to easily top up the expected parental contribution part of the student loan, and actually the way I give them money (I pay their accommodation) means they probably have more than a lot of students. But they absolutely aren't getting a massive lump sum of money from me yet to do with what they want. It would be an absolutely terrible, terrible idea. The money has for the main part stayed invested ready for when they REALLY need it, not when they want to spend it on shite at university and possibly get themselves into trouble with party lifestyles.

I will pay off their loans when it is financially a good idea (they are on different student loan plans and I have just paid the fees of the older one's 4th year rather than him take another year's loan as he has secured a very good graduate job and will be paying massively more over his lifetime than his original loan).

With the younger one, on a different plan, and possibly different earnings potential, I will probably pay off his student loan every month once he has started to pay it back (from money I have in investments for the purpose).

And they can both have money towards a deposit on a property WHEN they are at the stage where they aren't travelling around for work.

So my kids will get plenty of financial help. They are very lucky. They just don't need massive lump sums NOW.

If you don't need it then I would set up a trust for the kids and/or put it into pensions for them, Maybe that Lisa thing? It just one thing less they will have to think about as they get older.

Definitely see a financial advisor - they have many more tricks up their sleeve for making the most of tax allowances. We had a similar amount to you and had very good results from the wrap that ours uses. Ours have reasonable charges, we haven't noticed them with the growth we have received. I also use our own stocks and shares ISAs with Vanguard, whose charges are low, and we have seen good growth from those too. I wouldn't give it to your children yet, you don't know when you might need the money. But we put some into pensions, some into ISAs, some into house improvements and enjoyed some lovely holidays. And we still have more than we started with. Enough to help our DC with house deposits, holidays and random things.

Definitely consult an IFA. My husband is one. His fee is normally 1 percent and he gives a free initial consultation. You can search for well regarded financial advisers on the Personal finance society website. Whatever you do, don't put money into premium bonds.

So get a good one.

An amount of this size should be invested a portfolio with a reputable company.

If you go for a relatively row risk given your ages the return will be 3% after fees etc But the total fund will grow.

I would interview different wealth management companies eg Brewin Dolphin, Hargreaves Lansdowne etc - see what they offer and compare their fees. They have tax and inheritance planning specialists. I wouldn’t go with one IFA personally - they’re hit and miss ime - other than to give you the low down on the different wealth management options.

I wouldn’t pass on to the kids at this point. I would invest it and add the interest to your existing annual income with the aim to grow the fund to cover care fees further down the line.

It’s a big blessing to your kids to have plenty of funds for care so they’re not burdened with it.

I was once in a similar position and part of the insurance was that an advisor from a firm visited me. I wasn't convinced by him and then interviewed several more, learning about advice as I went along until I chose someone. I used an independent advisor, not one attached to a firm. Twenty years later that advisor's advice proved good.
So my advice to you is to interview two or more advisors until you find one you can work with.

In my experience FAs don’t have lots of tricks up their sleeves as regards tax except for the stuff that’s readily known eg ISAs, pensions etc. In fact, and I accept we may be unlucky, but they have all gone out of their way to not want to discuss tax and tell us we need a tax advisor. They simply don’t have the skills. You are much better investing in tax advice, the investing but isn’t overly complicated.

Agreed. You need to talk to an account for tax planning.

Sounds like you are really comfortable already. Maybe keep an amount (£20-30k) for 'fun money' and then give the rest to your kids? They definately need it more than you do!

3%? You're having a laugh! Did you miss off the 1 in front of the 3? Inflation is at 3.8% so I bloody hope you're including the effects of that too...

I wouldn't pay someone to give advise on that sum. I'd split between stocks and shares, high interest account, premium bonds (for the fun and the access) and also have a nice holiday or something.

I agree, it isn't a particularly large sum. Wouldn't even buy half a house in some part of the country. All this talk of "wealth management company" is ridiculous. If it was more than 500k then maybe that's worth considering, if you need to start considering inheritance tax and have more complex financial affairs where eg capital gains tax/second property/you've worked outside the UK for many years etc is going to start have a bearing on things.

Premium bonds are never going to make you rich so you should never see them as an investment as such if you only have a small amount to put in them. But if you have a larger amount like OP's and want to put 50k in there for a short time in case you need quick access to the cash, guarantee a bit of income every month with a very slight chance of "winning" something bigger, and guaranteed safety, with no tax on the "prizes", then it's something you could consider doing. It's silly to just tell someone "never buy premium bonds" without knowing the full picture of their financial circumstances.

Presumably you understand the way portfolios work..

If you’re conservative and take the least out of the fund, the fund grows. They’re both working so they don’t actually need the money as income.

I fully understand how portfolios work. I have my own. It's your percentage return I'm querying.

Anything over 200k is worth investing properly. Arguably anything is worth investing properly.

Premium bonds are a waste of time unless you’ve and you just want to stash 50k somewhere tax free. You’d get a better return from a high interest account.