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.

So do I. If they take a minimal % now while they’re both working, the fund will grow more quickly.

Well that’s stating the obvious. But why do they need to take ANYTHING now, if they’re both working, and have kids’ expenses covered for a while?

this is a silly discussion really as no-one could advise OP in any in-depth kind of way without knowing the full financial picture and I’m sure that OP knows fully well that the number one rule when you have a lump sum to invest is not to take any advice from randoms on the internet. 😆

A holiday home? I realise I may be projecting my own dream here! Congratulations nonetheless.

They don’t, but it could fund a nice extra holiday annually without hurting the fund so why not.

The general advice is to talk to professional advisors which is perfectly sensible.

@CurlyhairedAssassin The better paid are much better off than lower paid grads with the latest loans. Jobs and pay are an unknown though.

I’m a bit confused. OP - you are your DH are clearly v financially savvy. Super high earners, no mortgage, ISA’s maxed out, great pensions. Why are you asking mumsnet how to invest it? I would totally understand if you didn’t understand finances etc but this doesn’t seem to be the case.

I'm not talking about that type of tax.

For example, I invested in some AIM ISAs and venture capital trusts where you get back in cash 30% of your investment from HMRC.

And pensions advice, also inheritance advice.
Those aren't for everyone but you need specialist advice about them if you do decide to use them.

I find it hard to understand why anyone would want to make their children's lives harder than they need to be. You are in an incredibly fortunate position money wise, i would be giving it to my children for housing

Whatever you decide, please remember there are charities who would welcome s little support.

3% are you kidding!!!! I can get over 4% securely with a bank with Gov backed guarantee. You'll need to get 4 accounts with different banks. Without even trying very hard, and you're suggesting paying a financial advisor to get you 3%. If this is what you are doing please review your investments - you are being ripped off!

I don't believe in passing inheritances on to children, particularly when they are at that age. It's your husband's inheritance and he should use it as he (and you) think fit. Your children will inherit from you both. They have enough for a deposit on a house and they have had a good education and have no debt. I wouldn't give them any more than this. It's good for them to work and it's not good for them to have everything given to them on a place.

HL Active Savings and or Interactive Investor bonds (I think those can be joint) for 1-5 years at guaranteed interest (do not go above the 85k per person allowance), let them mature gradually to move into your two ISAs over a number of years, top up the kids ISAs so they can use it for house deposits etc later on. If you have a buffer and a stocks and shares ISA already you can adjust your risk profile to invest in more equity funds (tends to be higher risk, may be higher return).

i know but the son I'm talking about is on a Plan 2 loan. His high salary means the amount in interest he'll be paying would be absolutely huge. I'm not saying he couldn't afford it on his salary (as long as he stays a high earner) but it doesn't seem financially prudent to pay the interest if there are other ways round it.

I'm sure that the OP and her husband can afford an extra holiday anyway from the sound of it. Also, when you're working full time it's not always easy to take a load of annual leave for holidays. Some of it needs to be used for other thing,s, especially when you have adult children who live away from you. It's nice to visit them sometimes, and often it means at least a day of annual leave being taken up whenever you go and visit.

Eventually young adult children don't always want to come away on a family holiday anymore, they'd rather go on a cheapo European break with their mates or backpacking or something, so holiday costs can actually often get a bit cheaper in your 50s, especially if a couple no longer has to stick to school holiday times. (bummer for school staff, though...)

Regarding giving money to the children to get around IHT, I personally think that only makes sense if you already have enough that you both could comfortably retire today. Otherwise, you have done well by your kids, they are already in a very good position if they have cars, savings, and zero debt at ages 19/20, and it would not make sense to give them loads of money now and risk having to work longer than you want to. You may have more money, but they have a lot more life ahead of them.

Regarding pension, you said that your husband is tapered out due to high earnings, but are you? Since marital assets are joint assets anyway, the best option for both of you might be to top up YOUR pension if you have room to do so.

For whatever you cannot put into ISAs or pensions over the next couple of years, I would not knock premium bonds if you are both higher rate taxpayers or additional rate taxpayers. The prize fund may only be paying 3.6% right now, but that is actually equivalent to 6.0% on a pre-tax basis (ie if a savings account pays 6%, after 40% tax you would keep only 3.6%). Listed shares may offer more, but at higher risk, while investment grade fixed income instruments probably offer about the same but require paying an advisor unless you can pick your own.

An IFA might promise a balanced portfolio that can return 6-8%, but after taxes and fees, that works out to about the same net return as premium bonds.

IFA fees take a large chunk of your annual returns. They can add value mainly if the IFA helps you to make better decisions about asset allocation and about which tax wrappers to use.

Sheesh it was just an example… in any case, holidays can always be upgraded.

Keep some aside for next years ISA allowance - for you DH and the children.
a large chunk into your pension, and then reduce your monthly pension contribution to the max your company will match.
10k to your husbands pension
short term gilts, then money into the ISAs when they mature.
longer term gilts to give your retirement a boost.

Long term savings can go up and down in value. Shorty term savings do too! It’s only been a couple of years that returns on savings of any kind have been above 2%! Shares via ISAs have made much more. However we have a portfolio where we nominate level of risk and we are just below high but age and risk aversion obviously dictate where you set this. We absolutely know our portfolio managers know a lot more than we do. We get 4 times a year reports and an annual meeting as a minimum. We can access tax planning and trust advice etc. Some of the private banking services will offer this too. But if you have a large IHT liability, you probably want to stop this getting worse if you can.

I think we clearly need tax advice at this stage (having managed without to date since we are reasonably financially literate).

In visiting PIL yesterday it transpires that the DC also have £50k each in an investment bond.

They also have their CTFs which are still just sitting there circa £5-6k in each.

They will clearly inherit through us eventually and we will no doubt give them money at the point at which they decide to buy property but that is probably 3-4 years down the line at least.

My thought process was initially that it might be better for some of this money to bypass us and go directly to the kids but they already have a lot in their own names and we are still worried that they could make a silly decision with it.

I think the advice we need is more about our own position in terms of how we hold the money and ultimately IHT on our estate. We will be over the IHT threshold.

In terms of how we hold the money my pension is good enough that there's no real benefit to me putting more in unless the rules change to increase the tax free sum. DH is restricted to 10K which has already gone in this year. Neither of us get contributions from an employer so pensions aren't as tax efficient for us as for employed staff.

We can use premium bonds as a holding position for £100k but my view is that its basically just a tax free lottery.

We can put £40k combined into ISAs next year but already had money waiting in savings to go in (currently maxed out for the year).

We have a S&S isa but haven't held shares outside of an isa previously.

@user0507 The only obvious ways to avoid IHT on your estate is to give it away 7 years before you die, or put it into a trust. That needs specialist advice. Both ways you lose control of the money. £50,000 sounds a lot but for a deposit in London, it really isn’t! Even where I had a 2 bedroom house 1 hour from London, these are now £275,000. They will need a decent income to buy on a single salary. Of course 1 hour from London, no grad locally gets these salaries.

We have plenty of money but we have given a lot more than this to dc. Not at 18 but 25 and both dc invested with our guidance. One in a flat and the other in savings vehicles. Had she been saving long term, we would have taken a different view but she’s flat hunting now. The use of the money also affects decisions and how many years you need the investment.

We have never had premium bonds. Too random for us but we have share ISAs and various other savings including pensions. Rachel will be coming for us I expect.

My IFA is carefully managing our inheritance tax at the moment, through different vehicles. There are ways that we wouldn't know about ourselves. I think it's sensible to take advice.

Another way of passing wealth on to avoid IHT is payments out of excess income. If you are worried about IHT and kids having access too soon you can set up a JSIPP for each child and add £240per month which is grossed up to £300 by HMRC. As it’s a pension it can’t be accessed until age 55. You can also add £333.33 per month for each child into a LISA once they are 18 (also with 25% added by gov) which they can use for house purchase or can access at 60. You need to keep records to prove it’s out of excess income and doesn’t affect your own lifestyle. Doesn’t sound like much but over time and with growth in S&S these will add up. Whilst they can’t access for a long time it does mean that when they earn themselves eventually they will have less pressure to save as much.

No but it isn't £50k. It's more than double that already with the bond and their CTFs

Anyway we are going to take some tax planning advice.

What I'm definitely not going to do with it is put it into a blockchain real estate tokenisation scam though Luciemin Thanks for the PM though...

Another vote for looking at Rebel Finance School and educating yourself before you make any decisions.