About to become a first time investor but should I stick with a cash ISA, because of US/Israel/Iran situation

[adviceatthislatestage]

Hi all, I am 59 and last year attended a pre retirement workshop (I’m in local government)

Plan is to retire at 63/64. Can’t get my works pension till I’m 67, so I’ll have to make my savings work for a few years.

It’s not much but I have £80k in a cash isa.

Following the workshop, I’ve had a couple of meetings with an investments company called MyWealth to discuss increasing my £80k into an amount that will cover me for the years before my pension kicks in.

I’m risk averse but still their advice was to transfer the whole lot, invest with their company and leave it for 5 years. Cue lots of graphs showing how much I’d make in ISA interest over 5 years as opposed to the fabulous money I’d make with them. Said because my investing was via an isa transfer any future profits made would be tax free.

I was initially ok with this, and they now sent me paperwork to sign. However given the current situation in the Middle East, am now worried that the timing is all wrong and I should just leave in a cash isa for another year.

Or is now actually a good time to invest and (hopefully) by the time I need the money the world will have been back on an even keel.

I’m one of these people who have never had money so £80k is a lot for me. If I was to end up with less at the end of five years, it would be quite disheartening to say the least, as likely to mean having to work till the bitter end (67) after all.

Fully aware no one on an internet forum can tell me what to do, but would be interested in all opinions. Many thanks

I moved £74k into a stocks & shares ISA in Feb. In the first 2 weeks it made £2k, then in the next 2 weeks lost £4k. It’s gone up slightly since but I’m not concerned as it’s money to stay there for a few years. No one can tell you what to do, but you should talk to your advisor about your risk appetite and profile as investments can be tailored around the risk. Historic data evidences better returns than from cash, but it depends if you can ride it out (albeit you could potentially be buying at a low point now so doing well)

I don’t believe that’s correct. If it was always originally in a cash isa (which mine was) then it can be moved flexibly back and forth. The limit is only relating to new money in.

anyway April 27 is another year away even if I’m wrong about the flexible isa set up

Just to clarify, what I do is switch my overall isa funds of circa £300k back and forth between my T212 cash isa and my T212 s&S isa. It never leaves the isa wrapper. I’m not referring to taking it out to spend and then replacing in the same tax year.

That’s a very financially uneducated response

You really won’t be able to do this from next year as part of the new budget announcement to encourage investment. You possibly won’t even be able to take it out of shares and keep it in the “cash to invest” portion of the s&s ISA without penalty (although not yet confirmed). Make sure you’ve got it where you want it from next March!

And the above seems to apply even if the money was in the ISA prior to 2027. It’s a blanket rule on all funds from 2027

OK thats helpful thanks. It's annoying but helpful. It seems like a stupid rule if they are trying to encourage people to put their money into S&S ISAs

Not for the relatively short timescale in the current volatile situation it isn’t.

Vanguard used to be the default low fee fund - it’s not anymore - I saved nearly £1000/year moving away from vanguard

Isn’t it awful that the NHS lead this vultures to their employees.

I’m shocked that this company is being given access to public sector employees. The proposed charges are very high.

In your shoes and given the current state of the world I would split the money between cash and S&S isa. If you act quickly you can use this year’s isa allowance as well as next year’s. So I would start a S& S isa now with 20k, add another 20k after April 5th, then put the rest in the highest cash savings account I could find. But I am not a financial advisor - just reflecting my own preferences for easy saving and investing.

That company gave presentations at my work too. The morning half of the one I was on was useful factual advice about retirement and about money in general terms.

The pm session was a sales pitch, as already described above.

I guess some companies attract investors by having low fees and a good record; others make deals with employers, to target their soon-to-retire staff with “courses” that are a sales pitch for an expensive product.

Similar experience here.

I found the individual advice session quite useful as a 'what to think about when forecasting retirement income/expenditure' map. But the specific investment suggestions were terrible and their fees weren't great.

OP, 5 years is considered the minimum timeframe for stock investments. Now's a pretty good time to get in as a long term investor with flexibility about when to withdraw. But I'd be wary about it in your situation - possibly investing a portion but certainly wouldn't go all in. And not with them.

I'm a keen investor but I wouldn't invest for that limited time frame if the capital is needed for income in 4 or 5 years. With possible interest rates rising on the horizon in the near future, savings rates might well become very competitive.

You could consider a SIPP for the 25% tax relief uplift for some of the capital - up to the amount you could receive as a tax free lump sum, plus your tax free income allowance over the three or four years before your works pension kicks in. This would give a considerable boost to much of your capital with virtually no risk, if you deposited it whilst still working. (You can still contribute when not earning but it is limited to £2880 plus the uplift)

You could keep the SIPP in cash on a low cost platform if it pays interest, or a cash-like investment (such as a very low risk money market fund or a gilt fund). Trading 212 is in the process of rolling out their SIPP to a limited number of users.

Trading 212 says on the s&s isa that its held in qmmf and is at risk of loss

If you’re a local authority worker, it would be worth looking into AVC’s. You can choose the risk profile.

QMMFs (qualifying money market funds) are designed to be 'ultra-low risk' and are highly regulated. They are used by investors and institutions as a safe haven to park cash, providing high liquidity and stability. On a risk scale of 1 - 7 they score a 1 - the lowest. Even with an ultra low risk option there will be some risk involved, and investment platforms are required to highlight it.

Thanks all.

Having emailed MyWealth to let them know I would not be going ahead, I’m still getting calls (number now blocked) and even today was emailed again. Persistent little buggers aren’t they

Quick question- the £80k is in a cash isa atm.

In April, can I transfer the whole amount to trading 212 (or similar) but split between stocks and shares isa and a cash isa? If so, have I understood correctly that I can then move between the two isas without penalty or other issues?

I feel quite embarrassed that I can hold down a job, raise a family, run a home and yet have no real clue about finances, other than the basic stuff

In April, can I transfer the whole amount to trading 212 (or similar) but split between stocks and shares isa and a cash isa? If so, have I understood correctly that I can then move between the two isas without penalty or other issues?

Yes.

You can do this today or tomorrow, no need to wait until April (unless the existing cash ISA is fixed term, ending in April ?)

To do this, you need to get Trading212 (the new provider) to do the transfer. The money should not enter your current account with your bank. It needs to go from the old isa directly into the new one.

In April 2027 the isa rules will change and you won't be able to move money in the same way from a S+S ISA into a cash ISA. This is because of the new limit of £12k for cash ISAs for under 65 year olds

It sounds like that company has given you terrible advice. I would not move it all you need a cash buffer of at least six months salary.

Then with that small amount of money just open a stocks and shares Isa with trading 212. Vanguard or alike. Very cheap fees. That company will eat into it with fees. Pick a global index fund or for less risk something diverse like vanguard life strategy which includes gilts and bonds. But probably lower return.

At your age this is a good time to buy everything is cheap in a couple of years it will rebound. If you were worried drip feed your money into shares to even out the peak and lows.

Also you can access your pension before 67. It's just reduced. For example I'm civil service alpha which is 67. I can take it from 57. But it's reduced by about 4 percent a year. If you do the math and expect to live beyond a certain age it actually makes sense to take it early

That’s utterly scandalous that companies like that are given taxpayer funded time.

glad you haven’t touched them with a barge pole.

Many years ago I read The Simple Path to Wealth. I invest basically in tracker funds with very low fees. DH works with a financial advisor for the much larger family wealth. I have great fun every year when I beat our financial advisor! Read around the subject it’s not too bad.

At least some of this money would be better going into a pension- either a Sipp or AVCs. Can you say what you earn, op, and how much you want per year in retirement?

taking pension early for a government pension teaching NHS etc it is about 4% reduction per year, it is still index linked , so if you take it 4 years early it is 16% less
so for example if your pension today was 24K per year and you decide to retire 4 years early at 63 it will be 16% less which is 20,160
if you live to 85 ( about average for a woman currently 65)
if you take it today at 63 you will have 22 years at 20160 total = 443K

if you take at 67 assuming inflation at 2% 24 K is now worth 26K ( you will also have another 4 years contributions so probably nore than this) = so 18 years at 26K total 468K
both pensions are index linked so although numerically the 26K pnsion will rise by more £ annually as 2% of 26K is more than 2% of 20K,
they should both keep pace will inflation so if 20K is enough to retire on now it should keep pace with inflation so lifestyle doesn't drop over time

If you were 10 years younger then I’d say invest in stocks and shares, but at your age it’s quite risky. I wouldn’t invest all of it.

Definitely look at putting some into a SIPP (a pension which you manage yourself) for you to withdraw from when you retire to when your other pensions kick in. There’s a huge tax advantage to that which is worth £1000’s.

For every £80 you put in a SIPP the government adds £20, taking it up to £100. That’s completely free and you don’t have to do anything to get it - it will be added automatically. There are rules about how much you can put into a SIPP in any one year.

You have to pay income tax when you take the money out, just as if it were income from a job. However, just as with regular income, you get a personal tax allowance which is currently £12,570. For the gap years between when you stop working and when you take your other pensions you won’t be using your personal allowance for anything else so you can use it for the income from the SIPP.

What’s more, you can take 25% of your pension tax free. So overall you’ll be able to withdraw up to £16,760 from the SIPP without paying income tax (current figures). 25% (£4190) will be tax free, and the remaining 75% (£12,570) falls within your personal tax allowance.