Page 3 | If you had a million pounds

Horsesandzebras · 2022-11-30T10:17:54+00:00

If you were 40 and had £1 million pounds how would you cut your cloth to financially secure your future? These are your circumstances 1. You have ill health and will never work again. You are 90% housebound 2. You have one dependent child (2) 3. You have a partner, you are in a committed healthy relationship, but not married. He is father of child. 4. You have no other assets or income. You have £1 million to house and income yourself 5. You live in the UK What would you do?

Bard6817 · 02/12/2022 11:32

Luckydip1 · 02/12/2022 11:12

@Bard6817 what is a GIA

General Investment Account.

So where one would simply buy funds or equities, but it’s not within a tax wrapper, so potentially subject to Capital Gains, so try to use them only after you have used other allowances, such as stocks and shares Isa. etc.

Original poster

Horsesandzebras · 02/12/2022 11:34

Eleusa · 02/12/2022 11:14

OP, if you're in this position, you probably need advice before committing, from someone who understands the various scenarios and isn't in a position to make money from you taking money from your pension, instead of receiving an income.

This is the best advice on the thread. What the right decision is is extremely complex and depends on a number of factors- you really need proper advice which is personal to your situation. I'd only caution that you hear a lot of stories of people losing out because they took the lump sum, so do be completely sure that you understand what a lump sum is likely to provide you with before agreeing to that. Please ignore anyone telling you to give money away- can only assume they have misunderstood the situation.

This

I get this. I just don't know who that person is. The IFA motivations are to earn a living off clients money, whether they admit it or not.

Prior to ill health these are sums I could have undertaken myself, but just find impossible to deal confidently with now.

Also, to put other readers minds at rest. I will not be giving my financial security away to anyone!

However, I'm still non the wiser on the marry or not to marry front....

Right now I need to work out if regular lifetime payments are better than going for financial independence. I'm swaying towards lifetime regular payments...

We live a relatively minimalistic life. We just want to enjoy family life. Live in peace in a family home. Give our child a good education and upbringing. Eat well. And confidently afford the gas bill and some luxuries now and then. The health has gone to the wall so both of us are on the same page with this life vision.

OP posts:

BarbaraofSeville · 02/12/2022 11:46

Regular lifetime payments would also give you financial independence. If you know for certain that you have a guaranteed index linked income for life, then that's effectively 'financial independence'. You don't even need to worry about the risks of stock market volatility.

Unless you actually want to spend the million pounds in one go, you don't need access to it all straight away.

Working out how much lump sum would be equivalent to £20k increasing by 4% pa for a 40 YO is what actuaries do, I think. I don't know the answer but it is likely to be a hundreds of £k.

Pensionwise might be able to help you. It says it's for over 50s, but given you're facing ill health retirement, they might be able to do something for you, or at least point you in the right direction.

www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise?gclid=Cj0KCQiA4aacBhCUARIsAI55maHqYXKyw0Z4pU8XMHDLwJ8x3w7IOe28Aa2MybccGwEB-0ZTf5wx0A4aAhTZEALw_wcB&gclsrc=aw.ds

Are you a member of a union? That's another option.

Original poster

Horsesandzebras · 02/12/2022 11:50

Working out how much lump sum would be equivalent to £20k increasing by 4% pa for a 40 YO is what actuaries do, I think. I don't know the answer but it is likely to be a hundreds of £k.

Is anybody able to do this calculation for me? I get a head freeze looking at it.

Thanks for your input everyone

OP posts:

Imalandlady · 02/12/2022 11:54

I’m in a slightly similar situation due to an unexpected inheritance and my illness. This is what I did:

I bought a property that I can live in for the rest of my life. This will be VERY unpopular with Mumsnetters, but I also bought a second smaller property outright to rent out. I decided to buy a rental property rather than invest money, because I don’t understand financial products and IFAs seem to charge huge fees. Having a second property felt like a tangible asset and it would provide a regular small income.

I chose both properties very carefully and made sure I had good legal and financial advice every step of the way. My rental property is in a more ‘desirable’ area than the one I live in (closer to a station and town centre) which means it always has tenants. I kept some extra money aside for property maintenance, insurance, tax etc in an ISA.

In your circumstances I wouldn’t get married but would make a will so that your DP will be ok if you die and he is the sole carer for your child.

Crazykatie · 02/12/2022 11:57

I’m happy and settled where I am now and don’t want to change anything, if I won the lottery I would give my 3 sons most of the cash to buy decent places to live.
Easily the best use

Hyperion100 · 02/12/2022 12:05

500k - Buy a property to let out
300k - Hand to fund manager to invest
100k - Pay off outstanding mortgage
100k - Go travelling for a few years

alwayscheery · 02/12/2022 20:17

Bard6817 · 30/11/2022 11:02

Great question. Alas, i wish i’d known the answer to this when i was in my 30’s and 40’s and was stupidly well paid.

The old addum of Money goes to Money is very true.

Open an ISA so you can benefit from Tax free growth of investments.

Open a SIPP so you can benefit from Tax free Growth and a sum which is not subject to IHT.

Open a GIA so you can make profits from money not in a Tax Wrapper as above.

Open a Savings account.

Open a bills account.

Keep a Current Accoubt and Credit Card.

Clear any debts, excluding mortgage.

Get 50% of the amount into the SIPP right away.

Fund the ISA Fully every year from the GIA.
Put about 10% maybe 20% into savings.
The balance into the GIA.

Monthly - service your current account from the savings account or GiA (depending if you have profits from the GIA) so you keep control of the flow and don’t go mad.

Monthly service the bills account from the saving account and keep a close eye on bills.

In terms of investments - steer clear of FA’s and be vary wary of IFA’s. Stick with Vangaurd who charge incredibly low fees. Focus on S&P 500 equities 80 to 100% and just buy and hold.

In essence your savings and the GIA are how you live day to day. GIA when you are in profits, ideally you want a 2 year buffer of cash, in your savings account to help ride out the markets bad times. Ie. You don’t sell anything in the GIA when times are bad.

Ultimately you are seeking to get everything into the tax free wrappers, so that you have more profits kept and not subject to income or lifetime allowance, hence it’s a 1 time sipp payment and nothing more. The isa has a 20k annual limit, use it every year. You can also consider junior Isa for the kids, and fill them annually too.

Ideally you should be able to make more from the ISA and the GIA than you pay towards the mortgage. If not, and you take a more cautious approach, clear the mortgage.

£1m is only life changing if you invest it and treat it as a 1 time event and not for splurging. Invested sensibly, with Vanguard or someone else low cost, it will make a huge difference to you and your kids life. Spend it quickly, and it will give you a lovely decade and it will be back to normal worrying about bills for everything.

To sum up, that £1m can reasonably give you an income of about £30k a year and leave a sizeable inheritance for the kids.

Excellent advice as always @ Bard6817
I am curious, why the S & p 500 rather than a global tracker such as vanguards fysE Global All Cap index Fund?

Bard6817 · 02/12/2022 21:13

alwayscheery · 02/12/2022 20:17

Excellent advice as always @ Bard6817
I am curious, why the S & p 500 rather than a global tracker such as vanguards fysE Global All Cap index Fund?

Show quote history

Thank you.

Just prefer North America as an economy. The Vangaurd S&P 500 fund i think actually covers about 1200 companies, so very diverse. Easier to keep tabs on the US via the likes of CNBC, a limitless money printing machine. When times get tough, the money heads inwards, and with the way the world is shaping up, the US is investing in itself, semi conductors etc, if the world does go to poop, the one place that will be doing well is the US. Add in the performance of the US markets since 1930’s (although that’s no guide to future performance) then it’s a hell of a pedigree.

Global can be amazing, but i suspect it needs more oversight and a bit more movement.

Most tech comes out of north america too, and as it’s down 30% it’s a great buy in time. That being said, i still think it has a bit more to fall, so my next splurge will likely be April ish. Yes i’m trying to time the market, but it works for me. Other investors, i’d say start buy and hold now.

The final issue is of course the currency aspect…. We’ve had double whammy of performance from Index growth since 2008, and a falling pound, the Truss mini budget being especially lucrative if you played it, but I don’t believe either is going to end now and i think GBPUSD is likely to hit equity at some point before 2024.

Going global adds to my headaches, trying to keep on top of the forex aspect and knowing all the currency pairs for where i’m in, is just too much. I’m getting on a bit. :)

Have you had much success with Global?

determinedtomakethiswork · 02/12/2022 22:41

Hyperion100 · 02/12/2022 12:05

500k - Buy a property to let out
300k - Hand to fund manager to invest
100k - Pay off outstanding mortgage
100k - Go travelling for a few years

Did you read the bit where the Op said she was housebound?

Farawayfromhere · 02/12/2022 22:55

Buy a small house outright and probably invest the rest in a high yield tracker fund, aiming for an income of around £20,000 per year.

Use the ISA and pension allowance each year- this would be £20,000 into an ISA and £3600 into a pension if you were not able to work.

I would try not to spend the capital and just spend the income in order to preserve as much as possible for the future, so would live quite carefully.

I suppose it also depends if the kind of disability required carers etc, which could cost a lot more. In that situation a different plan might be needed.

caringcarer · 02/12/2022 23:04

I'd buy a bungalow. I'd buy an annuity as rates very good ATM. I'd make sure it was inflation proofed. I'd work out how much I need to be comfortable each month, then add five hundred extra each month. I'd put some money in child's name in ISA. I'd invest the rest.

EstherTW · 02/12/2022 23:37

In a similar situation myself. My input, taking a pension as regular payments gives you a reliable income. This may be better for borrowing, and put you in a better position for certain benefits. Your own investments aren't usually considered reliable for mortgage or other borrowing, as they aren't guaranteed. Having capital can cancel you out of certain state benefits. A guaranteed income from a different source (pension) is not considered your own capital, and may be more reliable for borrowing.
I know you want to buy a home outright, however you never know for the future. You may one day need or want to secure a loan to buy property. You may also wish that you could claim certain benefits, which capital owned yourself may deny you.
On the other hand, capital kept and managed yourself can be passed onto your child.
I think you need a solicitor, not a financial advisor, to explain what different options mean for you. A financial advisor will explain what it means for the money, not the person.
I wouldn't marry. You can give your partner a lifetime right to live in your property, but then it passes to your child. You need to ask a solicitor about that too! Best of luck with your decisions.

validnumber · 02/12/2022 23:49

Obviously you will want to put some but I would advise against putting large chunks in savings under your child's name. They may grow up with the same attitude to money as their dad and blow it all when they get access!
You can always give them what they need for specific things when they are older and need it.

PlaitBilledDuckyPuss · 02/12/2022 23:51

Buy the cheapest reasonable house outright - (sub 100k in a cheap location) - put most of it in a high interest savings account (fully use ISA allowance), live as frugally as possible for as long as possible off the capital. I don't trust the stock market.

PiggyInTheLidl · 03/12/2022 08:46

Dies your partner have a pension? Does he pay towards his state pension? Will you get full state pension?

Honestly, I would not marry him. What financial security would it bring given that he has no assets, probably no pension etc.

His future security can be looked after in a will. But if he is crap with money I would leave your assets direct to your kids, with provision for him to live in the house.

With the best will in the world, you haven’t got enough to be giving big sums to your kids, this pot may need to support you for 50 years.

Unless you know that your illness is life limiting. In which case I would think some specific advice would serve you best.

caroleanboneparte · 03/12/2022 08:52

Put it all into a house then claim UC and PIP. Get a lodger for an extra £9500 pa. Have dp give up work to care for you/dc.

hopsalong · 03/12/2022 09:34

Why can the OP never work again? How long does OP expect to live? This is the crux of the matter, because £1m is a lot to most of us, but not very much at all if it needs to produce an income stream for another 40 or 50 years.

If the OP has a life-limiting illness then I think professional advice from people familiar with the condition is needed.

If the OP expects to have a normal lifespan, then OP needs to rethink the idea that they can't work again. You don't have to be in perfect or even good health to earn some income in a WFH job. This is the reality for many people, because few adults in the UK can afford to live entirely on a partner or on capital. 1m is too little.

Bard6817 · 03/12/2022 10:14

hopsalong · 03/12/2022 09:34

Why can the OP never work again? How long does OP expect to live? This is the crux of the matter, because £1m is a lot to most of us, but not very much at all if it needs to produce an income stream for another 40 or 50 years.

If the OP has a life-limiting illness then I think professional advice from people familiar with the condition is needed.

If the OP expects to have a normal lifespan, then OP needs to rethink the idea that they can't work again. You don't have to be in perfect or even good health to earn some income in a WFH job. This is the reality for many people, because few adults in the UK can afford to live entirely on a partner or on capital. 1m is too little.

Hogwash.

£1m is more than 95% of the population will retire on.

The issue is level of retirement. If the OP wishes to simply replace state pension income (10k a year) and add this to her LGPS payments, her pot imvested in cash would last 100 years. Add in inflation and it’s less obviously, but add in investment performance, she could live a frugal lifestyle and leave her descendants millions.

You also question her decision/ability to work. LGPS have medical staff making that assessment - if that’s their decision, accept it at face value unless you have some axe to grind, as you risk being offensive in questioning that aspect. I’m sure if the OP wanted guidance on the condition and it’s impact, they know where to go, or can ask in a non financial thread.

Turmerictolly · 03/12/2022 10:24

The Moneysavingexpert forum has both a savings/investment forum and a pensions forum. They have industry experts posting on there giving advice including lots of IFA's. I think you have to wait a day after registering to post but I'd post this there.

Original poster

Horsesandzebras · 03/12/2022 14:41

Bard6817 · 02/12/2022 21:13

Thank you.

Just prefer North America as an economy. The Vangaurd S&P 500 fund i think actually covers about 1200 companies, so very diverse. Easier to keep tabs on the US via the likes of CNBC, a limitless money printing machine. When times get tough, the money heads inwards, and with the way the world is shaping up, the US is investing in itself, semi conductors etc, if the world does go to poop, the one place that will be doing well is the US. Add in the performance of the US markets since 1930’s (although that’s no guide to future performance) then it’s a hell of a pedigree.

Global can be amazing, but i suspect it needs more oversight and a bit more movement.

Most tech comes out of north america too, and as it’s down 30% it’s a great buy in time. That being said, i still think it has a bit more to fall, so my next splurge will likely be April ish. Yes i’m trying to time the market, but it works for me. Other investors, i’d say start buy and hold now.

The final issue is of course the currency aspect…. We’ve had double whammy of performance from Index growth since 2008, and a falling pound, the Truss mini budget being especially lucrative if you played it, but I don’t believe either is going to end now and i think GBPUSD is likely to hit equity at some point before 2024.

Going global adds to my headaches, trying to keep on top of the forex aspect and knowing all the currency pairs for where i’m in, is just too much. I’m getting on a bit. :)

Have you had much success with Global?

Show quote history

I think you might be a genuis.

OP posts:

Original poster

Horsesandzebras · 03/12/2022 15:02

caroleanboneparte · 03/12/2022 08:52

Put it all into a house then claim UC and PIP. Get a lodger for an extra £9500 pa. Have dp give up work to care for you/dc.

The irony is I would probably be on a similar income on UC, but living in a £1m home. I'm not sure how good I would feel about myself doing this with intension. But I also take your point, that is an option.

OP posts:

Bard6817 · 03/12/2022 15:06

Horsesandzebras · 03/12/2022 14:41

I think you might be a genuis.

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lol. Definately not - but thank you.

Original poster

Horsesandzebras · 03/12/2022 15:11

Bard6817 · 03/12/2022 15:06

lol. Definately not - but thank you.

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Seriously thank you. 😊

OP posts:

EstherTW · 04/12/2022 15:52

Do remember that you will have to apply for benefits in order to obtain NI credits, so you get your state pension. Likely that you would have to satisfy ongoing ill health checks, which is never guaranteed. Another way of looking at the point of claiming UC and using all the money for a home is, what if you are turned down for UC at some point, what do you do then?