How to invest £100K lump sum

[herbaceous]

Long story, but essentially I have about £100K I want to invest for the future. I don't have specific goals, other than not living in penury when old, having something for DS when I cark it or perhaps before, and basically to prevent it being frittered away.

I'm 60, work part-time in education, no plans to retire ever, have a high-earning partner, am not married. High-earning partner is worse with money than I am, and won't discuss it so I am looking after my own interests. Have a 17yo DS, who has a child trust fund from the good old days of Blair.

I am a money fuckwit, and the idea of an IFA gives me hives, as I don't know how to find one, won't understand what they're saying anyway, and feel hideously inadequate in the face of expertise.

I have various work pensions from the dark ages, mostly worth bugger all, but one has about £30K in it.

I'm thinking
Pay £20K into said pension
£20K into a cash ISA
£20K into easy-access savings
£35K into longer-term high-interest savings
£5K into Premium Bonds for the laffs.

Does that sound sensible?

I'm also due to inherit a flat (sitting tenant) and about another £100K in the next six months or so.

Sounds sensible and switch another £20k into ISAs next financial year. Just roll the interest on each year or take some of it as extra income.

Do the £20K ISA now, because the amount will go down in the next tax year. The pension and fixed rate savings for 1 or 2 years (interest rate is pretty high at the moment) are where I would go. I would never do premium bonds or put that much money in an easy access account. Better to keep 5K for a really good holiday so it's not all boring making sense. So 5-10K having a good time. The rest in pension and secure investments including Cash ISA.

I always suggest you look up the Financial Flow chart and see what that suggests for financial security.
it starts with a cash emergency fund of a few months outgoings and then builds up through ISA, pensions and investments.
You need to be clear about what the money is for and when you might need to spend it

It's worth looking at your pensions to determine what you'll be entitled to when you hit the pension age. Is that £30k in a pension pot or a pension that pays £30k?

Sadly the former!

I’ve got another one which pays £3k a year. Plus full state pension.

So £80k into cash or cash-equivalent and only £20k invested? Obviously depends on your tolerance for volatility but I'd question why you need so much cash, especially if you have no plans to stop work.

I would consider putting more into your pension, especially as at 60 you can get it out without waiting if necessary (although this will have knock on effects) and benefit from 25% tax free. What is the pension invested in?

Definitely no need for an IFA but you could consider a free Pension Wise session www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise

What's your current living situation? Mortgage/ rent/ owned?

I would consider migrating your smaller pensions that aren't doing much into for example a single SIPP invested into an index tracker ETF and adding some of your inheritance to that as longer term investment.

Max out your ISA allowance.

Tbh, with £100K coming now and £100K plus flat later you really do need to see some form of IFA even if you don't want to.

I thought the max one could put in a pension per year was £20k? Hence that notion

I do also have a stocks and shares isa worth about £40k with Fidelity.

Pension is with Standard life.

And about £25k in another cash isa.

Considering cancelling my life insurance. I make no meaningful contribution to family finances, so my death would in fact be a bonus!

Joint mortgage, of about £120k on a house worth about £600k. I don’t really contribute to the mortgage. Paying it off would be an option, but as I only own half would only benefit half too!

I don’t understand ‘index linked’ or ‘EFT’ so can’t see an IFA as they’d laugh in my face.

With the pension only add what you will get tax relief on. I would then use your full isa allowance. Save the rest and then next tax year move those other savings to pension and isa again.

Consider at least a civil partnership with your ‘high earning’ partner to protect yourself from a potential inheritance tax bill….

That isn't a lot of cash for a 60 + person retirement plans or not. Very much best to hold onto it as intact as possible

Someone else more knowledgeable than me may correct me, but I would put the bulk into a pension, given that you don't have a large private pension as things currently stand and you still have some time to grow your pot slightly.

Someone on here recommended a Facebook group called the Rebel Finance School which involves a free of charge course. That would be useful to do, OP.

I'm closer to retirement than OP 😂

It's a lot of cash relative to what she has invested (£30k in a DC pension). In the days when everyone bought annuities, it made sense to have a very high proportion of cash/gilts approaching retirement, because of the risk of a crash. These days most people don't buy annuities, or at least not at the point of retirement, and in any event OP isn't planning to retire any time soon. De-risk too early and you will run out of money.

OP, you can put up to the lower of a) your earnings and b) £60k into a pension per year. Anything you put in will be grossed up by your tax rate (so £7500 turns into £10000 if you pay basic rate), then taxed on the way out less your 25% tax free.

I would recommend the Meaningful Money books and podcast.

Agree that is very cash weighted which gives poor returns. I would consider weighting it towards pensions in tracker funds as that's likely to generate a better return, but only if you don't expect to access your pension for at least 5 years, so any downturn can be weathered.

I agree with the recommendations to put any money you don't need in the short term into a pension for the tax relief. You can put 100% (including existing contributions) of your earnings in per year. S&S ISA for most of the rest over years as per the £20k pa limit. The £25k cash ISA you already have will serve as an emergency fund. If you're in good health this money could have 20 years or more to grow until you need it so plenty of time to ride out peaks and troughs and beat cash.

I wouldn't bother with PBs unless you're a higher rate tax payer and have used up your personal savings interest allowance and are prepared to put in more than about £20k otherwise you're less likely to get near cash rates. But it could be a good holding place for larger amounts for a few years until you can move ot into pensions and investment ISAs.

You could also educate yourself fairly easily, as well as the Rebel Finance School, the Meaningful Money podcast would be a good place to start. The creator, Pete Matthew has also written a guide book for retirement which would be worth reading to decide if it's worth seeing an IFA or self managing. The free pensionwise session would also be a good idea.

@BjorkdiditThank you. I am understanding what you’re saying!

I did look up pensions, and there was something about being able to roll over your contribution allowance for three years? So I could put three years earnings in at once, as I haven’t before? I think?

I did this last year. I put £20k into a S&S ISA and £80k into an investment account. I did an attitude to investment risk, and I came out balanced, so the money is invested in a balanced portfolio. I transferred this years ISA allowance from my investment account in April.

I actually take an income of £600 a month from the investment account, and the portfolio has made up all the losses plus more.

It's all so confusing. You probably pay tax on that income, @Belladog1? Do you have a good pension too, or is this instead of the pension?

Maybe I do need an IFA. But I'm afraid of them. How do you know they're not just going to rip you off? Quite apart from the righteous judging that will go on...

I don't pay tax on the income. I'm not a large earner, so i needed the income to give me some extra spendies.

I did use a financial advisor that was recommended to me. He didn't charge me ongoing fees, but he did take an initial fee of 2%, but the portfolio has made that back.

I actually invested just as Trump was imposing tariffs on everyone and the markets were low, but then it rose rapidly once life settled down, then the war impacted it, but it's still doing very well.

So I could put three years earnings in at once, as I haven’t before? I think?

Yes you can do this- there's a calculator here that tells you what you can carry forward https://www.tax.service.gov.uk/pension-annual-allowance-calculator

Putting all or some of it in a pension will essentially get you free money in the form of tax relief. You can pay up to your annual salary, or £60k if you are paid more, and carry over up to 3 years. You would need to know how much you have paid into a pension in that time, to exclude it. As you are already 60, you could access the money when you need.

Oh good grief. Just looked up that 'pension allowance calculator' and it wanted to know how much I'd put into pensions each year since 2011. I haven't the faintest notion. Have had about six workplace pensions since then.

I am flying blind. Hence why can't see IFA!

Also, this tax relief. Excuse the utter fuckwittery of this question, but does the money just appear in the pension account? Or magic its way to me another way?