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Best Return
Barry Reah
Posted: 07 January 2013 18:33:07(UTC)

Joined: 07/01/2013(UTC)
Posts: 1

Hello Everyone

I have a £125,000 lump sum which I want to invest to get the best monthly return towards my pension. Where would it be best invested to make full use of this to get a decent return.

Many thanks for the help.
Income Investor
Posted: 08 January 2013 08:43:59(UTC)

Joined: 18/09/2012(UTC)
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Wouldn't we all like to know that!

Some thoughts, anyway:
- total return = income + capital gain - tax: you need to think about all of these
- use stocks & shares ISAs and share income with your spouse to reduce tax, if possible
- how much time do you want to spend? If no time, think about ETFs rather than expensive funds
- yield can help you identify risk: high yield = high risk
- diversify, but not too much
- you might be able to invest in some more pension, with tax benefits
- shop around for the best savings rates, ISAs

My own approach (described in detail on my website) is to focus on income but trying also not to lose money. I don't pay any tax on my 5-figure investment and savings income. My cash yield is an average of 4.7% and my investment portfolio yields around 5.5%. Capital gain this year was huge - but this is exceptional.
2 users thanked Income Investor for this post.
douglas gordon on 08/01/2013(UTC), Blind Jack on 09/01/2013(UTC)
Geoff James2
Posted: 08 January 2013 15:06:43(UTC)

Joined: 11/08/2010(UTC)
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Just to add to the options


(Please note that I have no connection with the management of Thincats except as a customer. Also I am not a financial advisor and this is not intended as financial advice)

2 users thanked Geoff James2 for this post.
douglas gordon on 08/01/2013(UTC), Blind Jack on 09/01/2013(UTC)
A Sick SIPP Owner
Posted: 08 January 2013 15:25:52(UTC)

Joined: 18/06/2012(UTC)
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If you put the money in a 'pension' fund it will be under the control of the govermnment
That seems to be considered by the government as their money, and you can only have some of it back - after 55% tax
As in if you got 40% tax relief when you put it in the fund £100 in cost you £60 net
want it back - well for the £100, you can have £35.

Then, when investing, consider the compensation limits.
£85K on savings with a (banking) group organisation.
£50K FSCS if the investor did not properly advise you.

So - based on my past bad experiences I'd say
Cash (maybe 20K) in a savings account that pays a reasonable rate, and allows 'instant' access.
Do remember that interest is taxed as 'income'.
Cash (maybe 50K) in a savings account that pays a reasonable rate, and allows you to get the money out within a couple of weeks.
Again, remember that interest is taxed as 'income'.
Cash (maybe £20K, and maybe several tranches with different groups) in an 'investment' that has a guaranteed minimum return
Check that the benefits are taxed as 'capital gains', and can be apportioned over the investment period.
As far as possible get the investments into ISA's.

Don's know how near you are to getting the Government OAP, but there may be advantages to not taking that - and having future years increased by 10% least 20%? income tax.

If you put the capital into your home, then there are social services advantages to not having 'savings'.
Then again, you will be tied to that 'home'
Maybe move to a location where living is cheaper, and into a property that is cheap to run
saving £1000 on heating each year is the equivalent to a tax free 10% on £100,000
Solar heating (electric panels) boom has gone, but a southern aspect is still worthwhile considering, especially with a good roof, and a basement, and even your own water supply.
maybe even space for a decent veg plot - get someone to do 100% of the hard work for the take from 20% of the area.

A Sick SIPP Owner
Posted: 08 January 2013 15:50:53(UTC)

Joined: 18/06/2012(UTC)
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Oops - re the 10% on £100,000 - 1 too many 0's on that
1 user thanked A Sick SIPP Owner for this post.
Blind Jack on 09/01/2013(UTC)
David 111
Posted: 08 January 2013 16:30:48(UTC)

Joined: 09/07/2010(UTC)
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With £125,000 you have enough in my opinion to hold a portfolio of (say) 12 blue chip shares paying reasonable dividends (say 4 to 5%). This will give you diversity and a reasonable income which is likely to grow with time. Don't bother with funds as the charges will eat into your return and it is difficult picking ones which outperform the market. Don't bother with cash or gilts - the returns are too low and gilts are probably in bubble territory. If you are a standard rate taxpayer don't get too hung up on trying to get everything into an ISA. The benefits for standard rate taxpayers are next to insignificant and you might end up paying charges for little benefit. If you want to diversify away from the FTSE consider adding a couple of investment trusts investing in the Asia Pacific region or Emerging Markets.

Do note that the FTSE is near a high at the moment, so it may be better to drip money into the market (by say investing in two companies a month) to avoid investing all your money at the top of the market.

The Digital Look website is quite good for checking out the various companies in the FTSE 100 and gives details of broker recommendations. For investment trusts I use the Trustnet website.
3 users thanked David 111 for this post.
Blind Jack on 09/01/2013(UTC), Stephen Garsed on 11/01/2013(UTC), Bryan Jefferson on 13/01/2013(UTC)
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