How should I invest my £100,000 retirement lump sum without using a financial adviser?

15 July 2021

Question by Katherine

I retired this past summer at the age of 52 years. From my retirement I received a lump sum of money and a monthly pension. I have £100,000 that I do not need for the foreseeable future. This money together with the rest, is lying in a 0.2% high street account. Its breaking my heart! I have spoken to a couple of financial advisers to steer me. To a certain degree, it is like giving them my purse with my eyes shut and letting them go out to spend it. I will never have this type of money again and it needs to really work hard for me. One of my main concerns with Financial Advisers are their costs. I fully appreciate they have to make a living and nothing is free. However one wanted to charge £1,850 each year to make a review. That does not include the setting up fee of £2,500, and the fund yearly costs. With me having all this time on my hands, I therefore thought with a little more enlightenment I could do this myself! All I want is simply to see this money grow to its potential, sensibly and above inflation. I appreciate the high street is slowly starting to move, but nothing like decent percentages. Therefore my next thoughts are Stocks and Shares ISAs. I do not currently have any ISAs. My only concerns here are the current Brexit problems - I saw the FTSE drop this past week. I cannot find any information out there to assist with my decision making if this is certainly a good time to invest, or if I should wait till we have had the vote in parliament or after 29th March 2019. If I had a crystal ball! My next dilemma is how to choose a fund. I have never done this before... I estimate myself as taking a medium risk. If I go down this route, I am aware that I can place £20,000 for this year. Come April 2019 I place another £20,000 and so on until the £100,000 has been utilised. Do I have to place it into the same fund or can I choose another different fund with a different company? For the rest of the £60,000, I will have to find a High Street savings account to place it in until the appropriate tax years arises, I believe? I am a basic taxpayer. Please can you help to ease some of this burden, which has proved an awful part of my retirement and made me frightened to spend any money.


Answered by

Hi Katherine,

I am very sorry this has caused you to worry, and I can understand your concerns.

The returns on deposit accounts are painful and not the right place for money that you don’t need for the long term, so you are right to explore your options. My answer is from a financial advisers perspective but this is not the only option for clients to invest.

It is encouraging that you are interested in managing this yourself, but it will require some time and research. There are useful guides such as the ones on the Boring Money site, as well as the government-funded website www.moneywise.org, which will help you understand the options available if you decide to DIY invest. As an alternative, there are lower cost advice solutions called remote advice or robo advice which will help steer clients towards suitable solutions, and are suitable for less complex advice needs. The feedback I found with ‘Robo advice’ is that this lacks the interaction and reassurance that some people need when they are making important decisions, but it will be a more cost effective solution for some investors.

If you feel nervous about the investment markets, you can invest your money in stages as suggested in your question, which will involve investing it in lump sums over time rather than investing it all as one lump sum. This is not a failsafe solution, and my view is that investments should always be viewed with a more long-term time horizon in mind, but a lot of investors are concerned about Brexit and the impact this may have so this can help you with the timing risk which is hard to predict.

The alternative is to consider investing it in an ISA up to the maximum, and put the remainder in a taxable equivalent called a Unit trust or OEIC, and transfer some of the Unit trust and OEICS to your ISA each tax year. You need to be mindful of the tax implications if you make gains on the taxable version, but you do have an annual allowance which may be sufficient so that transfer over time may not incur any capital gains tax.

If you choose to self-manage the investments, you can invest your ISA in multiple investment funds, but they would need to be with the same provider in that tax year. You can get providers which will allow you to have multiple funds in your ISA and these are called platforms- Boring Money writes excellent Best Buy reviews for these platforms to help you decide on which provider to use.

If you choose to invest the money in stages, you can earn up to a £1,000 in savings interest tax-free with high street savings account, so you should be able to earn most of the interest tax-free. Be mindful that with the amount you are looking to invest, it will take just over 4 years for you to invest the full amount in ISAs and some of your savings will meanwhile be earning less than inflation in high street accounts, which is also a risk. The key to any long-term investment like Stocks and Shares ISAs is to prepare yourself for the volatility that goes with it.

If you are thinking of investing, prepare yourself that you may at some point experience a market fall and consider your reaction. Investors typically feel losses more than gains, and the issue is many investors don’t sit on their hands - which is in most cases the best thing to do! Ongoing reviews from financial advisers will typically include explaining and assessing the investment returns, but also the continuous assessment of suitability and reassurance of whether it is the right place for your money especially when markets are as volatile as they are now.

Advisers help clients reconsider their decisions from a different point of view, and support clients with understanding the circumstances and impact on their investments. Ongoing advice and service is not compulsory, so most advisers should be able to offer you part of a service where they can just advise you on the initial set up. There are investment options which will automatically invest in a mixed range of investments to suit your attitude to risk, so it would not always require ongoing annual reviews.

I always encourage clients to reassess if their investments are still suitable when they experience any significant changes in circumstances and self-manage their investments. If you decide to use a financial adviser on an ongoing basis, ensure they have a clearly defined ongoing service offering and continuously review if you are getting value for money. The value of a more personal assessment is that it will be specific to your circumstances, which I can’t take into account fully here, but there are a few options here to consider, and I hope this helps you decide on the best route to investing for you.