Starting an investment journey

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I've received a small pot of cash (c£4-5k) that I wasn't expecting and I'd like to do something meaningful with it instead of the usual frittering away that tends to happen. It came from HMRC as a tax overpayment based on higher rate relief from pension contributions (I don't do, nor want to do a SA). I know the amount isn't very Powerfully Built PH Director, but it's a bit of a windfall and something to start with.

Now my first thought was throw it back into my pension as a lump sum. But I quite like the idea of using it to start some form of investing, something I'm not up to speed with at all.

If I do choose to use it that way, I'd want to put it somewhere (longer term) and pretty much leave well alone with the exception of a small monthly top up. Suggestions welcome as to the best platform and type of "account" to be using for this.

I see many abbreviations - ETF, CFD that mean zip to me at this stage so whilst I appreciate things go down as well as up, I want to minimise the risk of blowing the whole thing and want to put it somewhere like S&P500 or similar

Or is the first option of adding back to my existing pension the right choice here? Would that then entitle me to further relief at higher rate that I'd need to claim back for this financial year (Assuming I add it before the end of this tax year).

Let's have your thoughts!

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FreeLitres said:

Why not do a SA each year? Don't you want to regularly claim back the over paid tax?

Yes, but it was as simple as a phone call to HMRC to do and I don't want the hassle of SA deadlines

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Countdown said:

Open a Stocks & Shares ISA, stick it into a low cost Tracker like vanguard VWRL

xeny said:

Pension vs investing outside a pension depends on if you want access to it before you reach pension age.

Keep in mind in both cases it will be invested, just in a pension tax wrapper or an ISA wrapper (If you want to avoid self assessment, do not invest it outside a tax wrapper of some sort).

If you'd get higher rate relief or not would depend on how much higher rate tax you have paid in the year in question. You don't get more higher rate relief than the amount of higher rate tax you have paid.

The asset you invest in is a separate choice from the kind of "thing" that holds the investment.

This recent post asks a very similar question - you could do worse than skim the answers there: https://www.pistonheads.com/gassing/topic.asp?h=0&...

Simpo Two said:

I think the decision is whether you want to do the most sensible/tax-efficient thing - which is probably to put it in your pension, especially if you're a higher-rate taxpayer - or, seeing as it was an unexpected windfall, you could play with it and if you lose half you're still better off than you were...

If the latter, at least do it in an S&S ISA so there are no tax concerns.

Thanks all

Looks like a S&S ISA is the way to go.

Recommendations for low cost/fee providers? Do I then pick what the money gets invested in after opening?

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av185 said:

Apart from IHT.

I'm not likely to amass that much that IHT becomes an issue. It would be nice though

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boyse7en said:

I went for Vanguard as it had low costs for smaller investors. It's got a fairly simple online interface that allows you to pick what market your money is invested in. I started with the Vanguard 100 ISA, which is a Stocks and Shares ISa investing a wide spread of markets. Subsequently i've put money in and bought into the S&P500. It's all clear where your money is and how much it has risen or lost in value.

Thanks - I'll check that out

I see a lot of Hargreaves Lansdowne mentioned as well as Vanguard. Plus the likes of Trading 212?

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av185 said:

Fair point but if it is a long term investment which will likely grow in value it is best pointed out. Many think Isas are completely tax free but they aren't so this could well influence whether you cash them in before your pension depending on whether you want to pay income tax or IHT.

Appreciate the heads up. I suppose something like that is a decision for 15-20 years time as I get nearer to retirement

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So the consensus then is a Vanguard account and then pick from there what to invest in?

Should I be looking at S&P500 or elsewhere?

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xeny said:

Keep in mind Vanguard only offer Vanguard funds, which are pretty broad, but tend towards sensible choices, with low fees. It's not a good choice if you want to buy individual stocks, or active funds from the latest fashionable manager.

I'd suggest considering an world equity tracker, which is a broader (more constituents) index than the S&P 500. Worse performance recently, but have got to wonder if America's stock market can keep outperforming forever.

I'm not wanting to be hands-on with this, instead pick something and leave well alone for the longer term (with a small monthly top up)