How to best deploy Redundancy package and savings



I have just accepted a "voluntary" redundancy package which, when added to my recent house downsize, leaves me with 500,000 euro to take me to retirement in seven years time when a partial pension will kick in.

As somebody who worked and was squeezed through the belt tightening years, I would like to have my cake (the lump sum) and eat it (have an income from the interest)!

I have thought about buying an apartment and using rental income, but having read some of the threads here that idea is losing some of its gloss!

Any advice or suggestions greatly appreciated. Hope I have managed to post in the right segment after my initial attempt!

Brendan Burgess

I don't think that investing in property is a good idea for you. It is too inflexible. You might get a bad tenant or a period of time when it is empty and you would have nothing to live on. You might have expenses which you could not afford.

Property is really only more attractive than equities where you borrow to buy the property and can write the interest paid against the rental income for tax purposes.

I would suggest that you invest your money directly in a portfolio of around 5 blue chip shares. You will get dividend income on which you can live. If the income is not sufficient, you can sell off some of the shares if you need cash. (You can't sell a bit of an apartment).

I suggest directly buying shares rather than investing in a unit-linked fund, because you will not pay any income tax if your income is below the annual exemption amount.

If you are buying shares, avoid shares which pay no or low dividends (e.g. Ryanair) and opt for shares which have high dividend yields.(e.g. the banks).

Have you income this year or last taxable at the top rate? If so, consider making contributions to your pension fund up to the maximum amount allowed. However, you will have to do this by Wednesday to count against last year's income.