I am retired aged 67 with a UK pension and a pension from my Australian super fund. I earn $7000 per year in a part time job. My wife is 56 earning $100000 per year. She salary sacrifices $30,000 per year into super.  She is looking to retire or go part  time in 6-7years. We have no debt and own our home. We have $60,000 in bank accounts and $40,000 in a UK bank account.  We are expecting a windfall soon of around $45,000  and a further larger sum mid-year.  There are some home improvements we would like to do but there will be funds left over to invest for the future. Can you advise where we should invest the funds?  I have seen interest rates by some fund managers at 6 -7 %. The bank is offering 4%. Are the fund managers risky?

A Given your age and stage of work life, I would be strongly encouraging you to invest the funds within the Superannuation system.

Retain an emergency fund outside Super in a savings account, usually 3 months living expenses.  The remainder you don’t need for home improvements invest into Super.

At 67 provided you satisfy the work test of working 40 hours in a 30 day period during the financial year, you can make personal contributions to Superannuation.  The cap on personal (non concessional) contributions is $150,000 per financial year.  If you don’t satisfy the work test, your wife could make the contribution into her fund.  As she is under 65, she is entitled to contribute up to $150,000 per financial year or $450,000 every 3 years.

Your UK Pension and income from work are taxable income.  The advantage of Superannuation is that when transferred to Allocated Pension, the earnings within the fund are tax free and when you are over 60, the income drawn from the fund are tax free as well.

Be careful with your wife’s salary sacrifice. For those under 59 at 30 June 2013, the limit on employer contributions (including salary sacrifice) for the financial year is $25,000.  The higher Concessional cap of $35,000 only applies to those who were age 59 or over on 30 June 2013.  If she exceeds the cap the excess contributions will be taxed at her marginal income tax rate .

In terms of investing, determine your appetite for volatility.  You could spend a third of your life in retirement, so investing in growth assets is important.  You need exposure to growth assets (such as shares) for at least a portion of your funds to protect against the long term risks of inflation.

A fund manager will pool assets and invest in accordance with the mandate of the fund.  Fund managers can specialize in specific asset classes such as property or shares or they can be diversified investing across a range of asset classes.

Get professional advice on building a portfolio.  Don’t base your investment decision on past performance but rather use it as a guide to compare relative performance. If you want to build this yourself, choose a manager or a selection of managers that reflect your appetite for volatility, have a proven track record and can deliver a return appropriate to the level of market risk the portfolio is exposed to.

Follow Andrew on Twitter @AndrewHeavenFP.  This article was originally published in The Australian.