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  • FIRST POST
    • bcfclee27
    • By bcfclee27 6th Sep 17, 10:36 AM
    • 52Posts
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    bcfclee27
    What to do with my inheritance ?
    • #1
    • 6th Sep 17, 10:36 AM
    What to do with my inheritance ? 6th Sep 17 at 10:36 AM
    Hi all, just looking for advice on what to do with a sizeable inheritance. My father passed away leaving me a sum that I want to use wisely......

    I'm 37 in police and wife is a teacher so we have decent pensions.
    We have 2 kids no plans for anymore.

    House worth about 460k.
    2 year fixed mortgage ending 31 Jan 2018.
    Current mortgage left 264k

    6k loan paying off £112 a month for next 56 months.
    4K loan to father in law £250 a month (interest free)

    3k in savings.

    Received 160k from dad with a possible 30k to come from his shares.

    So what do I do with the money - I imagine the smart move is to...
    1) pay loans off at least the 6k one because of the interest.
    2) keep 20k emergency savings
    3) stick the lot of what's left into my mortgage.

    So just looking for advice on what to do with it all.
    Many thanks.
Page 3
    • AnotherJoe
    • By AnotherJoe 8th Sep 17, 5:27 PM
    • 7,595 Posts
    • 8,196 Thanks
    AnotherJoe
    Is the majority right though. At the end of the day you will have to hold your own counsel.
    If a gamble on equities is what you fancy, wait until you have funds spare after they become freed up because you don't have a mortgage.
    As to extra pension.....why? what do you need extra pension for. If you feel you do, then again, wait until you have freed up spare cash from not having to pay the mortgage.

    Come hell or high water, you are gonna have to clear the mortgage..._
    Originally posted by DiggerUK
    The extra pension (or ISA) is there to give options about retirement dates - either they can retire earlier than the scheme pension age without having to take a long term decrease in pension, or maybe they can just retire earlier because the scheme they are in won't allow it. It's not there to supplement their existing pensions, necessarily.

    The mortgage will get paid down in the general scheme of things as it is. Paying it off earlier (which was the question) leaves them poorer longer term = less able to retire at a time of their choosing. I've just retired 3 years early. That wouldn't have been possible without additional pension / savings. Had I been more on the ball that could easily have been 3 or 4 years additionally early.
    • phillw
    • By phillw 8th Sep 17, 5:47 PM
    • 937 Posts
    • 555 Thanks
    phillw
    Paying it off earlier (which was the question) leaves them poorer longer term = less able to retire at a time of their choosing.
    Originally posted by AnotherJoe
    It mostly comes down to what interest rate they have on their debts and what interest rate they will get on their savings. Ignore whether it's a debt or savings, put the money with the biggest interest rate (taking into account any early repayment penalties or tax)

    My wife and to an extent myself realise or assume that paying lumps off the mortgage is the number one target. But after reading through this thread it has really tempted me to look into investing instead.
    Originally posted by bcfclee27
    There is risk to everything. I overpaid on my mortgage when the rate was low because I was expecting interest rates to spring back up. My mortgage had a £500 over payment limit, so I could have saved the money but then be stuck not being able to dump all my savings into the mortgage. It's cost me money, but I've made other good decisions that saved me more so it's not so bad. I no longer have a limit to overpayments & rates aren't going anywhere. So I've changed my strategy.
    Last edited by phillw; 08-09-2017 at 5:54 PM.
    • atush
    • By atush 9th Sep 17, 1:07 PM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    Hush. Those of us who see merits in some gold sovs are viewed as dangerous heretics or gibbering loonies.
    Originally posted by kidmugsy
    Not really, many of us normal types hold a little gold. but we dont usually ramp it up to novice investors.

    Those are the gibbring idiots?
    • atush
    • By atush 9th Sep 17, 1:09 PM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    Op, split your spare money.

    Some into S&S isas (vanguard 80 sounds fine for the long term) and overpay a little. Dare I say even consider aVCs or PPs/Sipps a little.

    You dont have to do just one thing with your spare cash.
    • HardCoreProgrammer
    • By HardCoreProgrammer 9th Sep 17, 3:15 PM
    • 110 Posts
    • 41 Thanks
    HardCoreProgrammer
    The usual pension enthusiasts come out of the woodwork in droves again. Just to warn you:
    1. You are both basic tax payers. Remember that while you get 20% tax credit paying in, this will be clawed back when you come to withdraw from it. I would bet that tax would be higher at that point (e.g. some are campaigning to merge income tax and NI, and if they succeed, tax would become 32%), so you may even be making a net loss.
    2. Your money is locked until a time which can be changed at a whim by the government in power. When I started my pension 15 years ago, I could draw on it at 50, now it is 58. I start to wonder if I will ever live long enough to draw it ...
    3. There is no legal way to get it out before 58, so it is sitting duck to tax raids.

    I would just pay down the mortgage, if it makes you sleep better at night. This is exactly what I did. Not having to worry about how to pay the bills when I lost my job during the financial crisis is worth every penny of the theoretical gain I forfeited.
    • HardCoreProgrammer
    • By HardCoreProgrammer 9th Sep 17, 3:19 PM
    • 110 Posts
    • 41 Thanks
    HardCoreProgrammer
    And one more point, no job is safe nowadays. Police in my local area are being made redundant due to budget cuts (and thanks to that, moped gangs aka highway robbers are totally out of control). Just do not assume that your job is safe because it is civil service or local government.
    Last edited by HardCoreProgrammer; 09-09-2017 at 3:30 PM.
    • Audaxer
    • By Audaxer 9th Sep 17, 3:52 PM
    • 571 Posts
    • 248 Thanks
    Audaxer
    If possible could you please recommend a S&S ISA that you would invest in if you were me - I have been investing small amounts already in VLS80 but some don't seem to like the uk percentage involved. So could you pleas give an example of a similar product that doesn't have as much uk but is still as good a product as VLS.
    Originally posted by bcfclee27
    I like Vanguard and a VLS80 seems a perfectly good long term investment for an S&S ISA. But I would not put all my eggs in one basket, one reason being that you would only be covered by the Financial Services Compensation Scheme up to £50k for each fund house. That could be £50k each for you and your wife, but hopefully after a few years the investments will have grown well above £50k each. Other examples of low-cost passive globally diversified multi assets funds that you could also hold as well as VLS80 would be an HSBC Global Strategy or L&G Multi Index fund - both have funds with similar equity to bond percentages as the VLS80. Both also have less UK exposure than the VLS80.

    Bear in mind that if you put a lump sum in any fund with 80% equities you have to be prepared for the value to drop by about 40% in the event of an equity crash. As long as you and your wife don't panic and think about selling if this happens just after you have invested a lump sum, it will hopefully give you good long term returns.

    If I was in your position I'd definitely want to use some of the inheritance to reduce my mortgage. Paying off £100k of the mortgage and £20k each in S&S ISAs now and again when you can invest next year's allowance in April seems like a perfectly good plan. In future years you could top up the ISAs monthly with the money you save from the reduced mortgage.
    • kidmugsy
    • By kidmugsy 9th Sep 17, 4:57 PM
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    kidmugsy
    Nmany of us normal types hold a little gold. but we dont usually ramp it up to novice investors.

    Those are the gibbring idiots?
    Originally posted by atush
    Why would the fact that an investor is a novice make the least difference at to whether some gold sovereigns proved to be a good or bad investment? The universe doesn't give a hoot about how experienced an investor I am.
    • kidmugsy
    • By kidmugsy 9th Sep 17, 4:59 PM
    • 9,850 Posts
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    kidmugsy
    Based on what?
    Originally posted by Anonymous101
    Based on current values of CAPE.
    • KayJay
    • By KayJay 9th Sep 17, 5:18 PM
    • 89 Posts
    • 72 Thanks
    KayJay
    And one more point, no job is safe nowadays. Police in my local area are being made redundant due to budget cuts (and thanks to that, moped gangs aka highway robbers are totally out of control). Just do not assume that your job is safe because it is civil service or local government.
    Originally posted by HardCoreProgrammer
    Police Officers cannot be made redundant. This is because they are not employees, they are 'Officers of the Crown'. It's police staff that can be made redundant and many of them are - because forces are having to save money and it's the only way to save on the wages bill.
    • kidmugsy
    • By kidmugsy 9th Sep 17, 5:32 PM
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    kidmugsy
    The only problem is my wife is very risk averse and sees the money as a one off gift if you like that we need to invest securely - ie the mortgage.

    The thought of placing large sums in stocks and shares ISAs to her would be like taking it all down Ladbrokes and losing it all.
    Originally posted by bcfclee27
    So use a personal pension for her, and LISAs - the 25% taxpayer boost offers valuable protection against a stock market slump. On those same grounds perhaps avoid conventional S&S ISAs if she would be really anxious about them. A happy, unworried wife is more valuable than a bit of extra investment return. Sticking to LISAs and a personal pension will mean spreading your investing over a decade or so. Perhaps she'd be happier with that anyway.

    As for paying off some of the mortgage loan: could you win a lower interest rate by getting the LTV any lower? For example, if you paid off about £40k and got the LTV below 50%?

    Anyway, say you did opt for investing slowly over a decade or so: where could you keep the capital meantime? You can each save up to £50k in premium bonds - they are offered by ns&i so your capital has a Treasury guarantee. They'd pay you the equivalent of about 1% p.a. tax-free in the usual £25 or £50 monthly prizes with the remote chance of winning a bigger prize. If your new mortgage loan costs you about 1% p.a. it's roughly all square but with the PBs giving you far more flexibility and liquidity than overpaying. And you could tease your wife about gambling with PBs.
    Last edited by kidmugsy; 09-09-2017 at 5:35 PM.
    • kidmugsy
    • By kidmugsy 9th Sep 17, 5:34 PM
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    kidmugsy
    budget cuts (and thanks to that, moped gangs aka highway robbers are totally out of control).
    Originally posted by HardCoreProgrammer
    In extremis I suppose the police could divert their efforts from harassing people for various un-PC posts online and turn their attention to proper crime.
    • justme111
    • By justme111 9th Sep 17, 6:21 PM
    • 2,856 Posts
    • 2,745 Thanks
    justme111
    Why pensions are being recommended- because your wife's retirement age would be 67+ in her teacher's scheme. Surely she would not want to work for that long let alone in teaching. So the private pension that you would contribute to now could be used to help to fund your family from the moment she stops working ( after 58 I believe subject to being fiddled with by future governments) to her TPS retirement age.
    I would split the inheritance indeed into :
    -repaying debt -10
    - emergency fund ( either santander or other smaller accounts)-20
    - S&S ISAs -40
    - chunk of mortgage paid when you can -60
    - pensions for you two- 40
    -childrens ISAs -20
    Then use the funds you got freed from debt repayment for a year to spend on something your family would enjoy and tell children it was a gift from their grandfather..
    • Audaxer
    • By Audaxer 10th Sep 17, 9:07 AM
    • 571 Posts
    • 248 Thanks
    Audaxer
    You can each save up to £50k in premium bonds - they are offered by ns&i so your capital has a Treasury guarantee. They'd pay you the equivalent of about 1% p.a. tax-free in the usual £25 or £50 monthly prizes with the remote chance of winning a bigger prize. If your new mortgage loan costs you about 1% p.a. it's roughly all square but with the PBs giving you far more flexibility and liquidity than overpaying. And you could tease your wife about gambling with PBs.
    Originally posted by kidmugsy
    Premium Bonds may pay out an average of 1% on the whole, but there is no guarantee that all individuals will get prizes amounting to 1% per annum. I had £10k in Premium Bonds for 10 years and certainly didn't have winnings anything near the equivalent of 1% per year.
    • atush
    • By atush 10th Sep 17, 11:26 AM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    Why would the fact that an investor is a novice make the least difference at to whether some gold sovereigns proved to be a good or bad investment? The universe doesn't give a hoot about how experienced an investor I am.
    Originally posted by kidmugsy

    Because novice investors starting out dont have a large amount of money. So if they put half or more in sovereigns, that would not be a diversifed approach. And gold rampers tell them to put the lot in gold, not 2% or so.

    Gold should not be a large part of a diversifed portfolio.

    I really thought you were not a gibbering idiot. Shouild I re assess?
    • atush
    • By atush 10th Sep 17, 11:28 AM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    The usual pension enthusiasts come out of the woodwork in droves again. Just to warn you:
    1. You are both basic tax payers. Remember that while you get 20% tax credit paying in, this will be clawed back when you come to withdraw from it. I would bet that tax would be higher at that point (e.g. some are campaigning to merge income tax and NI, and if they succeed, tax would become 32%), so you may even be making a net loss.
    2. Your money is locked until a time which can be changed at a whim by the government in power. When I started my pension 15 years ago, I could draw on it at 50, now it is 58. I start to wonder if I will ever live long enough to draw it ...
    3. There is no legal way to get it out before 58, so it is sitting duck to tax raids.

    I would just pay down the mortgage, if it makes you sleep better at night. This is exactly what I did. Not having to worry about how to pay the bills when I lost my job during the financial crisis is worth every penny of the theoretical gain I forfeited.
    Originally posted by HardCoreProgrammer
    Rubbish. No one can give an opinion that takes into account things that might not come to pass.
    • bcfclee27
    • By bcfclee27 10th Sep 17, 12:33 PM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    Thanks for everyone's advice I really appreciate it.

    So thanks to this board I have completely changed my original thinking. My plan was to pay nearly all of it in into my mortgage but having read people's reasoning on here, I will probably pay little if any into the mortgage.

    My father in law has used a IFA for many many years who he knows and trusts and has done well with in accordance to their expectations and risk levels.

    I am going to see this IFA with a view to using him as my knowledge on financial matters is very limited as you can tell.

    However my aim is to pay some into S&S isas and possibly some into pensions depending on the advice we are given.

    What are people's feelings on IFAs I imagine opinions will vary and massively dependent on their ability. However I feel I need one due to my lack of knowledge and feel that my father in law trusts his after many steady years.
    At least this is better than me using a total stranger etc...
    • Audaxer
    • By Audaxer 10th Sep 17, 2:05 PM
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    Audaxer
    Probably okay to have an initial meeting with the trusted IFA that your father-in-law uses to get an idea of what he can do for you and his costs. As you sound as you now have a good idea of what you want to to with the inheritance, I would be tempted to DIY it unless you are very impressed after your initial meeting with the IFA and you don't consider the costs excessive.

    It would be interesting to know after your meeting what costs you are quoted by the IFA, and whether his proposed advice/strategy would be much different to what you are already thinking of doing with the money.
    • HardCoreProgrammer
    • By HardCoreProgrammer 10th Sep 17, 2:24 PM
    • 110 Posts
    • 41 Thanks
    HardCoreProgrammer
    Rubbish. No one can give an opinion that takes into account things that might not come to pass.
    Is this the best you can come up with? No rational argument so go for the ad hominem heh?

    So you are saying in effect: trust the government not to screw with the pension pension system, like they did since time immemorial, for the next 2x years. Do you really mean it?

    If OP wants to retire early, there are plenty of other ways to save. They can put 40k into ISAs per year (with their income probably cannot save that much per year anyway) and they can get the money out the moment the government does something silly.

    Advising a basic rate taxpayer with no employer contribution to pay into a pension is irresponsible.

    By the way, my last post did not name names. But you cannot keep yourself from taking the bait can you?
    • kidmugsy
    • By kidmugsy 10th Sep 17, 4:21 PM
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    • 6,641 Thanks
    kidmugsy
    Premium Bonds may pay out an average of 1% on the whole, but there is no guarantee that all individuals will get prizes amounting to 1% per annum. I had £10k in Premium Bonds for 10 years and certainly didn't have winnings anything near the equivalent of 1% per year.
    Originally posted by Audaxer
    Of course there's no guarantee, it's a lottery for heaven's sake. But the bigger their holding (up to £100k between them) the likelier it is that their returns will approximate 1% p.a.
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