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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 1
    • martinsurrey
    • By martinsurrey 6th Sep 17, 10:57 AM
    • 3,173 Posts
    • 3,857 Thanks
    martinsurrey
    • #2
    • 6th Sep 17, 10:57 AM
    • #2
    • 6th Sep 17, 10:57 AM
    What are your incomes?
    • DiggerUK
    • By DiggerUK 6th Sep 17, 11:00 AM
    • 2,794 Posts
    • 2,681 Thanks
    DiggerUK
    • #3
    • 6th Sep 17, 11:00 AM
    • #3
    • 6th Sep 17, 11:00 AM
    Bitter sweet reasons for you being here, hope everything is levelling off for you.
    I suspect your 6K loan is a fixed repayment schedule, check t&c's.
    As the honourable thing to do....pay off FIL.

    I'm in the school that says get rid of debt.....aim to pay as much off the mortgage as you can. You may be able to negotiate a more favourable deal if your LTV is low. Highest instant access (don't get excited about rates) or even Premium Bonds for fun, till Jan 2018.

    As you are both in secure work, 20K emergency fund seems high. Maybe halve that figure.
    Best of fortune..._
    I am not now, nor have I ever been, a Financial Adviser.
    Forward, to the 'British Spring'
    • bcfclee27
    • By bcfclee27 6th Sep 17, 11:06 AM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    • #4
    • 6th Sep 17, 11:06 AM
    • #4
    • 6th Sep 17, 11:06 AM
    What are your incomes?
    Originally posted by martinsurrey
    Mine about 40k (£2,200) a month
    Wife part time 20kish (£1,500) a month
    • bcfclee27
    • By bcfclee27 6th Sep 17, 11:08 AM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    • #5
    • 6th Sep 17, 11:08 AM
    • #5
    • 6th Sep 17, 11:08 AM
    Bitter sweet reasons for you being here, hope everything is levelling off for you.
    I suspect your 6K loan is a fixed repayment schedule, check t&c's.
    As the honourable thing to do....pay off FIL.

    I'm in the school that says get rid of debt.....aim to pay as much off the mortgage as you can. You may be able to negotiate a more favourable deal if your LTV is low. Highest instant access (don't get excited about rates) or even Premium Bonds for fun, till Jan 2018.

    As you are both in secure work, 20K emergency fund seems high. Maybe halve that figure.
    Best of fortune..._
    Originally posted by DiggerUK
    I can pay loan off no conditions or charges.

    The money is sat in NS&I easy access income bonds until I need to change mortgages etc.

    Thanks
    • martinsurrey
    • By martinsurrey 6th Sep 17, 11:38 AM
    • 3,173 Posts
    • 3,857 Thanks
    martinsurrey
    • #6
    • 6th Sep 17, 11:38 AM
    • #6
    • 6th Sep 17, 11:38 AM
    Good LTV, not higher rate tax payer, decent pension provisions.

    A nice place to be in.

    Options I see are (after paying off the loans):

    Most tax efficient - start personal pensions, contribute into them and live off the inheritance for a few years, its an instant 20% saving - downside is that you can touch it until you are 55 (currently)

    Most flexible - keep it, but put as much as you can in stocks and shares ISA's (£20k per year each per year). You lose the 20% tax saving of a pension, but the income and capital gain is tax free coming out, and you retain the flexibility to access it if your circumstance change, over the long term this could be a plank of early retirement income.

    Safest - pay off the mortgage.


    I would do a mix of 1 and 2 in your boat.

    £10k pay of BOTH loans
    £80k in S&S ISA over the next 8 months (£40k now and £40k in April).
    £60k to live off and start pension contributions with the aim of having £72k in there before the cash runs out
    £10k to have some fun.
    • xylophone
    • By xylophone 6th Sep 17, 11:47 AM
    • 23,400 Posts
    • 13,600 Thanks
    xylophone
    • #7
    • 6th Sep 17, 11:47 AM
    • #7
    • 6th Sep 17, 11:47 AM
    Repay money borrowed from FIL and other parties.

    Do your children have CTF/JISA accounts? You might consider a gift to each.

    Are you and your spouse making maximum use of joint and sole interest paying current accounts?

    For example You might each open three BOS Vantage Accounts which would give you 2% on £30,000.

    DDs are required but no problem if you each set up a couple of Tesco Savings accounts.

    This would cover your emergency fund.

    If you know that you want to pay off part of the mortgage in 2018 and want to hold money in cash to do it, you and your wife might each consider a fixed rate account.

    http://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html

    You might each consider a stocks and shares ISA.

    You/ your wife may wish to retire earlier than scheme retirement age.

    It may be worth considering opening a personal pension for each of you.
    • bcfclee27
    • By bcfclee27 6th Sep 17, 1:02 PM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    • #8
    • 6th Sep 17, 1:02 PM
    • #8
    • 6th Sep 17, 1:02 PM
    I'm now thinking of the option of an offset mortgage because of the suns involved ?

    Would anyone do this as opposed to paying off a chunk and then a fixed rate deal ?
    • Anonymous101
    • By Anonymous101 6th Sep 17, 1:12 PM
    • 1,010 Posts
    • 369 Thanks
    Anonymous101
    • #9
    • 6th Sep 17, 1:12 PM
    • #9
    • 6th Sep 17, 1:12 PM
    I'm now thinking of the option of an offset mortgage because of the suns involved ?

    Would anyone do this as opposed to paying off a chunk and then a fixed rate deal ?
    Originally posted by bcfclee27
    How about doing your own offset? So rather than overpay your mortgage or pay it off in one lump invest the money you would have overpaid by at a higher rate and earn some money rather than just not pay the interest on the mortgage.

    The method of investment can range from a straightforward cash savings account to investing via a S&S ISA.

    I'm choosing to invest into an index linked tracker fund within my ISA rather than overpay the mortgage. Mortgage rates are very low at the moment so its not worth just offsetting or paying off for me. By investing in my ISA i'm expecting a much better return on my money over a 10 year period and I still have the ability to take money out and pay a chunk off the mortgage when it comes to remortgaging time if that suits.
    • getmore4less
    • By getmore4less 6th Sep 17, 2:50 PM
    • 30,211 Posts
    • 18,066 Thanks
    getmore4less
    The first thing to do is sort out your budget.

    You have been living with debt something has caused that.

    You need budget planning till the kids leave home.

    Then you will have a better idea of how much is really surplus.
    • getmore4less
    • By getmore4less 6th Sep 17, 2:55 PM
    • 30,211 Posts
    • 18,066 Thanks
    getmore4less
    If looking to invest why not just transfer the shares to yourself into a nominees account.

    Most will do this for reduced/zero cost.

    That's what I did with my dads holdings.
    • kidmugsy
    • By kidmugsy 6th Sep 17, 3:23 PM
    • 9,830 Posts
    • 6,620 Thanks
    kidmugsy
    I'm 37 in police and wife is a teacher so we have decent pensions. We have 2 kids no plans for anymore ...

    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.
    Originally posted by bcfclee27
    At what age are you allowed to draw your police pension? Would you want to retire at that age? Would your wife like to retire at the same time without the heavy penalty of the actuarial reduction on her TPS pension? If so, consider making large annual personal pension contributions for her. Then if she retires early she can live off the personal pension until her TPS and state pensions become due. That's likely to be both massively tax-efficient and life-enhancing.

    Another thing you could both do with a view to early retirement is open LISAs: you can pay in until you are 50. Each £4k you add gets made up to £5k by the taxpayer. You can take the money out tax-free from age 60. In emergencies you can withdraw money before 60 but with a penalty. Given your amount of capital such emergencies shouldn't arise.

    You'd better pay off the loan from your father-in-law now. Interest-free family loans ought to be paid back as soon as affordable in my view. It's what we did.

    £20k savings in say the Santander 123 account sounds OK to me - the interest rate isn't marvellous but you get a cash-back on your bills. As a joint account available O/L, by cheque book, at ATM, it's pretty good. As for the mortgage, there's no hurry to decide. You've got months to think it over. One thing I'd add: would you like to move house?
    Last edited by kidmugsy; 06-09-2017 at 3:26 PM.
    • atush
    • By atush 6th Sep 17, 3:28 PM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    pay off the loans. -10K
    Boost savings to 30K -30K

    Boost pension AVCs for both of you (or use a PP/Sipp)
    Depending on what is being paid into pension each year, could beo 20K or more each depending on salary -40K

    S&S isas for each -40K

    That totals 120K, you could save the rest in NSI until next year when you could do the pensions and S&S isas again.

    Consider opening JISAs for both children and put in the max
    • FatherAbraham
    • By FatherAbraham 6th Sep 17, 11:19 PM
    • 737 Posts
    • 561 Thanks
    FatherAbraham
    Some of the suggestions made on this thread don't seem to take sufficient account of the gilt-like nature of your employment incomes and relatively large state-backed defined-benefit pensions.

    The point is that you can afford to take a lot of risk with your inheritance, because that risk is offset by your job security and pension security.

    For someone with your projected income stream, paying the mortgage debt off (effectively a savings-deposit account) looks in principle to be a terrible asset allocation.

    Warmest regards,
    FA
    Last edited by FatherAbraham; 07-09-2017 at 6:49 AM.
    • bcfclee27
    • By bcfclee27 7th Sep 17, 8:13 AM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    Some of the suggestions made on this thread don't seem to take sufficient account of the gilt-like nature of your employment incomes and relatively large state-backed defined-benefit pensions.

    The point is that you can afford to take a lot of risk with your inheritance, because that risk is offset by your job security and pension security.

    For someone with your projected income stream, paying the mortgage debt off (effectively a savings-deposit account) looks in principle to be a terrible asset allocation.

    Warmest regards,
    FA
    Originally posted by FatherAbraham
    Thanks to everyone for the current suggestions etc.


    I recently also opened a S&S ISA in the form of a Vanguard Life Strategy 80, which I pay a small amount into per month (£50).


    Im somewhat confused by the advice, I always thought the main priority is to get rid of your mortgage, that way it frees up a lot of monthly expenses that can be used for investments etc.
    Yet nobody seems to think I should pay a lump of this off, baring in mind I have a fairly large mortgage (260k).


    Would really appreciate it if someone could explain why paying a large amount of my mortgage off and then massively overpaying and getting rid of the mortgage within 5-10 years is not a good idea in my situation.


    Also are peoples views that I should pump large amounts into my VLS 80 rather than the mortgage ?


    appreciate all the advice.
    • JohnRo
    • By JohnRo 7th Sep 17, 9:30 AM
    • 2,458 Posts
    • 2,213 Thanks
    JohnRo
    There's nothing wrong with affordable low cost debt, it's a good thing if it's being used wisely which is generally the case with a mortgage. Some people have psychological reasons for wanting to clear a mortgage debt asap but it's not automatically the right thing to do if able.

    From a financial return POV with your secure income and retirement futures sorted there are potentially far better long term investment opportunities and outcomes for this money, paying off an affordable low cost mortgage early is not something that would concern me.
    'We don't need to be smarter than the rest; we need to be more disciplined than the rest.' - WB
    • AnotherJoe
    • By AnotherJoe 7th Sep 17, 9:35 AM
    • 7,562 Posts
    • 8,166 Thanks
    AnotherJoe
    Thanks to everyone for the current suggestions etc.


    I recently also opened a S&S ISA in the form of a Vanguard Life Strategy 80, which I pay a small amount into per month (£50).


    Im somewhat confused by the advice, I always thought the main priority is to get rid of your mortgage, that way it frees up a lot of monthly expenses that can be used for investments etc.
    Yet nobody seems to think I should pay a lump of this off, baring in mind I have a fairly large mortgage (260k).


    Would really appreciate it if someone could explain why paying a large amount of my mortgage off and then massively overpaying and getting rid of the mortgage within 5-10 years is not a good idea in my situation.


    Also are peoples views that I should pump large amounts into my VLS 80 rather than the mortgage ?


    appreciate all the advice.
    Originally posted by bcfclee27
    That's what a lot of people think, and one can see the upside to that in terms of stability, and also historically when mortgage rates were well above 5% so an expensive loan should be paid off.

    However, your mortgage is a cheap loan, you have stable jobs, and financially you'd do better in the long run to increase pension contributions, taking advantage of long term growth amd tax relief, so you can retire earlier at your own timetable without needing to be forced to particular dates by your pension schemes.

    Also as someone pointed out, you are in debt, address the reason for that if it's relevant and wasn't a one off.
    • FatherAbraham
    • By FatherAbraham 7th Sep 17, 9:49 AM
    • 737 Posts
    • 561 Thanks
    FatherAbraham
    I'm somewhat confused by the advice, I always thought the main priority is to get rid of your mortgage, that way it frees up a lot of monthly expenses that can be used for investments etc.
    Yet nobody seems to think I should pay a lump of this off, baring in mind I have a fairly large mortgage (260k).


    Would really appreciate it if someone could explain why paying a large amount of my mortgage off and then massively overpaying and getting rid of the mortgage within 5-10 years is not a good idea in my situation.
    Originally posted by bcfclee27
    Before you read Monevator's article on this (link below), please bear in mind that you are not a normal employee. Your risk of losing your income is tiny compared to the population at large, and you're also protected from such horrors as defined-contribution pension schemes which normal workers have to deal with.

    In particular, read the article's section on What would a disaster look like?, and contemplate that such issues simply do not apply to you.

    "Why I'm not paying off my mortgage": http://monevator.com/not-paying-off-my-mortgage/

    Also are peoples views that I should pump large amounts into my VLS 80 rather than the mortgage ?
    Originally posted by bcfclee27
    Surely you mean "VLS100"? VLS80 is for those with low risk capacity .

    Warmest regards,
    FA
    • atush
    • By atush 7th Sep 17, 11:54 AM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    Im somewhat confused by the advice, I always thought the main priority is to get rid of your mortgage, that way it frees up a lot of monthly expenses that can be used for investments etc.
    Yet nobody seems to think I should pay a lump of this off, baring in mind I have a fairly large mortgage (260k).
    Because mtgs today are cheap. Mine is 1%. Our pensions have doubled in the last 10 years. So save 1% interest, or make 5% or more PA over inflation?
    • bcfclee27
    • By bcfclee27 7th Sep 17, 12:16 PM
    • 52 Posts
    • 7 Thanks
    bcfclee27
    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.


    How about if I did something in between say 80k into the stocks and shares ISAs (VLS 80 ) and 100k off the mortgage ?


    In regards to the loans I shall pay both them off.


    In regards to getting into debt it was a one off rather than poorly managed lifestyles. House improvements (central heating) that we could do at a significant saving (hence the dad loan).
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