Money to invest or save

Noktok

A recent windfall has left my finances in need of re-organising and I would appreciate any advice or ideas on how to manage it all.

The current state of my finances is as follows;

£70k in my current account
£20k in a cash ISA
£20k in my spouse's cash ISA
£18k in a joint savings account
An outstanding mortgage of £90k with 1.25% variable interest rate

Obviously my first priority is to move the money out of the current account to somewhere more useful. I am also considering whether it would be better to redistribute the money in the ISAs and savings account into different types of investments.

The mortgage has just finished a fixed term so we are free to pay it off if we wish without penalty. However since the interest rate has dropped to 1.25% I suspect it may be a better idea to save or invest the money instead.

My plans for the money so far include:

• purchase a new car within the next few months (spending perhaps £12-14k)
• use £5100 to start a new stocks and shares ISA (I have already used up my cash ISA allowance for this year)
• add another £10200 to the S&S ISA in April.
• potentially do the same for my spouse, giving a maximum of £30600 in S&S ISAs between us by April
• consider moving house in 5-7 years time, but otherwise no immediate plans to access the money.

I have no idea what to do with the rest of the money. Should I move it to the highest interest savings account I can find, as fast as possible? Should I look at investing it into further stocks and shares? Am I unwise to delay paying off the mortgage?

Your replies are appreciated.

plunt

while you wait for others to give you more detailed advice, go to lloyds and set up 3 lloyds vantage current accounts. (make sure they are just the basic accounts with no fees)

then stick 7k in each of those accounts and once a month transfer online internally 1k between them.

this should give you 4% before tax. and interest is paid monthly on up to 7k in each of them. so send the monthly interest to an external account.

who do you currently have bank accounts with? as this may help people choose accounts with more ease setting up.

Soliton

Your idea for the S&S ISA sounds good to me. The allowance for next 2011/12 is £10,680 so you will be able to squeeze a little more into there.

You have many options to earn more on the money than the 1.25% interest on your mortgage, so paying that off now doesn't seem sensible.

You and you spouse's tax position will affect what to do with the rest of the cash, as will your attitude to risk. You could look at using your Capital Gains Tax allowances by investing outside ISA.

I would certainly get the cash out of your current account into as instant access savings account while you decide what to do.

Newbie2saving

I would second the Lloyds Vantage accounts to get the best interest on your savings (actually a current account), but pays 4% gross on a balance 5-7K, can open 3, then have to circulate 1k into each/month. That takes care of £21k. Start looking into S&S ISA's and the provider you like. I have mine with H-L, but there are others. Depends on whether you feel you want to enter into investments rather than 'safe' banking and also whether you feel comfortable enough to invest on your own or through an IFA.

I know your interest rate is really low on your mortgage, but to me, to be mortgage free makes life easier. Could think of paying it off once you have creamed the best from your money in a few years time???

Whatever you decide to do you are in a great position and I think there will be a lot of good advice coming along from others much more knowledgeable than I!

Loughton_Monkey

Noktok wrote: »

My plans for the money so far include:

• purchase a new car within the next few months (spending perhaps £12-14k)
• use £5100 to start a new stocks and shares ISA (I have already used up my cash ISA allowance for this year)
• add another £10200 to the S&S ISA in April.
• potentially do the same for my spouse, giving a maximum of £30600 in S&S ISAs between us by April
• consider moving house in 5-7 years time, but otherwise no immediate plans to access the money.

Your replies are appreciated.

It is a -no brainer' not to pay off your mortgage at 1.25%.

Buying a new car is in no way an investment. It depreciates. But since you have so much cash (well done) you might as well. Work out how much it is going to cost. Work out how long it will last. Work out how much you will sell it for. Work out how much a new one will cost in 'X' years. Divide all that up and save now so much per month in a 'new car account', so that you can replace it.

Start a pension and get tax relief.

Any surplus, lock up in ISA (or pension) next year as well.

Do some calculations to answer the question "What am I going to live on when I retire?"

Noktok

Many thanks for all the suggestions and advice, it is all greatly appreciated.

plunt wrote: »

who do you currently have bank accounts with? as this may help people choose accounts with more ease setting up.

My current account is a Lloyds classic and the savings account is Birmingham Midshires.

I'd never heard of Vantage before but it seems I can upgrade my current account to it directly. I was concerned that there might be some hidden downside to doing so but I can't find any. Even if I fail to meet the Vantage conditions or accrue more than £7,000 in my account I'm still no worse off than if I never upgraded at all, am I? I don't see any fees, penalties or restrictions associated with a Vantage account - just loss of interest. And since the basic Classic account earns no interest at all I guess upgrading to Vantage is win-win!

It makes me wonder why anyone would not want to upgrade their classic account to Vantage. And if that's the case, why don't they offer it as standard!

I'll attempt to open three accounts for myself and investigate whether I can do the same for my spouse. Thanks for the tip!

Primrose

You don't say what age you and your wife are and how far you both are from retirement, but are you happy that your future pension provision is adequate? Many people are drastically under-funded in terms of the pension they want to be adequate, so giving that a boost, especially if either of you are higher tax payers, ought to be another option for you to consider for at least part of your windfall.

As for buying a new car, that's obviously an option, but does it have to be a "brand new" one? Within a few weeks of it being on the road it will already have lost a huge chunk of its value so it won't be much of an investment. Depending on how much of a motoring enthusiast you are, buying one a few months old or a dealer's demonstration model would be a far better option financially.

Noktok

I will check our pensions situation, thanks for reminding me.

I regard the car as an expenditure rather than an investment. Ideally I'd like to buy a car that's a year or two old, but only if I can find exactly what I want. I've owned my current car for ten years and desperately need to replace it before it gives up on me. I'd expect to keep the next one for another ten years and so I think it's worth spending extra if necessary to get a car that I'm going to be completely happy with for that period of time.

plunt

there are no fees attached to the vantage accounts so long as you make sure they are all basic current accounts and not their silver and so on stuff.

you will be able to open three (sometime they say you can only open one a day) but you can open the first in branch and the other two on the phone. so nice and easy. if they ask you why, say because you want to manage your money better and be more organized.

your wife can also open 3. so there you can get up to 42k at 4%!

just remember to transfer around the 1000 pound each month between the accounts which you can do instantly online so should take under 30 seconds! (same goes for your wifes, this 1000 pound doesnt need to come externally

add a santander account which gives you 5% on 2500 and there thats a little more. just remember the santander one you have to transfer in 1k a month (can transfer it right back out after) but santander dont to instant external transfers over 300 pounds (faster payment) so this is slightly annoying and you may find it not worth the hassle

other than that if you or your wife have never owned a house and are under 35 you could open up a first home saver account with santander which is a regular saver account paying 5% and you can put an initial deposit of 5k in and then about 300 each month after. (to close the account you need a mortgage interview with them, but just go in and have it and then dont take any of their products and your sorted!)

hope this helps a little

Noktok

I was hoping I could upgrade my existing Lloyds Classic account to Vantage online via the website, but it seems they only allow new customers to do that. Looks like I'll have to visit a branch, which due to personal reasons I probably won't be able to do for a week or two.

I assume if I walk into a branch and ask to open three Vantage accounts at once, they're not likely to be too impressed.

I think I may open a Lloyds eSavings account in the meantime, just to stick the money somewhere it can start earning some interest while I sort things out.

psychic_teabag

Try doing it over the phone - they provide an 0800 number and the staff have always been friendly and helpful.

I've heard that there's a limit of one current account created per day.