Just checking this isn't really stupid ...

Savvy_Sue

I'm in the process of inheriting c. £70,000 from my late mother, and the funds have started to arrive - £20,000 so far.

We are both over 55. Current financial situation:

• DH not currently working but will probably pick up bits of freelance work from time to time.
• I earn less than £18,000 pa.
• Interest only mortgage of £240,000 on 2.39% fixed for another two years, which we repay by downsizing, hopefully without having to get another fix or go onto their SVR. Probably got equity of £200,000, maybe more and planning to go mortgage free.
• £4,000 in two TSB accounts paying 5% gross interest
• £40,000 in two Santander 123 accounts, which function as current accounts, paying 3% gross interest
• £20,000 in ISAs between us, not currently topping these up as the interest rates looked so boring
• £4,000 in a Smile deposit account, not paying much interest at all but I've run out of better places to put it.

• No debt apart from that mortgage!

So, I need a 'quick fix' and a longer term solution.



DH's pensions are fairly respectable and we sorted them out last year. If he dies first I'm still OK.



My pension is pitiful: too many years of not working! Although I'm paying into a Stakeholder one at work, as is my employer.


My thinking is that for the 'quick fix' I might as well put the maximum I can into my pension this tax year, because I haven't got time / capacity to make more meaningful decisions right now. I could look at opening high interest accounts with Lloyds etc but frankly I'm struggling to follow the money-go-round I've got set up already.



Does that sound as sensible as anything else for right now?



Then I can get some 'proper' advice for the next tax year, when the balance of the legacy should come through, making sure we've got reasonably easy access to a deposit / legal fees / other expenses when we start househunting.

PeacefulWaters

I would certainly go for the pension option. Especially if, when you retire, you're likely to draw out less than the tax threshold each year.

You might want to act over the current tax year and the new tax year starting next month to effectively double your short term options.

If you have salary sacrifice in a work scheme, lower your income to £10k for the year next year with deductions from wage via that scheme for tax and NI relief.

For anything beyond this using a SIPP or somebody like Cavendish Online might be more appropriate to accumulate the tax relief. You invest £8k and they'll top it up to £10k for you.

I'd suggest posting in the pensions section for a more precise answer. Including your state pension age and preferred retirement age might help too.

edinburgher

Sounds eminently sensible, you're covering all bases.

Re. cash - I've heard that Lloyds do accounts with 4% interest and a regular saver with a reasonable rate - might be worth moving money from Smile?

masonic

Savvy_Sue wrote: »

£4,000 in two TSB accounts paying 5% gross interest

Since you're already set up at TSB, why not add a joint account for 5% on a further £2,000?

atush

i agree with your thoughts of pension, and think you might also consider a S&S isa as your 68K of savings is all in cash.

This should be enough in cash so i'd consider you both open S&S isas and invest in some good income funds/investment trusts. Reinvest dividends now, with a look to receiving them as income later once retired.

mad_rich

One thing you haven't mentioned is how your current income fits with your lifestyle.

Do you need (or want!) more income? Are you using (or could you cope with) less?

I'm not suggesting you fritter the money away, and the pension does sound a very sensible (and lucrative) place to put it, but I would at least think about this before deciding.

Savvy_Sue

Thanks for all responses. Not ignoring you, just too hectic to get back online.

PeacefulWaters wrote: »

I would certainly go for the pension option. Especially if, when you retire, you're likely to draw out less than the tax threshold each year.

That could very well be the case. Need to get the detailed forecasts.

PeacefulWaters wrote: »

You might want to act over the current tax year and the new tax year starting next month to effectively double your short term options.

That was my intention. Just don't have time to get very personalised advice I need this side of new tax year.

PeacefulWaters wrote: »

If you have salary sacrifice in a work scheme, lower your income to £10k for the year next year with deductions from wage via that scheme for tax and NI relief.

Probably could do salary exchange but it might freak both me and my manager out (because we do the mechanics of payroll at our end).

PeacefulWaters wrote: »

For anything beyond this using a SIPP or somebody like Cavendish Online might be more appropriate to accumulate the tax relief. You invest £8k and they'll top it up to £10k for you.

:rotfl: and that is where you start to lose me. Maybe I can do some research while I'm on holiday at the end of the month!!!

PeacefulWaters wrote: »

I'd suggest posting in the pensions section for a more precise answer. Including your state pension age and preferred retirement age might help too.

Yes, I agree I should do that, but will wait until I've got time to read and think about the answers ... I can give my age, but my preferred retirement age is another matter! :rotfl:

edinburgher wrote: »

Sounds eminently sensible, you're covering all bases.

Thank you.

edinburgher wrote: »

Re. cash - I've heard that Lloyds do accounts with 4% interest and a regular saver with a reasonable rate - might be worth moving money from Smile?

I will look, but atm can't bear the thought of opening yet another current account.

Although ... I guess I could close the TSB accounts and switch them to Lloyds ... hmm.

BTW, I have to keep the Smile account because that's where we've got our travel insurance. All the other banks which offer it as part of a package want to charge a lot extra to cover either DH or me - some banks don't like him, some don't like me.

And right now I don't have time to shop around for the travel insurance in its own right. It's never straightforward because he's got a list of ailments which have to be declared, even though 90% of them would never affect our travel plans.

masonic wrote: »

Since you're already set up at TSB, why not add a joint account for 5% on a further £2,000?

Already got a joint and a sole. Could make DH set one up in his sole name, but then I'd never know what was in it. Or is that one where I can have two joint accounts? Gosh, that would add to the fun of the money-go-round, wouldn't it?

atush wrote: »

i agree with your thoughts of pension, and think you might also consider a S&S isa as your 68K of savings is all in cash.

This should be enough in cash so i'd consider you both open S&S isas and invest in some good income funds/investment trusts. Reinvest dividends now, with a look to receiving them as income later once retired.

That looks like something to explore next tax year.

mad_rich wrote: »

One thing you haven't mentioned is how your current income fits with your lifestyle.

Do you need (or want!) more income? Are you using (or could you cope with) less?

Now there's a question or two. And it relates back to the preferred retirement age!

The way in which DH stopped working last year meant that we were going to be OK for money, even if we didn't change our lifestyle, for at least two years. And that was without downsizing, which would obviously free up more income if we went mortgage free and reduced our utility bills.

It did also raise questions about whether he or I were ready to 'retire'. But I'm not sure he will ever retire completely, and he's certainly not ready to do so yet.

So, we can't live on my salary. But for the moment, we don't need to worry. And we don't need to worry for quite a lot longer than when he first stopped working, although he doesn't regard living off my mother's money as a long term proposition. But I'm quite happy for us to do so.

mad_rich wrote: »

I'm not suggesting you fritter the money away, and the pension does sound a very sensible (and lucrative) place to put it, but I would at least think about this before deciding.

Frittering money is not something I'm generally prone to doing, although I did wonder about starting a 'shh, don't tell mum' email conversation with my siblings detailing all the things we were now able to do of which she would NOT have approved. :rotfl:

Anyway, I've got my short-term answer. Stick as much as I can into my current pension and then get some proper advice ...

To save me hitting the pensions board now, can anyone tell me how I work out the maximum I can put in? Is it 80% of my gross salary? Presumably I take off the contributions I've already made this tax year as well? Or shall I just phone the pensions company and ask them to help me do the sum?

Eco_Miser

Don't close the TSB to swap to Lloyds, you'd have £5000 earning 4% = £200 instead of £4000 earning 5% = £200 plus £1000 earning something somewhere else.

I'd open the Lloyds account as well, and also squirrel away £400 each month into the associated monthly saver.

If you're going to go the S&S ISA route, consider subscribing this year, even if you don't actually buy anything just yet, on the use it or lose it principle.

For you, the maximum gross pension contribution is 100% of your gross annual salary, that's 80% from you and 20% from HMRC, and includes what you've already paid this year. [For reference the maximum is never less than £3600 or more than £40,000]

AlwaysLearnin

Eco_Miser wrote: »

.
If you're going to go the S&S ISA route, consider subscribing this year, even if you don't actually buy anything just yet, on the use it or lose it principle.

You could chuck £15k (each?) in this month (assuming you still had the full allowance left) from your Santander accounts and leave as cash while you make your mind up. You could even put in to a cash ISA initially, just to get in in to the wrapper, then transfer that to an S&S when you're ready (decided platform etc). Worst case; you decide against it over the next month or so and take the money back out, then you're in the same position as today, just a couple of pounds down on lost interest.

kidmugsy

Take your annual earnings, say £18k. Subtract the amount you will have contributed to your employment pension, say £1k. That means you can contribute a gross £17k to your personal pension. The amount for which you write the cheque (or wave the debit card) is 80% of that, so £13,600. The pension provider then claims the missing bit (£17,000 - £13,600 = £3,400) from HMRC, and adds it to your pot. Personally, I'd use Hargreaves Lansdown because I like their excellent service. You should (in my view) decide whether just to leave the money sitting in cash within the pension until you have had time to gather your thoughts and decide what to invest it in.

I also agree that Cavendish Online has a fine reputation in these parts.

UPDATE: I agree with AlwaysLearning, you could also open an S&S ISA and, again,leave the money sitting in cash until you've gathered your thoughts. You would seem to have money available of roughly (£20k - £13.6k) plus the £4k at Smile = £10.4k. You could add £4.6k from Santander, intending to top up Santander later as more money arrives.

UPDATE2: don't overlook the advantages of also contributing to a personal pension of some kind for DH. He can put in a gross sum of his earnings in this tax year, or £3600, whichever is bigger. Remember to multiply by 0.8 to get the net contribution. Again it's use it or lose it.

enthusiasticsaver

I would look at stocks and shares isas as well once your pensions are sorted. You are very cash heavy and if you can afford to lock some of the £70k away then that is an option. That is the route I am taking and I am 55 as well and worked part time for many years since having children so my pension is not brilliant and the isas are one way of helping bridge the gap.