£56,000 lump sum - advice please

matt748

Good afternoon,
I am shortly to receive a lump sum with pension, and would like to run my plans past you. If anyone can see a flaw or a better way, I'd be grateful for your input. BTW I'm now self employed. This is what I propose to do:

The Plan:
£5,000 into an instant access acc for emergencies.
£15,240 into my existing ISA (currently at 1.05%)
£15,240 into my wife's existing ISA (currently at 1.05%)
£7,000 for home improvements
Leaving a remainder £13,520 to go into an existing easy access savings account (currently at 0.9%), possibly to be used for monthly overpayments on the mortgage (no other debts).

I'm quite cautious, but want to make the money work as hard as it can.

Thanks in advance.

xylophone

If you wish to keep this money wholly in cash, your would almost certainly get a better return by using interest paying current accounts, sole and joint.

colsten

Don't forget there are also the 4, 5 and 6% Regular Savings accounts.

jamesd

If you don't mind secured lending you can get 8%+ from P2P investing, with various types of security from homes through land to pawned items held by a pawn shop.

Where the P2P lending is done to a business it's also possible to do this from a limited number of SIPP accounts, not the mainstream ones, relatively costly ones with annual charges likely to be in the £1,000 sort of range but without other charges for normal actions. Lending to individuals in a pension including via P2P is prohibited by pension law.

Al.

matt748 wrote: »

Good afternoon,
I am shortly to receive a lump sum with pension, and would like to run my plans past you. If anyone can see a flaw or a better way, I'd be grateful for your input. BTW I'm now self employed. This is what I propose to do:

The Plan:
£5,000 into an instant access acc for emergencies.
£15,240 into my existing ISA (currently at 1.05%)
£15,240 into my wife's existing ISA (currently at 1.05%)
£7,000 for home improvements
Leaving a remainder £13,520 to go into an existing easy access savings account (currently at 0.9%), possibly to be used for monthly overpayments on the mortgage (no other debts).

I'm quite cautious, but want to make the money work as hard as it can.

Thank's in advance.

If you don't need the money, can you keep (some of) it in the pension? I'm assuming it's a DB one. If available, have you considered inverse commutation? The benefits include a higher survivor's benefit and possibly, higher income for when you stop work and your tax position is better.

Keep_pedalling

How big is your mortgage and what rate are you paying?

enthusiasticsaver

The plan as it stands is not going to gain you a great deal in interest or work for you. At 1% interest that is only £560.


If you were to open 3 Santander 123 accounts (2 sole and 1 joint) you could be earning 3% gross on the whole £56k or 2.4% net. There is a monthly fee but that can be offset by cashback on direct debits and the fee is due to increase in January but it will still earn you £1680 over the year and you have instant access to all of it.

matt748

keep_pedalling wrote: »

how big is your mortgage and what rate are you paying?

£114,000 @ 2.04%

matt748

Al. wrote: »

If you don't need the money, can you keep (some of) it in the pension? I'm assuming it's a DB one. If available, have you considered inverse commutation? The benefits include a higher survivor's benefit and possibly, higher income for when you stop work and your tax position is better.

Thanks for the tips. It's not a pension that I can keep money into.

jimjames

Any reason why you're not using S&S ISAs rather than cash? You'd get up to 4% income from some investment funds and can structure risk levels to your own preference. There's no reason why the whole amount needs to be invested but using at least part of the money would seem to make sense when you can make the most of the tax wrapper.

kangoora

Whilst the basics of your plan seem sound you are getting appalling levels of interest. If you can spare the time to set up 12 high interest current accounts and the standing orders between them you can make £1,392 a year interest (based on £49k) - instead of £490.

Taking the easy option of the fewest number of accounts to open (4) will get you £1,128, still £600/year more.

Have a play with http://www.bankaccountsavings.co.uk/ and drag the wheel to £49k, it even tells you what accounts to open and what SO's to set up.