What to do with my inheritance ?

kidmugsy

bcfclee27 wrote: »

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.

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?

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

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

bcfclee27

FatherAbraham wrote: »

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

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

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.

AnotherJoe

bcfclee27 wrote: »

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.

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

bcfclee27 wrote: »

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.

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/

bcfclee27 wrote: »

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

Surely you mean "VLS100"? VLS80 is for those with low risk capacity :rotfl:.

Warmest regards,
FA

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

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).

bcfclee27

atush wrote: »

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?

OK so IF in say 5 years time mortgages started to rise, would that be the time to cash ISAs in and pay the mortgage off, or with VLS type passive investing is it really a case of leave for 20 - 30 years for it to grow.