What to do with my inheritance ?

phillw

AnotherJoe wrote: »

Paying it off earlier (which was the question) leaves them poorer longer term = less able to retire at a time of their choosing.

It mostly comes down to what interest rate they have on their debts and what interest rate they will get on their savings. Ignore whether it's a debt or savings, put the money with the biggest interest rate (taking into account any early repayment penalties or tax)

bcfclee27 wrote: »

My wife and to an extent myself realise or assume that paying lumps off the mortgage is the number one target. But after reading through this thread it has really tempted me to look into investing instead.

There is risk to everything. I overpaid on my mortgage when the rate was low because I was expecting interest rates to spring back up. My mortgage had a £500 over payment limit, so I could have saved the money but then be stuck not being able to dump all my savings into the mortgage. It's cost me money, but I've made other good decisions that saved me more so it's not so bad. I no longer have a limit to overpayments & rates aren't going anywhere. So I've changed my strategy.

atush

kidmugsy wrote: »

Hush. Those of us who see merits in some gold sovs are viewed as dangerous heretics or gibbering loonies.

Not really, many of us normal types hold a little gold. but we dont usually ramp it up to novice investors.

Those are the gibbring idiots?

atush

Op, split your spare money.

Some into S&S isas (vanguard 80 sounds fine for the long term) and overpay a little. Dare I say even consider aVCs or PPs/Sipps a little.

You dont have to do just one thing with your spare cash.

HardCoreProgrammer

The usual pension enthusiasts come out of the woodwork in droves again. Just to warn you:
1. You are both basic tax payers. Remember that while you get 20% tax credit paying in, this will be clawed back when you come to withdraw from it. I would bet that tax would be higher at that point (e.g. some are campaigning to merge income tax and NI, and if they succeed, tax would become 32%), so you may even be making a net loss.
2. Your money is locked until a time which can be changed at a whim by the government in power. When I started my pension 15 years ago, I could draw on it at 50, now it is 58. I start to wonder if I will ever live long enough to draw it ...
3. There is no legal way to get it out before 58, so it is sitting duck to tax raids.

I would just pay down the mortgage, if it makes you sleep better at night. This is exactly what I did. Not having to worry about how to pay the bills when I lost my job during the financial crisis is worth every penny of the theoretical gain I forfeited.

HardCoreProgrammer

And one more point, no job is safe nowadays. Police in my local area are being made redundant due to budget cuts (and thanks to that, moped gangs aka highway robbers are totally out of control). Just do not assume that your job is safe because it is civil service or local government.

Audaxer

bcfclee27 wrote: »

If possible could you please recommend a S&S ISA that you would invest in if you were me - I have been investing small amounts already in VLS80 but some don't seem to like the uk percentage involved. So could you pleas give an example of a similar product that doesn't have as much uk but is still as good a product as VLS.

I like Vanguard and a VLS80 seems a perfectly good long term investment for an S&S ISA. But I would not put all my eggs in one basket, one reason being that you would only be covered by the Financial Services Compensation Scheme up to £50k for each fund house. That could be £50k each for you and your wife, but hopefully after a few years the investments will have grown well above £50k each. Other examples of low-cost passive globally diversified multi assets funds that you could also hold as well as VLS80 would be an HSBC Global Strategy or L&G Multi Index fund - both have funds with similar equity to bond percentages as the VLS80. Both also have less UK exposure than the VLS80.

Bear in mind that if you put a lump sum in any fund with 80% equities you have to be prepared for the value to drop by about 40% in the event of an equity crash. As long as you and your wife don't panic and think about selling if this happens just after you have invested a lump sum, it will hopefully give you good long term returns.

If I was in your position I'd definitely want to use some of the inheritance to reduce my mortgage. Paying off £100k of the mortgage and £20k each in S&S ISAs now and again when you can invest next year's allowance in April seems like a perfectly good plan. In future years you could top up the ISAs monthly with the money you save from the reduced mortgage.

kidmugsy

atush wrote: »

Nmany of us normal types hold a little gold. but we dont usually ramp it up to novice investors.

Those are the gibbring idiots?

Why would the fact that an investor is a novice make the least difference at to whether some gold sovereigns proved to be a good or bad investment? The universe doesn't give a hoot about how experienced an investor I am.

kidmugsy

Anonymous101 wrote: »

Based on what?

Based on current values of CAPE.

KayJay

HardCoreProgrammer wrote: »

And one more point, no job is safe nowadays. Police in my local area are being made redundant due to budget cuts (and thanks to that, moped gangs aka highway robbers are totally out of control). Just do not assume that your job is safe because it is civil service or local government.

Police Officers cannot be made redundant. This is because they are not employees, they are 'Officers of the Crown'. It's police staff that can be made redundant and many of them are - because forces are having to save money and it's the only way to save on the wages bill.

kidmugsy

bcfclee27 wrote: »

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.

So use a personal pension for her, and LISAs - the 25% taxpayer boost offers valuable protection against a stock market slump. On those same grounds perhaps avoid conventional S&S ISAs if she would be really anxious about them. A happy, unworried wife is more valuable than a bit of extra investment return. Sticking to LISAs and a personal pension will mean spreading your investing over a decade or so. Perhaps she'd be happier with that anyway.

As for paying off some of the mortgage loan: could you win a lower interest rate by getting the LTV any lower? For example, if you paid off about £40k and got the LTV below 50%?

Anyway, say you did opt for investing slowly over a decade or so: where could you keep the capital meantime? You can each save up to £50k in premium bonds - they are offered by ns&i so your capital has a Treasury guarantee. They'd pay you the equivalent of about 1% p.a. tax-free in the usual £25 or £50 monthly prizes with the remote chance of winning a bigger prize. If your new mortgage loan costs you about 1% p.a. it's roughly all square but with the PBs giving you far more flexibility and liquidity than overpaying. And you could tease your wife about gambling with PBs.