What to do with 25% tax free lump sum?

Garnet_Gem

I'd divide it into 3.

1 - Long term savings
2 - Easy access savings for use "as and when"
3 - Spending money - Enjoy!

redimp98

1. Pay off the high interest debts first

2. Pay off mortgage debt

3. Put max in ISAs

4. Consider other investment vehicles

5 Have a little spend but dont let it just fritter away until it becomes nothing

royeee

redimp98 wrote: »

4. Consider other investment vehicles

Any examples?

[Deleted User]

we will be in that very pleasant postion too. At present I am administering my husbands sipp, which I could vest now but will wait for another 5 years so that the pot grows.

Its a bit like juggling balls really. It is important to have enough put by to fund possible care needs in old age, after all who wants to end up in a third rate care home :eek: when care at home can be bought in

A third of me wants to buy a holiday home abroad but my sensible head says no, save the cash and holiday from the accumulated interest

My own small sipp was vested a couple of months ago and I put the cash element into ns&i index linked certificates. Thats a pretty good way to save as the matured certificates can be reinvested plus the yearly allowance can still be used. So that element builds up tax free and inflation proofed. Personally I think that is the way we will go year on year and have already got a good foundation saved up that way over the last three years

As a make-do and mend person all my life, I am finding it very hard to join the spend-it- now brigade but I will try because by golly we earned what we have

A priority list:
get home and garden in perfect, easy-care condition
get a basic money pot as a safety net
get some savings going longer term such as ns&i
enjoy holidays while you can

EdInvestor

kittie wrote: »

we will be in that very pleasant postion too. At present I am administering my husbands sipp, which I could vest now but will wait for another 5 years so that the pot grows.

You might be better to vest it now,take the highest income allowed and then reinvest the money in your Stocks and shares ISAs (in the same investments as in the SIPP).That way you build up a bigger tax free income for later.

The old age allowance is going up to 10k a year in the next few years, but the state pension will use up at least half of this.So the more taxable pension income you can convert to non taxable ISA income the better, especially if your income is ticking up around the 21k level, where you start to lose your old age allowance due to the clawback rule.

It's also very sensible to make sure you are both using your allowances - in many cases, much of the taxable income will be in the man's name and he will be paying full tax on it , while the wife's allowance will only partly be used (eg by a small state pension) and thousands of tax free income potential is wasted.:(

[Deleted User]

Good point Ed. I think we`ll do that next april. Nice to get an objective view. Thanks

[Deleted User]

I have actually saved most in an icesave bond and I have spent some on a really good overlocker so I can get to grips with making sweatshirts and knickers. Also used some to pay for a holiday in Italy

EdInvestor

From the tax point of view, after filing up your cash ISA, N&SI index linked certificates are good, and after your investment ISA, then direct purchase of shares which pay dividends is worth considering. The dividends are effectively tax free for those on basic rate ( though they do count for age allowance clawback, so you need to watch for that) and the capital gains can usually be covered by the big annual CGT allowance of 9,200 each in realised gains, if necessary.

Raw_Foodie

I still have 9 years to go before I can lay my hands on this, and it's of course anyone's guess what's going to happen by then economically.

Anyway, if I still do have a pension plan by that time, I'll invest those 25% into whatever I haven't yet got round to for making my house and garden as close to carbon neutral as possible: wall and under-floorboards insulation; a woodburner, possibly with a backboiler connected to the radiators; small solar water facility, small solar PV; also thinking about how to create a rodent-proof produce storage area underneath the floorboards to replace fridge/freezer.

And while I'm making those more cost-intensive plans, I'm learning about food growing and have planted the first two small apple trees in my back garden. The plan is to turn most of the garden into a high-yield low-work forest garden, thus also creating a bit of a buffer zone against rising food prices.

Basically I'm planning for and investing into a peaceful, quiet, reflective sort of lifestyle that will only need a bare minimum of cash to finance it. After all, whatever money I don't have, no one can tax me on! :-)

royeee

royeee wrote: »

Those who opt to take 25% tax free lump sum instead of full pension, what do with it - spend, spend, spend or save, save, save or bit of both and in what way? Just trying to get my head into it and think through.

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Last edited by MSE Wendy : Yesterday at 7:30 PM.

Wendy, nice edit-plug but which tip are you referring to?