Investing an inheritance

TangoPhoenix

Hi all, I’ve been lurking on this board for a little while, and have learned so much!

My husband passed about six months ago, and I now have an inheritance of about £600,000. I’m hoping you all can help me a bit with ideas around investing the money, for both income (now and future) plus growth. I will no doubt also be consulting an IFA, but would like to be as informed as I can too, and would also like to DIY as much as possible.

Some pertinent facts:
* I’m in my early 40s. I have time to take on investments that are more risky, but I also want to protect the investment as much as I can. My feeling is a split of about 60% equities (via funds) and 40% bonds/cash.
* I currently don’t have much of an income. I had my own business, but during the three years my husband was getting progressively more ill, that dwindled to basically nothing. I’m rebuilding it, but it will take time. This is partly why I was looking into making my investments work for me income-wise now and in the future.
* Monthly expenses (including mortgage, car payments, plus living expenses etc) are about £2,500.
* Mortgage is at 1.3% fixed till May 2019. Amount outstanding is about £100,000. I was thinking of just keeping the mortgage going, but had wondered if it would be better to pay it off.
* I currently have a cash ISA with my bank maxed at £20,000 at 1.5% as well as a S&S ISA (with HL), also maxed at £20,000. The funds in the S&S ISA are INC units at the moment, but I’m thinking of switching the funds in the ISA wrapper to ACC and keeping the INC units for outside the wrapper for easier tax accounting. I was thinking of opening a share dealing account with HL too, with a starting deposit of £50,000 and then drip-feeding in £1,000 per month. I’m open to thoughts on whether a bigger lump sum would be better though. Also open to suggestions for other platforms e.g. I was thinking I should split things up with other platforms for better FSCS protection.
* The rest of the money is currently split up between various savings accounts for FSCS protection and better interest rates than offered by my own bank: two accounts with different banks each with £80,000 at 1.3%, a chunk with NS&I at 0.95%, £15,000 in premium bonds with NS&I (which have currently earned me £25), and the rest (that I haven’t yet had a chance to move anywhere yet) in a savings account earning a dismal 0.25%

Thank you all so much!

xylophone

Do you have a pension?

What is your state pension situation?

https://www.gov.uk/check-state-pension

campbell19925

TangoPhoenix wrote: »

* Mortgage is at 1.3% fixed till May 2019. Amount outstanding is about £100,000. I was thinking of just keeping the mortgage going, but had wondered if it would be better to pay it off.

There is no world where it makes sense to keep your mortgage of £100,000 ongoing when you have just inherited £600,000 and are asking for options on where to invest this money.

TangoPhoenix

xylophone wrote: »

Do you have a pension?

What is your state pension situation?

I don't have a pension.

For state pension, it says I'll receive £164.35 a week (£714.63 a month, £8,575.55 a year) starting in 2043.

TangoPhoenix

campbell19925 wrote: »

There is no world where it makes sense to keep your mortgage of £100,000 ongoing when you have just inherited £600,000 and are asking for options on where to invest this money.

The reason why I thought to keep it going was if I could get more than 1.3% on that £100k elsewhere then surely it makes sense to do so (i.e. net 'profit')?

Linton

TangoPhoenix wrote: »

The reason why I thought to keep it going was if I could get more than 1.3% on that £100k elsewhere then surely it makes sense to do so (i.e. net 'profit')?

If you were an experienced investor then you could be right as you would be able to balance out the risks. Otherwise, possibly otherwise. To get significantly more than 1.3% tax free for £100K you would need to take some risk. And you dont know what the rate will be in a years time. With £600K to play with it could well make sense to pay off the comparatively small mortgage as this is equivalent to a 100% safe investment. You could then invest the remainder, and the extra spare monthly income, in a higher % equities than you would otherwise have done.

campbell19925

TangoPhoenix wrote: »

The reason why I thought to keep it going was if I could get more than 1.3% on that £100k elsewhere then surely it makes sense to do so (i.e. net 'profit')?

I think you are over-thinking this. Of course it's possible to do that, but your fixed rate ends next year - so then what? At what point do you pay off the mortgage?

If it was me, I would make it a priority to pay off the only major debt in my life

Fatbritabroad

TangoPhoenix wrote: »

The reason why I thought to keep it going was if I could get more than 1.3% on that £100k elsewhere then surely it makes sense to do so (i.e. net 'profit')?

That seemed perfectly sensible to me you can get more than that for a proportion of the cash in savings accounts

I'll be the first one to say it then tVery sorry for your loss

TangoPhoenix

Linton wrote: »

If you were an experienced investor then you could be right as you would be able to balance out the risks. Otherwise, possibly otherwise. To get significantly more than 1.3% tax free for £100K you would need to take some risk. And you dont know what the rate will be in a years time. With £600K to play with it could well make sense to pay off the comparatively small mortgage as this is equivalent to a 100% safe investment. You could then invest the remainder, and the extra spare monthly income, in a higher % equities than you would otherwise have done.

That makes a lot of sense, thank you.

TangoPhoenix

campbell19925 wrote: »

I think you are over-thinking this. Of course it's possible to do that, but your fixed rate ends next year - so then what? At what point do you pay off the mortgage?

If it was me, I would make it a priority to pay off the only major debt in my life

I do totally over-think things

But yes, my thought was to see what the new rate would be and decide accordingly then. But you guys have given me another way of looking at it, and challenging my thoughts on the matter is part of why I posted here

JohnRo

campbell19925 wrote: »

There is no world where it makes sense to keep your mortgage of £100,000 ongoing when you have just inherited £600,000 and are asking for options on where to invest this money.

Of course there is, why would you choose to sink £100K into paying off a property loan when you have the outstanding loan covered several times over and can, presumably, switch to a cheaper mortgage at the appropriate time, assuming any exit penalties aren't prohibitive.

There is nothing wrong whatsoever with carrying large amounts of cheap affordable debt, it makes a lot of sense to do so imo and allows the money not paying off the entire loan to go into something far more productive than saving 1.3% p.a. of the remaining debt burden.