£100k+ Inheritance advice

short_butt_sweet

IMHO, the most important point is that, if you do pay down part of the mortgage, you redirect all of your reduced mortgage payments into investments. e.g. if mortgage payments go down by £500 a month, then start investing £1,500 a month, instead of £1,000.

your mortgage is quite high relative to income, so paying down part of it might even be a good idea, despite the low mortgage rate (which investment returns are likely - but not certain - to beat).

however, using the whole lump sum to reduce the mortgage would arguably be overdoing it. perhaps invest part of the lump sum, reduce the mortgage with the rest?

HHarry

Paul,

I'm in the exact same situation as you - with all the same confusion. I eventually came to the conclusion that dithering wasn't going to achieve anything. At the risk of being ridiculed by the experts on here (!), here's what I have or plan on doing.

Pay off some of my mortgage. About 2/3rds was interest only, so I'm getting rid of that. At a rate of 2.75% I could probably do better with investments - but that feeling of security is a big emotional driver.

Fill up this years S&S Isa. Sure there's a chance we're at the top of the market, but you've got to commit at some point. If there's a correction then I can jump in with next years allowance in April and take advantage. The general consensus seems to be 'time in the market' - I had thought about drip feeding, but I just wanted to get it done.

Open a SIPP. I'm also only a basic rate taxpayer so there's not a massive advantage over my ISA, but i was hoping to build a £50-100k pot which I will draw down and hopefully pay not a lot of tax on if I'm working part time and just using up my Personal Allowance (I have other pensions for later in life).

Buy some Premium Bonds. It's not the greatest return, but it's tax and risk free - and there's the potential to win big!

To me that felt like a diverse strategy for the money - if you make a bad decision in one area, hopefully it'll pay off in another.

Good luck!

Paul_the_electrician

HHarry wrote: »

Paul,

I'm in the exact same situation as you - with all the same confusion. I eventually came to the conclusion that dithering wasn't going to achieve anything. At the risk of being ridiculed by the experts on here (!), here's what I have or plan on doing.

Pay off some of my mortgage. About 2/3rds was interest only, so I'm getting rid of that. At a rate of 2.75% I could probably do better with investments - but that feeling of security is a big emotional driver.

Fill up this years S&S Isa. Sure there's a chance we're at the top of the market, but you've got to commit at some point. If there's a correction then I can jump in with next years allowance in April and take advantage. The general consensus seems to be 'time in the market' - I had thought about drip feeding, but I just wanted to get it done.

Open a SIPP. I'm also only a basic rate taxpayer so there's not a massive advantage over my ISA, but i was hoping to build a £50-100k pot which I will draw down and hopefully pay not a lot of tax on if I'm working part time and just using up my Personal Allowance (I have other pensions for later in life).

Buy some Premium Bonds. It's not the greatest return, but it's tax and risk free - and there's the potential to win big!

To me that felt like a diverse strategy for the money - if you make a bad decision in one area, hopefully it'll pay off in another.

Good luck!

I will definatly look into premium bonds, i think that as with everything, everything in moderation and diversify

It would just be a great feeling to smash that mortgage though!:beer:

But maybe just do half and half

Fatbritabroad

HHarry wrote: »

Paul,

I'm in the exact same situation as you - with all the same confusion. I eventually came to the conclusion that dithering wasn't going to achieve anything. At the risk of being ridiculed by the experts on here (!), here's what I have or plan on doing.

Pay off some of my mortgage. About 2/3rds was interest only, so I'm getting rid of that. At a rate of 2.75% I could probably do better with investments - but that feeling of security is a big emotional driver.

Fill up this years S&S Isa. Sure there's a chance we're at the top of the market, but you've got to commit at some point. If there's a correction then I can jump in with next years allowance in April and take advantage. The general consensus seems to be 'time in the market' - I had thought about drip feeding, but I just wanted to get it done.

Open a SIPP. I'm also only a basic rate taxpayer so there's not a massive advantage over my ISA, but i was hoping to build a £50-100k pot which I will draw down and hopefully pay not a lot of tax on if I'm working part time and just using up my Personal Allowance (I have other pensions for later in life).

Buy some Premium Bonds. It's not the greatest return, but it's tax and risk free - and there's the potential to win big!

To me that felt like a diverse strategy for the money - if you make a bad decision in one area, hopefully it'll pay off in another.

Good luck!

fwiw seems like a great plan to me and that's a very well placed (!) none of us 'know' what's best and what's 'optimal' (as far as any of us think anyway) may not be best for you.

You said I had balls of steel I don't see it like that I've just decided that if I'm wrong I have enough time to make it up in the future. Plus I'm finding the more I've got the higher the (calculated) risks I'm prepared to take with parts of my savings

Albermarle

For both Paul the Electrician and HHarry you are I think taking a sensible route in both cases .However income/job security is the unknown . The more this feels solid then the more risk you can afford to take with investments and not worry so much about the mortgage payments .

Whatever happens having a cash buffer to tide you over a minimum 6 months unemployed is a priority .

kidmugsy

OP, you're only 38. You've got easily another 20 or 25 years, maybe more, to increase your pension. There's no rush. Maybe you'll find yourself a higher rate taxpayer - that would be a good time to pile money into the pension. Maybe the pension tax relief will be reformed and you'll get more relief as a basic rate payer. That also that would be a good time to pile money into the pension.

It's important that you save for old age but it's not critical that you must do it now and that you must do it with a pension.

For example, I quite like the idea of your saving into a Lifetime ISA from age 38 to 50. You add £4k p.a. and the taxpayer adds £1k p.a. bonus. Then when you withdraw the money tax-free at age 60 you bung as much as you can into a pension for your last few years of working life. By golly that could prove profitable: two lots of tax advantages in a row.

Meantime in your fifties, when your LISA contributions have stopped, you could contribute more to your pension. Or you wipe out that last bit of your mortgage loan - whatever seems attractive at the time.

Paul_the_electrician

kidmugsy wrote: »

OP, you're only 38. You've got easily another 20 or 25 years, maybe more, to increase your pension. There's no rush. Maybe you'll find yourself a higher rate taxpayer - that would be a good time to pile money into the pension. Maybe the pension tax relief will be reformed and you'll get more relief as a basic rate payer. That also that would be a good time to pile money into the pension.

It's important that you save for old age but it's not critical that you must do it now and that you must do it with a pension.

For example, I quite like the idea of your saving into a Lifetime ISA from age 38 to 50. You add £4k p.a. and the taxpayer adds £1k p.a. bonus. Then when you withdraw the money tax-free at age 60 you bung as much as you can into a pension for your last few years of working life. By golly that could prove profitable: two lots of tax advantages in a row.

Meantime in your fifties, when your LISA contributions have stopped, you could contribute more to your pension. Or you wipe out that last bit of your mortgage loan - whatever seems attractive at the time.

Yes theres some good ideas there!

I really like the LISA idea that sounds like a great little trick

just to throw a spanner in the works, after some discussions, instead of selling the property and receiving a half share of the proceeds we are now talking about renting the property long term

It is in romford 3 bed end of terrace house, no mortgage, would rent out for likely £1250 PM

Right near london cross rail

So would receive likely £500 PM after fees and costs/ before tax

Would it be better to rent out the property and invest the £500 straight into pension?

Fatbritabroad

I would say for youve already got alot in property. From a diversification pov it might be more balanced to go another route. Also assume there's two other people involved? How would it work if one if you needed to sell? Can you all afford it if there's void periods, repairs etc.

Not one for me personally but just trying to give an alternative view

kidmugsy

Paul_the_electrician wrote: »

Right near london cross rail

Perhaps sell within a couple of years of Cross Rail opening and working successfully? Then buy a house to let in the neighbourhood of the next railway development?

Anyway, I tend to be sceptical of letting property. But at least you bring trade skills to the task. And presumably if its family property you understand its strengths and weaknesses pretty well. But as FBA says, you'd not have diversified your portfolio - a lot of your money would be in residential property. Plus you risk a Corbyn government confiscating property rights from landlords. Rather you than me.

Thrugelmir

Paul_the_electrician wrote: »

paying off a mortgage is so much a more clear cut goal with an achievable end, i suppose thats why most fall into the trap of having an underfunded retirement

Don't be lulled into a false sense of security by recent investment returns. Likewise there's little point in having a huge retirement pot only to hit a rocky financial patch in your life. The tortoise eventually beat the hare in the race ( if you know your fables).