What to do with £80k to get the best "safe" benefit

londoninvestor

loskie wrote: »

20k in a SIPP (remember to claim the tax relief).

Bear in mind that would need to be split across two tax years - each year the partner earning 15k can put in max £15k gross contribution (£12k net contribution) and the unemployed partner can put in max £3600 gross contribution (£2880 net contribution).

kidmugsy

How old are the couple?

Anyway, if I were in their shoes, and much less than age 55, and frightened of investing in stocks and shares, I would probably:

(i) clear the mortgage (unless there were heavy penalties),

(ii) bung the further £20k into the best high interest accounts I could find, to act as my emergency cash fund for the time being,

(iii) Save the monthly excess income into regular savers paying 5% AER (I particularly like the flexibility of the Nationwide ones).

Then each year as the regular savers mature I'd ask myself whether I needed to spend any of the money or whether I'd rather bung it all into pensions.

If your friends have already passed age 55, or are close to it, I'd alter my behaviour to favour pensions a bit more.

I wouldn't touch P2P with a barge-pole: if shares might cost them sleep think what P2P might do.

Audaxer

Elika0215 wrote: »

Thanks for the replies. So for stocks and shares, the fear is a financial crash could wipe their savings out. They (and I) know very little about markets and fluctuations with stocks and shares, so wouldn't that be an added risk?

There will be financial crashes in the future, but if invested sensibly for the long term you won't lose everything and markets will bounce market as they have done in the past. There is more possibility about losing everything if invested in something like P2P - these products may be okay in a future financial crisis but no-one really knows as they have not been around that long.

If you/they want to learn about investing have a look at sites like Monevator. Low cost diversified multi asset funds with a risk level of their preference would be a good way to start if they wish to invest any of the money long term. However I think the main priority should be clearing the mortgage.

Elika0215

Thanks all again.

They're with me now and there is so much research to do! My head's spinning.

Ultimately, they don't want to make a fortune but want their lump sum is to rise above inflation. Even by a small amount. Is there a guaranteed way of doing this?


Edit 2: Just found out that they will incur an early repayment charge of £2,300 on a £60k mortgage.... I guess that moves the goalposts?

billy2shots

- Pay the mortgage off which is saving them 1.9% on £60k

- split the other £20k between Nationwide current accounts x3 (one each and a joint £2.5k Max in each)
Do the same with £1.5k in TSB accounts
Put the rest in Marcus at 1.5%.

- open up 2 saving accounts with Nationwide that are linked to the current accounts. These allow you to pay in £250 a month and will earn 5% for 12 months. Use the £400 saved from mortgage payments (add another £100 to make the needed £500).

- Review in a year when the Nationwide accounts mature.

Totally risk free, easy access to cash if needed.

Elika0215

billy2shots wrote: »

- Pay the mortgage off which is saving them 1.9% on £60k

- split the other £20k between Nationwide current accounts x3 (one each and a joint £2.5k Max in each)
Do the same with £1.5k in TSB accounts
Put the rest in Marcus at 1.5%.

- open up 2 saving accounts with Nationwide that are linked to the current accounts. These allow you to pay in £250 a month and will earn 5% for 12 months. Use the £400 saved from mortgage payments (add another £100 to make the needed £500).

- Review in a year when the Nationwide accounts mature.

Totally risk free, easy access to cash if needed.

That's really helpful too. Thanks.

Did you see my last post which may have overlapped with yours? That they just found out they would be charged £2300 with an early redemption on 60K mortgage? No sure if you factored that in to your suggestion.

Thrugelmir

Elika0215 wrote: »

Did you see my last post which may have overlapped with yours? That they just found out they would be charged £2300 with an early redemption on 60K mortgage? No sure if you factored that in to your suggestion.

At the very least overpay by the maximum amount that is possible.

For the partner in employment maximise any employer pension contributions that are available. Free money should never be declined.

Audaxer

Elika0215 wrote: »

Ultimately, they don't want to make a fortune but want their lump sum is to rise above inflation. Even by a small amount. Is there a guaranteed way of doing this?

There is no guaranteed way, but investing in a balanced globally diversified multi asset fund for the long term would give them a good chance of their lump sum rising above inflation.

Audaxer

Audaxer wrote: »

There is no guaranteed way, but investing in a balanced globally diversified multi asset fund for the long term would give them a good chance of their lump sum rising above inflation.

Just to add, if there wasn't a very good chance of at least beating inflation in the long term with a globally diversified fund or portfolio of funds, I don't think many of us would invest.

xylophone

Are they allowed a penalty free lump sum mortgage repayment each year?

For example, on a five year fix, it might be 10% of the mortgage outstanding.