What to do with £100k

Dave_Crouton

Hi all,

I'd very much appreciate some help with this. I'm about to come into around £100k and I don't know what is best to do with it.

I'm married with two teenage kids. My wife and I are both in our mid-40s. My wife earns around £12k and I earn around £55k (although this can fluctuate wildly). We currently have about £8k in savings. Our mortgate is approx £220k with 20 years left to run, currently fixed at around 2.5%. Our combined pensions are currently around £30k (I know, not good).

So, what should I do? Pay off mortgage, invest, put in pension? I guess I'm nervous about locking it all away, and would like some flexibility in case of emergency etc.

Massively grateful for your thoughts.

El_Torro

Make sure you have enough of an emergency fund (is £8k enough, considering you're a family of 4?)

Put anything you earn over £50k into your pension to avoid higher rate tax. If you want to contribute any more to your pension let your wife do it, as she can get tax relief on earnings that weren't taxed in the first place.

Contribute to Stocks & Shares ISAs. Tax efficient investing, not as tax effiicient as your pension but it is more flexible.


Over paying your mortgage could be good too, though remember that investing is likely to give better returns in the long run.


I would do the above, in order of priority. How much you contribute to each one depends on your goals and when you want to access your money.

Zorillo

I'd put the whole lot into pensions. And then start contributing a proper amount to them going forwards.

MaxiRobriguez

Most of it in pension (and then continue to contribute more after the lump sum goes in), some for S+S ISA and then some to add to your £8k savings which is a little short for an emergency fund.

Split would be like 70/20/10.

Wouldn't bother overpaying the mortgage, interest rates aren't going anywhere, let inflation deal with it.

Thrugelmir

Dave_Crouton wrote: »

So, what should I do? Pay off mortgage, invest, put in pension? I guess I'm nervous about locking it all away, and would like some flexibility in case of emergency etc.

Spread the money across the entire piste. Drip feeding it in, in order that you've flexibility should the need arise.

Dave_Crouton

Thanks very much for your responses - lots of food for thought here, but reassuring there's a broad consensus on best way forward.

Albermarle

I'd put the whole lot into pensions. And then start contributing a proper amount to them going forwards.

If he put the whole lot into a pension at once he would have a lot of problems with HMRC !

Also the OP should not forget that within a pension or a Stocks and shares ISA , he will have a choice of what type of investments and it is important that he chooses one in line with his age and risk appetite and with low(ish) charges

SonOf

There is insufficient information in the first post to go on to really say what is best but the fact the current retirement provision is extremely poor, does indicate that it is an area that should be looked at seriously.

Zorillo

Albermarle wrote: »

If he put the whole lot into a pension at once he would have a lot of problems with HMRC !

He could probably have it all wrapped in the next six months or so through a combination of his own and his wife's allowances. I wouldn't expect anyone to actually attempt to dump £100k into a pension on the say-so of a single anonymous forum post

Gary1984

I'd go for a combination of cash, mortgage over payments and pensions.

If you were to put money into your mortgage I'd only put in what you'd need to bring your LTV down a bit for when you next remortgage. a rate of 2.5% is a bit on the high side these days. If you can get to 75% LTV you could reduce that by at least 1%.

As others have said I'd hold more in cash for emergencies and then invest the rest for the long term, utilising pensions as much as you can. Open a Sipp for your wife if she doesn't already have a pension due to the 25% uplift. Contribute enough into your own pension to get your net earnings under 50k and out of higher rate tax.

steampowered

It sounds like you have 20 years of missed pension contributions to catch up on.

Unless you are happy to live on the state pension (assuming you qualify) in retirement pension has to be your priority, surely. Even if it is painful.

I don't think you should be overpaying the mortgage until the pension situation is sorted out. Overpaying the mortgage has an opportunity cost of losing out on (1) tax relief and (2) investment growth.