Help please for clueless mum who just inherited 41k

happymum37

blue_max_3 said:

When you say early inheritance, do you mean the person who gave you the money is not deceased? There may be tax implications if they die within seven years or go into care (the local authority may come after the money). I'd not commit it if I were you. Premium bonds is good and safe. You could dip into it in emergencies, such as if one of you lost your job.

That's right she is still alive.  But thank goodness she's only 60 so fingers crossed nothing should happen.   We would be ok if hubby got made redundant as my full time wage wound cover us, at a boring rate of living, until a new job was found - and he has redundancy protection insurance. 
Thank you very much for the reply

happymum37

Albermarle said:

You husband is very risk averse but you are thinking of buying a rental property which can be risky if it does not work out well. So that does not add up. In general the view on buy to let as an investment is rather negative on this forum . Can be very hands on and the tax breaks of the past have largely disappeared. 
Second point is you have £15K cash already but you plan to spend most of it. In which case you need to replace it as you need an emergency cash fund . Premium bonds are as good a place as any for this, so leave £15K at least in there. For the rest , I would use at least some it to top up you husbands pension , which sounds rather inadequate . Typically a 43 year old should be adding  around 20% . It might be better to actually increase his monthly contributions rather than add a lump sum , or do both .

Thanks for the reply.  
So my hubby will do what ever i choose to do really.   We have 15k and would like a small used type car weigh would only be 5k max.  And a nice holiday in a lodge in Scotland for 1k. So we would have 9k left over for the emergency fund.  We are not flash!!

Husband has a pension with the government - sorry I'm so clueless with its name but his employer pays only about 4% and he pays 3%. 

Is that what you mean or set up a private pension?
Thank you again i really appreciate it

happymum37

xylophone said:

I'm happy for medium risk

Property investment is not medium risk, can be hard work and a lot of worry and you would need a buy to let mortgage (increasing your outgoings). 

If you are spending your savings on a new car, then part of the early inheritance will become your emergency fund?

Had you considered opening a stocks and shares ISA for  each of you and continuing to contribute?

https://monevator.com/passive-fund-of-funds-the-rivals/ 

Examples

https://www.fidelity.co.uk/stocks-and-shares-isa/ 

https://www.vanguardinvestor.co.uk/need-help/answer/how-do-i-open-an-isa

Some of the £500 spare a month could be contributed to your husband's pension?

Or you might consider paying off the mortgage,  and rebuilding your cash emergency fund in the first instance - after that increase contributions to your husband's pension and contribute to a S&S ISA for each of you?

Thank you for the reply. 

No out of the 15k we wound onlyy buy a used car for 5k and our holidays never cost more than 1k so that well leave 9k for the emergency pot.

We have no isas at all.  Neither do our children.  So that's a very good suggestion.  With the 500 pounds spare I do like the thought of over paying the mortgage and the rest in his pension.  My pension is very good but if i die he won't get out everything I put in so outs good to spread it out.

Thank you I'm looking at the isa bits tonight with a note pad in hand.

happymum37

bigadaj said:

When you say you pay 18% into a pension is that correct? Is that the nominal employer and employee contribution. You can pay up to your total earnings into a pension and get tax relief, but obviously wouldn't be able to access for around 20 years, but it would get you a 20% uplift on sums invested. 

Omg no I'm totally wrong.  I literally didn't realise. 

Its 14%

I can pay More in but they don't pay anymore in return. 

Thank you for your reply.  It's a lovely situation to be in but I'm so green with all of this!

happymum37

DireEmblem said:

bigadaj said:

When you say you pay 18% into a pension is that correct? Is that the nominal employer and employee contribution. You can pay up to your total earnings into a pension and get tax relief, but obviously wouldn't be able to access for around 20 years, but it would get you a 20% uplift on sums invested. 

This would be my thought, especially if your hubby has not contributed much to his.  If you overpay you’re mortgage - most only allow 10% a year before charging, what would you do with the extra income - I.e the difference between your current and reduced future mortgage payments?

if you don’t need it now, and you have a lot of savings(15k), lump it in your pension.

Google for an online pension calculator - put in your current pension/savings, and see how much difference adding the 41k could make to your retirement funds!

 Thank you!

I think after reading all of this I will definately increase husband's pension contributions.  And possibly a lump.  

We can overpay on the mortgage so i think that's a plan

Thanks again

happymum37

kinger101 said:

It's dangerous to assume the uplift is 25% for pensions.  For one, this is probably a DB scheme, but one has to factor in tax on entry and exit to the pension.  And OP probably isn't paying any income tax at the moment.  

OP - I agree retirement saving is probably your best option, but

(a) what is your NI contributions record like?  Are you on track for full state pension - i.e. 35 year's contributions at SRA.
(b) how much is your pension likely to be if you continue working until retirement?
(c) what options are available under AVC?

I'd hope AVCs were your best route, but it's possible part of the answer lies in voluntary NI contributions and LISA.

Thank you so much for the reply. 

I will have 35 full years national insurance contributions when i retire. I think i pay a reduced rate though as its a police pension I have separately.  

Sorry this is very clueless but as I have had such a long pause in pension with the time I took off for the children I have no idea currently what my pension will be- i will request a pensions statement though to find out. 

I can definately AVC the police pension but they don't match any further contributions

Thanks again

bigadaj

happymum37 said:

bigadaj said:

When you say you pay 18% into a pension is that correct? Is that the nominal employer and employee contribution. You can pay up to your total earnings into a pension and get tax relief, but obviously wouldn't be able to access for around 20 years, but it would get you a 20% uplift on sums invested. 

Omg no I'm totally wrong.  I literally didn't realise. 

Its 14%

I can pay More in but they don't pay anymore in return. 

Thank you for your reply.  It's a lovely situation to be in but I'm so green with all of this!

The contribution to a public sector db scheme is a fiction, the employer element at least.
What you could do is contact your pension provider and ask them the value your contributions represent, it can be a complicated calculation for a db scheme. You then take that from your gross salary and open a personal pension, maybe a sipp. you contribute 80% of your pay for the year into that and the pension provider reclaims tax to give you the extra 20%. This works for amounts below the personal allowance, so money you haven't actually been taxed on. You could then replace that money with the sum you have been gifted to live on and carry on doing that for a few years whilst putting the sum into your pension. You would still have the 20% of your salary in any case.

DiggerUK

I'd forget the stories of easy revenue from a BTL. When it's good it's ok, but if it turns problematic it becomes a nightmare.

You are both o.k.ish regards pensions, especially you. A few pay rises/promotions and the like will see you provided for. Private pensions (AVC etc) are not all they are cracked up to be, make alternative plans for retirement savings.

You now have enough to kill the mortgage and increase your cash flow. At the same time you will make the roof over your head a bomb proof safe security. Please, clear the mortgage first..._

Albermarle

Husband has a pension with the government - sorry I'm so clueless with its name but his employer pays only about 4% and he pays 3%. 

We need a bit more clarity on this.

Normally when someone says they have a pension with the government, it means they have a Civil Service final salary scheme, or similar . ( Like you have I think)

However the contribution % you mention for your husband would indicate this a standard auto enrolment scheme with a private employer ?

I suspect the pension is with NEST ? which is not actually the government but is government sponsored. Is that correct ?

daveyjp

Clear the mortgage as that is costing you money.

Once that is done you can take time to research and decide how you will invest the monthly payment.