Inheritance

K_potts

I am due to receive some inheritance about £400k in total when a house is sold but the first part around £150k in a couple of weeks.
We don’t have a mortgage and own our own home, both my husband and I work full time in late 40’s early 50’s. We have loans about 6k in total and are supporting our youngest at university.
Neither of us have great pensions so unsure what to do with the money in terms of investments etc. Apart from a couple more holidays and a new car plus helping out daughters out we are not massive spenders so want to use the money wisely but enjoy it a little too.  

I have looked for a financial advisor online but unsure how much they charge or if the inheritance  isn’t enough to warrant expert help. 

Can anyone offer any advise on our next steps please?

eskbanker

I'd say that it would be worth discussing your situation with some IFAs - meet two or three for the free introductory session and see if they feel right for you.

https://www.moneysavingexpert.com/savings/best-financial-advisers/

tacpot12

The amount of the inheritance is certainly enough to make it worthwhile considering an IFA. 
Your priority should be to make sure that you recover your pension situation. Before consulting any IFAs, your should review whether you have any options to increase the amount you pay into your works pension, and provide this information to the IFAs. 

The IFAs will be able to look at your entire situation to work out how to use the money to best achieve your aims.

I would say that a new car is a luxury, and if your old car doesn't have any problems, do you really need a new car? I chose to run an old car as one of a number of decisions that allowed me to retire at 53!

csgohan4

you  could max out your pension contributions for a while and live off the 400k, would be more tax efficient, even consider salary sacrifice to really reduce your tax bill. 

Otherwise investing in a tax wrapper would be prudent. 

you could park some of the money in premium bonds while you decide/ seek IFA 

if your seeking an IFA, might as well look at your pension itself to see if you can optimize it

Monkey_B

csgohan4 said:

you  could max out your pension contributions for a while and live off the 400k, would be more tax efficient, even consider salary sacrifice to really reduce your tax bill. 

Sorry to highjack this thread a little bit, but I've been thinking of suggesting to my partner that she applies this principle to her situation, but I haven't got my head around the tax implications.
Her pension position isn't great and she could easily afford to put £5k of her savings into her pension pot to top it up.
Would the best thing to do be (and is it even possible!) to increase her pension contribution to 100%, and live off the £5k until it's gone? Or could the same tax saving be achieved by increasing her pension contribution just to the amount that would take her under the £12500 threshold? Is there anything else that I should be factoring in here?

HCIMbtw

Monkey_B said:

csgohan4 said:

you  could max out your pension contributions for a while and live off the 400k, would be more tax efficient, even consider salary sacrifice to really reduce your tax bill. 

Sorry to highjack this thread a little bit, but I've been thinking of suggesting to my partner that she applies this principle to her situation, but I haven't got my head around the tax implications.
Her pension position isn't great and she could easily afford to put £5k of her savings into her pension pot to top it up.
Would the best thing to do be (and is it even possible!) to increase her pension contribution to 100%, and live off the £5k until it's gone? Or could the same tax saving be achieved by increasing her pension contribution just to the amount that would take her under the £12500 threshold? Is there anything else that I should be factoring in here?

Typically you would be best to look at the tax breakpoints on salary, e.g. if you are a 40% tax payer contribute everything necessary to take your salary into the 20% bracket. You benefit from getting all the higher rate tax relief on your contributions and can withdraw the pension at pension age at a lower rate of tax.

However, if you are considering £5k, then I expect it is likely her salary is more modest than having to think about a 40% tax threshold.

Im pretty sure it would not make sense to contribute 100% salary (not sure you can?) as we all get a personal tax free allowance each year, around £12,500. It feels like there would be no benefit to reducing salary below this threshold as you get no tax benefit. 

If she does want to lock away the money until she is at least 60, then it might be worth looking at a LISA to invest the £5k, putting in £4k this year and £1k next year. Investments in a lisa benefit from 25% government top up straight away, but have to be locked away until 60. If she is a 20% tax rate payer, this 25% is a bit better than that.. so maybe worth considering. 

Please note penalties apply for early redemption of a LISA.