Critique my finances please?

pat1976

Hi, I have no one to discuss my financial position with so would really appreciate some other points of view on where I am and what I'm doing.

Married couple, mid-40s, one high school child. Very secure and stable jobs, one full time the other part-time with a side gig.
Income (net) 
FT  PAYE      £36k    (planning salary sacrifice to SIPP to take this one out of high tax band)
PT PAYE       £30k
Gig TaxFree  £36k    (varies £2k to £5k per month, only likely to last a few more years)

Assets
House Value   £350k with £140k mortgage, interest only, Base Rate +0.5% (currently 0.6% around £75 a month) for the remaining 15 years, no intention to move.

Savings
Cash               £76k  (mainly offset against mortgage but thinking of moving most of this to PBs, £20k to shares ISA for this FY)
Cash ISAs      £65k (fixed at 1.74% until 2022)
Premium Bonds    £21k
Shares ISAs   £78k (passive globally diversified funds)
Shares           £21k (passive globally diversified funds)

Pensions
Current pensions: average salary pension currently £9k at age 65 but will continue to grow until we stop work
Old DC Pension Pot   £20k (over several pensions, probably terrible funds, planning to move to a SIPP)
Old DB Pensions       £9k @60 and  £7k @67 plus £13k lump  

Life Insurance
One life gives £350k plus £9k survivor's pension
Both lives £500k with some level of dependent's pension
No critical illness cover, current employer would cover at least 1 years sickness

So that's it. We don't really have any aims for our finances which isn't helpful. At one point it was aiming for FIRE but our child is disabled and may never live independently so that comfortable/secure FIRE figure is probably unachievable. 
We have always lived frugally but recently made a conscious effort to spend more, it has saved time but not substantially improved our lives and needs revisiting, we're only saving about £40k a year which is disappointing given the high income.
We could increase our incomes, the PT could go back to FT easily, and we could both easily get promotions but would not enjoy the jobs.  More could be made from the gig but it is already very time consuming.
We're both pretty risk averse and can't face putting much more in shares. Very tempted to pay off the mortgage but I realise this would be a stupid move given the interest rate.

Any comments are very welcome, just getting all the info together to do this has been really useful. Thanks.

stuart746

Hi Pat1976, some like to pay off their mortgage and the good feeling that provides so I wouldn't underestimate it. You have a lot of 'cash', which is tangible and safe, but can get eroded by a) low interest environment (which we have), and also by high inflation (which we don't have yet). Your pension value seems low compared to your incomes (do you have matched employer contributions?).
I'm sure others will come by with more useful observations...

Thrugelmir

pat1976 said:

We're both pretty risk averse and can't face putting much more in shares. Very tempted to pay off the mortgage but I realise this would be a stupid move given the interest rate.

Time is ticking away.  Unless you are guaranteed a return. Repaying the mortgage is the risk free option. Particularly if the income from the "Gig" is going to cease. 

pat1976

stuart746 said:

Hi Pat1976, some like to pay off their mortgage and the good feeling that provides so I wouldn't underestimate it. You have a lot of 'cash', which is tangible and safe, but can get eroded by a) low interest environment (which we have), and also by high inflation (which we don't have yet). Your pension value seems low compared to your incomes (do you have matched employer contributions?).
I'm sure others will come by with more useful observations...

Thank you.  I had mixed up my pensions there (edited now).

The current jobs are both DB schemes, the figures given are the amounts we would get at those ages if we left today, they'll keep going up whilst we stay employed.

tacpot12

Hi Pat1976, what is your plan to repay the mortgage in 15 years? If you don't have a plan, then realistically you need to be putting £9K per year into your S&S ISAs as minimum to give you the money to pay off the mortgage. I know you have said that you are risk averse and can't face the risk of further investing, but this really is a bad decision.

You have mixed up the DB/DC pension labels in your post, but it is clear that you are not happy with the investment decisions taken so far with your DC pensions. Rather than shun the stockmarket and accept that this money is not invested well, why not try to improve your knowledge of how to invest? If you can improve your investment choices for your pension, there is no reason why you can't also invest wisely in the stockmarket to repay your mortgage. It is very beneficial to your future financial health if you can get confident with investing.

It it really is too worrying, switching to a repayment mortgage would be a good idea - your home will be paid for and your security will be assured once the mortgage is repaid. It would be stupid to repay the mortgage in full now, but not to repay it over the next 15 years if you are not prepared to invest in the stockmarket.

As you have a disabled child, I think you should take some professional advice so that you can put together a plan that will ensure that they can be looked after if anything happens to you. It may be beneficial to set up a trust for them, and you may need insurances that you don't have in place yet.

You haven't mentioned state pension entitlement; you should try to ensure that you are both on track to receive the full state pension.

You have plenty of income, but need to convert this to assets, ideally assets that appreciate in value like shares and houses, and not Cash which gets devalued over time due to inflation. 

thegentleway

That’s a lot cash, what are you saving for? Is it earning more than 0.6% after tax? If not then you should overpay the mortgage.

stuart746

pat1976 said:

stuart746 said:

Hi Pat1976, some like to pay off their mortgage and the good feeling that provides so I wouldn't underestimate it. You have a lot of 'cash', which is tangible and safe, but can get eroded by a) low interest environment (which we have), and also by high inflation (which we don't have yet). Your pension value seems low compared to your incomes (do you have matched employer contributions?).
I'm sure others will come by with more useful observations...

Thank you.  I had mixed up my pensions there (edited now).

The current jobs are both DC schemes, the figures given are the amounts we would get at those ages if we left today, they'll keep going up whilst we stay employed.

Ah, makes sense. Good luck! Converting some of your cash to assets may be a good strategy but do get sound advice.

pat1976

Thrugelmir said:

Time is ticking away.  Unless you are guaranteed a return. Repaying the mortgage is the risk free option. Particularly if the income from the "Gig" is going to cease. 

If the mortgage wasn't at such a great rate I'd definitely pay it off, but I'm thinking that even premium bonds are likely (but not guaranteed as per your point) to give me a better return. But then there is the psychological effect of paying it off too.

I also think that if everything went wrong having access to that cash could be useful, but really that's just disaster thinking.

Cheers

stuart746

Pat, if we get to disaster scenarios, access to cash will be the last thing on your mind. It is a short step to hiding it under the mattress. As a conservative investor I get it, but you can afford to loosen up. As a matter of interest, why will the 'gig' income dry up in a few years (and will you be able to replace it)?

mark13

Hi Pat, I wonder what the cash value of the DB pension would be  and the performance of your ISA funds and whether you are comfortable managing them yourself. On paper I think you are in a good position even with a mortgage. You've got good income, good cash backup and a few years to add to your ISA and pension pots. Paying of the mortgage does give some reassurance, in my case I I took a y5r fixed  rate mortgage which I am allowed to pay of 10% each year. So I can reduce my mortgage and keep some invested in ISA's for better returns.  Also why aren't you doing 40K to you and your wifes ISA ? 

Ray_Singh-Blue

One way of looking at it:
£160K of cash, when considered with your £100K of shares, gives a 40:60 balanced portfolio of £260K which has likely handsomely out performed your mortgage over the last few years.

Another way of looking at it:
Ignoring pensions, you have a £450K net wealth, split roughly like this:
Property 70%
Stock 25%
Cash 35%
Bonds -30% (mortgage behaves like negative bond)

Another way of looking at it:
You have a £600K portfolio with 33% leverage.

Pretty healthy