Another Investing what would you do - But with Inheritance

katsu

Remember you can pay more than your 10% that gets their 7% match. A total of £40k a year (in total, so from you and them) can go into your pension, saving tax and NI, and there is provision to use money from previous years. So... its worth thinking about putting your pension up further. At least to be aware you can. 

I am paying in waaaaaay over the employer match in my work as the tax savings are great for a higher rate tax payer and I don't want to hang to work full- time into my late 60s so I feel its best to get the money in as early as possible. 

Albermarle

katsu said:

Remember you can pay more than your 10% that gets their 7% match. A total of £40k a year (in total, so from you and them) can go into your pension, saving tax and NI, and there is provision to use money from previous years. So... its worth thinking about putting your pension up further. At least to be aware you can. 

I am paying in waaaaaay over the employer match in my work as the tax savings are great for a higher rate tax payer and I don't want to hang to work full- time into my late 60s so I feel its best to get the money in as early as possible. 

I think it is probably fair to say that many of the regular posters on here are doing the same , or did it before and have now retired .
As you say best to get on with it before the plug on this 40% tax relief is probably pulled one day by HM treasury , as it costs them a lot.

bostonerimus

There's no need to get professional advice, it's just common sense. 
Stop leasing your cars.
Pay more into your pensions to get the tax saving and employer contributions and live off the inheritance for a while. I think the annual max amount is 40k.
What is the interest rate on your mortgage? I'm a fan of overpaying a mortgage as it is guaranteed to save you interest and you will hopefully get some capital appreciation too. Also not having to pay a mortgage helps a lot in budgeting and can allow you greater freedom.
Then max out your ISAs

funkyfin2000

Hi All,

Thought I'd update on what's happened and what we've decided to do broadly...

So first thing - money was paid £175k and have instantly stuck it in the Chase 1.5% rate account for the min - yes should split out due to the 85k protection at some point but for now quick and easy to do and maximise quick interest on it. It's in the wife's name as well as currently she pays no tax, so should be pretty minimum impact.

Think what we will do next, is start to pay off the mortgage with overpayments. Can pay around 10% a year whilst still locked in to a 1.74% rate for the next 4 years. With the aim to almost be mortgage free by the time the rate comes to an end. 

Secondly, we will likely stop leasing the car next year when it ends, and get off at that merry go round of PCP/PCH and buy a relatively new, but one with depreciation off car to last us a good few years. That will be a capital outlay but will be our best option.

All of this to aim to give us back around £1500 a month once everything is paid off in 4-5 years time.

This will completely zero the cash inheritance (we will keep some for slush fund) but will allow us to get debt free which is the main millstone around the neck to then help us invest the cash we free up.

mrsplinter

funkyfin2000 said:

Hi All,

Thought I'd update on what's happened and what we've decided to do broadly...

So first thing - money was paid £175k and have instantly stuck it in the Chase 1.5% rate account for the min - yes should split out due to the 85k protection at some point but for now quick and easy to do and maximise quick interest on it. It's in the wife's name as well as currently she pays no tax, so should be pretty minimum impact.

Think what we will do next, is start to pay off the mortgage with overpayments. Can pay around 10% a year whilst still locked in to a 1.74% rate for the next 4 years. With the aim to almost be mortgage free by the time the rate comes to an end. 

Secondly, we will likely stop leasing the car next year when it ends, and get off at that merry go round of PCP/PCH and buy a relatively new, but one with depreciation off car to last us a good few years. That will be a capital outlay but will be our best option.

All of this to aim to give us back around £1500 a month once everything is paid off in 4-5 years time.

This will completely zero the cash inheritance (we will keep some for slush fund) but will allow us to get debt free which is the main millstone around the neck to then help us invest the cash we free up.

You have some time with the £175k as FSCS protection covers temporary high balances for up to six months. I would reconsider overpaying now as you can get a higher interest rate on 1-year and above fixed rates savings accounts. You can get 2.8% on a 3-year fixed rate savings account.

[Deleted User]

Pension.  A no-brainer.  But for any cash you want to keep for instant access I would forget about these crumby savings accounts and get it out of sterling now.  The pound will be faring worse than other currencies because they don't have brexit stagflation we have to deal with.  

Albermarle

[Deleted User] said:

Pension.  A no-brainer.  But for any cash you want to keep for instant access I would forget about these crumby savings accounts and get it out of sterling now.  The pound will be faring worse than other currencies because they don't have brexit stagflation we have to deal with.  

OP - If you go back through the posts, you will see that investing via a pension to get the tax relief is strongly recommended. However you do not mention this in your update.

However the suggestion above to speculate in currency movements is an outlier ( to put it politely !) 

Exodi

Albermarle said:

OP - If you go back through the posts, you will see that investing via a pension to get the tax relief is strongly recommended. However you do not mention this in your update.

The OP mentions that they'd increased their pension contributions to receive maximum employer contributions.

I think all agreed that this is the absolute first thing that should have been done, as others have said, it's free money.

Unless you're asking if the OP has gone beyond this, which would also be a fair question (longer term, using all your money to pay off a 1.74% loan to free up future cash doesn't make much sense while you pay 40% in tax on earnings, unless OP intended to increase their pension contribution to 20%+ in the absense of a mortgage). 

funkyfin2000 said:

Thanks all - I've just literally ask my employer to up pension payments to10% so I get their 7%...

Albermarle

Exodi said:

Albermarle said:

OP - If you go back through the posts, you will see that investing via a pension to get the tax relief is strongly recommended. However you do not mention this in your update.

The OP mentions that they'd increased their pension contributions to receive maximum employer contributions.

I think all agreed that this is the absolute first thing that should have been done, as others have said, it's free money.

Unless you're asking if the OP has gone beyond this, which would also be a fair question (longer term, using all your money to pay off a 1.74% loan to free up future cash doesn't make much sense while you pay 40% in tax on earnings, unless OP intended to increase their pension contribution to 20%+ in the absense of a mortgage). 

funkyfin2000 said:

Thanks all - I've just literally ask my employer to up pension payments to10% so I get their 7%...

I did not reread all the posts and was just commenting that in their update, pension was not mentioned, despite nearly every poster mentioning it.
It is good that they are now at least getting max employer contributions. A 17% contribution rate is not bad for someone in their 40's, but previously was only 8%, so probably some catching up needed . Especially as pension contributions are so tax beneficial for a 40% taxpayer as you say .

funkyfin2000

thanks all - yes as you say - I did increase my pension contribution to maximise earnings from employer.

Could I ask for more information on what else to do with the pension over and above paying off the mortgage - I have to say I'm a little green on this area? I also want to think about my wife - this inheritance is actually hers not mine - she currently has a 2 day a week job - low income, doesn't pay any NI or Tax due to salary and gets a Local Authority based pension. Is there any benefit helping her out rather than me?

Sorry to ask!

Rich