What to do with spare money? ISA / pay off mortgate / other?

PJD

I have about £7k sitting in my current account.  My S&S & regular ISA are maxed for the current tax year.  My mortgage IR (£52k) is 1.6% (expires in Oct '22).

Shall I just pay off the mortgage (saving me about £1.50 per month per £1k paid off!) - which almost doesn't seem worth it.

Let it sit there until I can add it to my S&S ISA (I presume that now is a good time to invest given that shares are cheap?)

Or, - all ears to a better suggestion?

Many thanks for reading.

dunstonh

For most people, the pension wrapper beats ISA in terms of tax efficiency.  You mentioned ISA but not a thing about your pension.

MX5huggy

Pension, Pension, Pension

Did I mention pension? It’s the likely answer. 

PJD

Thank you.  Sorry I should of mentioned, - I have just upped my pension contribution (I can only change it once a year at Xmas), - I am putting 30% of my wages into a company Standard Life pension (invested in both Black Rock & Vanguard funds).

So I am looking for something else to do with the cash...

P1Fanatic

When you say the mortgage expires Oct '22 do you mean the current fixed term ends or its paid off fully? I'm assuming the former as otherwise a hefty monthly payment. If you have maxed your pension limit annually and there is no cost to overpay your mortgage (fixed rates often cap at 10% max of starting balance each year) then I would personally be paying it off as gives you a bit more flexibility should rates start rising come renewal time (assuming the mortgage term uses overpayments to reduce term rather than just the monthly payment). Otherwise just wait a month and use it towards next years ISA allowance.

PJD

Yes the fixed rate expires, so I'll have to remortgage.  

I do have enough to pay it off completely, but the bulk of that money is in a Vanguard Lifetrategy 80, - I figured i'd be better off that way

It almost seems a waste to pay off the mortgage given that rates are so low, (I am mindful that rates will be a little higher come Oct) - so I was looking for other avenues that my money might work a bit harder for me. 

Thanks for your thoughts

MX5huggy

You’ve covered pension but remember you can open a SIPP separately from your works pension. Putting that aside. 

You would be looking to fill the ISA come April I would not bother with Cash ISA. 

Then you have £2k per year dividend allowance and £12300 Capital Gains Tax allowance so you should be able to run a General Investment Account of £100k plus without creating a tax liability.

InvesterJones

PJD said:

Thank you.  Sorry I should of mentioned, - I have just upped my pension contribution (I can only change it once a year at Xmas), - I am putting 30% of my wages into a company Standard Life pension (invested in both Black Rock & Vanguard funds).

You can still buy a SIPP assuming you have some pension contribution limit left after the above.

Or you could stick it somewhere temporary (savings or regular investment account if you're concerned about missing out on stocks rising) and then in a few weeks start next year's ISA with it (you're unlikely to go over CGT allowance after a few weeks investment on 7k )

dunstonh

So I am looking for something else to do with the cash...

Why? If its the best option then you should go with it.  You dont need to use your workplace pension.  You can use the platform you hold your ISA with (if its a whole of market platform).

Pecking order puts pension above ISA.  Both share the same funds and same charges.    So, for most people its 1) pension 2) ISA 3) GIA.