Best use of £50k

savingsimprover

Since moving to a cheaper area I have £50k in the bank. I am mid forties and I’m not sure what is the best thing to do.

I want to redevelop and extend my house in the next year or so (will make a decision on that next summer) that will likely cost over £100k.

However, I feel really fortunate to have this money in cash right now- and don’t necessarily want to spend it all on a costly renovation. I was thinking when and if the time for renovation comes I could use a loan for that. And not blow all the money I have in cash in case I need it.

My friend who is an accountant recommended I put as much of it as I can into my pension. I think that does sound a good idea, but does that mean I am putting the money away and can’t benefit from it until I retire. That almost seems a waste while my children are young.

I’m interested to hear what others would recommend.

ColdIron

Are you a higher rate taxpayer?

savingsimprover

No I’m not 

DannyCarey

You could dump it in the new 2.75% saver account Santander has, or invest it.. 
Or go ahead with your extension. Only you know what will be best for you.

xylophone

Short of circumstances you would prefer not to contemplate, unless you have a "special occupation"/protected pension age, your pension will not be available to you before you reach age 57.

https://techzone.abrdn.com/public/pensions/Tech-guide-pension-age#:~:text=Furthermore a scheme member with,as low as age 35.

fourmarks

It's an individual choice based on your assessment of your current needs, future desires and risk aversion levels.

I have no financial qualifications, no great understanding of the subtleties of investment nor any finesse in such matters but, in my circumstances, I would put £20k into a stocks and shares ISA at today's levels hoping for a good return over the next 5 years (minimum).

£10k would go into the highest 12 month fixed interest account available. £10k would go into the highest 6 month fixed interest account available.  £5k would go into the highest 90 days fixed interest account available. All accounts to be recycled as future interest rates dictate. The remaining £5k I would waste on enjoying life in whatever form that make take. All very amateurish I'm sure, but at least it would make me feel like I was being proactive.

I've ignored pension investment as I am secure in that area. Wiser heads will agree with your accountant's suggestion that you invest heavily in your pension. I suggest that you listen to them.

Albermarle

My friend who is an accountant recommended I put as much of it as I can into my pension. I think that does sound a good idea, but does that mean I am putting the money away and can’t benefit from it until I retire. That almost seems a waste while my children are young

Your children might prefer that their parents have sufficient income to enjoy life after they retire. Or that they can afford to retire early, to look after Grandkids etc. instead of having to work until they are 70.

It is usually better to find a balance between spending today/ spending over the next few years/ saving for retirement. You are already mid Forties...........

Noneforit999

I get the whole 'add to your pension thing' and sure, you should certainly contemplate adding some spare funds to it but the reality is, live is for living and you may not be around to see it.

It sounds very dramatic but my wifes mum died this year at 56 very unexpectedly, it made me realise that whilst saving for retirement is important, I want to enjoy my life now so certainly won't be sticking every spare penny I have into a pension I may never see.

GazzaBloom

Personally, I would put it all towards the extension (assuming you have an emergency cash fund) and borrow as little as possible. In fact, I would not borrow at all and revise my plans. Debt ties you to an elevated required income floor for a long time, which nearly saw me come unstuck twice in my working life due to unexpected redundancies. It was after the second one that I got serious about shifting debt.

Everyone's circumstances are different, but having no debt is liberating, and while reducing it aggressively it felt really good.

Albermarle

Noneforit999 said:

I get the whole 'add to your pension thing' and sure, you should certainly contemplate adding some spare funds to it but the reality is, live is for living and you may not be around to see it.

It sounds very dramatic but my wifes mum died this year at 56 very unexpectedly, it made me realise that whilst saving for retirement is important, I want to enjoy my life now so certainly won't be sticking every spare penny I have into a pension I may never see.

We all know someone who has died before their time. I had a friend who dropped dead out of the blue in his mid 40's.
These dramatic events tend to influence our thinking a lot more than all the people you know who live to a ripe old age.
Someone in their Mid 40's will live on average to around 84, meaning 50% will live longer.
Of course everyone has a different view on living for today, or tomorrow, but people underestimating their own life expectancy, is one of the major issues leading to inadequate pension provision.

enthusiasticsaver

savingsimprover said:

Since moving to a cheaper area I have £50k in the bank. I am mid forties and I’m not sure what is the best thing to do.

I want to redevelop and extend my house in the next year or so (will make a decision on that next summer) that will likely cost over £100k.

However, I feel really fortunate to have this money in cash right now- and don’t necessarily want to spend it all on a costly renovation. I was thinking when and if the time for renovation comes I could use a loan for that. And not blow all the money I have in cash in case I need it.

My friend who is an accountant recommended I put as much of it as I can into my pension. I think that does sound a good idea, but does that mean I am putting the money away and can’t benefit from it until I retire. That almost seems a waste while my children are young.

I’m interested to hear what others would recommend.

I would not take a loan of £100k out in my 40s so I would use it towards the house extension.