Redundancy Payment - how best to save or invest?

andyslowrider

I'm being made redundant this month.  My settlement package, after tax, will be in the region of £55k.  I have a new job lined-up with an immediate start.  I expect to need to spend £5k to £10k of my settlement on a newer, more reliable car to cope with my increased daily commute but otherwise do not need or want to spend any of the money.  My somewhat predictable question is therefore what are the best way(s) to save or invest this money?

My current situation is:
Age 47 (married with 2 teenage children)
Savings ~£3k
CC Debts ~£2k (£1k on 0%)
Mortgage  ~£177k fixed at 3.2% for 22 years
Pension pot ~£125k 

All thoughts and suggestion gratefully received.

Dazed_and_C0nfused

andyslowrider said:

I'm being made redundant this month.  My settlement package, after tax, will be in the region of £55k.  I have a new job lined-up with an immediate start.  I expect to need to spend £5k to £10k of my settlement on a newer, more reliable car to cope with my increased daily commute but otherwise do not need or want to spend any of the money.  My somewhat predictable question is therefore what are the best way(s) to save or invest this money?

My current situation is:
Age 47 (married with 2 teenage children)
Savings ~£3k
CC Debts ~£2k (£1k on 0%)
Mortgage  ~£177k fixed at 3.2% for 22 years
Pension pot ~£125k 

All thoughts and suggestion gratefully received.

If that is your only pension provision (other than the State Pension) then adding to that would seem a sensible choice.

And tax efficient, especially if you will be a higher rate payer in the tax year you contribute.

eskbanker

Paying off interest-bearing unsecured debt is the obvious place to start, but that only takes care of £1K!  Are you able to make any mortgage overpayments without penalty?

Worth building up your savings to establish a more sizable pot that's easily accessible in the event of emergencies, etc, but I imagine that getting as much as you can into your pension will be worth considering, unless you have other pots likely to be available to you at retirement?

jimjames

andyslowrider said:

My current situation is:
Age 47 (married with 2 teenage children)
Savings ~£3k
CC Debts ~£2k (£1k on 0%)

First query is why you have £1k of credit card debt not on 0% and £3k of savings,. It makes no sense to pay interest at 30% and earn it at 3%!

Pension could be one option for some of it but emergency fund would seem to make sense as savings are pretty low.

Zerforax

May be worth seeing if you can contribute some of it into your pension before it is taxed? If you're getting 55k, it's already pushing you into the higher tax rate of 40% I presume.

So if the total is ~£90k settlement before tax then if you were able to make the annual £40k limit into your pension?

jaypers

Looking at the fact that you are walking straight into another job, it would make sense to me to put as much of your redundancy payment over and above the £30k tax free amount into your pension. Provided that Jeremy doesn’t do anything nasty with pensions, you’ll get 25% of it back tax free from 55 if you so wish. 

P1Fanatic

As above clear your £1k debt and boost your pension pot. £125k sounds too low at age 47 unless you a) have other investments for retirement b) plan to work right up to state pension age 67.

Albermarle

Zerforax said:

May be worth seeing if you can contribute some of it into your pension before it is taxed? If you're getting 55k, it's already pushing you into the higher tax rate of 40% I presume.

So if the total is ~£90k settlement before tax then if you were able to make the annual £40k limit into your pension?

Presumably £30K of the £55K will be tax free redundancy pay off. Without knowing OP salary before  redundancy and in the new job, it is difficult to be sure the max  they can add to a pension this tax year ( even if they wanted to)