Lump Sum Investment

bloke91

Hi all,

I have come into some money, around 150k. Looking for some advice on what to do with it in order to provide more comfortable in retirement, potentially allow me to retire earlier and also as an investment further down the line for my children.

I have been considering investing in a second property but conscious of the tax implications with me being a 40% tax payer.  I have since heard people are setting up limited companies to buy or investing in holiday homes to help with tax implications.

Other considerations I had is using it to top up my pension and stocks and shares isa particularly with the tax relief benefits.

Welcome your thoughts and thanks for your time.

Have summarised some additional background below:

·         I am married with two children.

·         I am aged 41 and a 40% tax payer.

·         Both myself and my wife in full time employment.

·         Mortgage will be paid off in 10 years time and we have good jobs and both me and my wife have 9 months of our monthly salary in cash as an emergency fund.

·         In terms of pensions my wife has a good local government employer pension on top of the standard government pension.

·         In addition to the standard government pension.  I have a local government employer pension yearly income expected to provide 8k a year from a previous job.  Also a 100k pot in a defined contribution stock market based pension, where my employer pays 8% and I pay 10%. i.e Combined total of 18%

·         No other debt.

Welcome your thoughts, experiences and suggestions.

Thanks in advance.

jimjames

Paying pension contribution to get below 40% tax might be a good idea if that's viable

Dazed_and_C0nfused

Property can be an awful lot of hassle.  Have you read up on the responsibilities a landlord has?

Investment choices aside pension contributions are a much simpler choice and with the potential higher rate relief, impact on tapered Personal Allowance and HICBC (if relevant) you might be surprised just how tax efficient they are.

Albermarle

Other considerations I had is using it to top up my pension and stocks and shares isa particularly with the tax relief benefits.

You only get tax relief on pension contribution, not on contributions to a S&S ISA.

They are both tax protected, in that any gains are not liable for tax, but that is not the same as tax relief.

 I am aged 41 and a 40% tax payer.

As said 40% tax relief on pension contributions is pretty generous. However to be clear  you can not get more 40% tax relief than 40% tax you pay. 

fcjf

In your shoes I would be looking at the following;

• Contribute more to your pension to get below the 40% bracket, if your work scheme is salary sacrifice then via that (if happy with the investment choices available) or if not consider opening a SIPP.
• Contribute more to your Wife's scheme if possible and beneficial.
• The above would reduce tax liability and potentially open up child benefit payments  
• Contribute to yours and your wife's ISA's
• Open S&S ISA's for your children.
• Pay off your mortgage when out of current fixed rate (if you're in one) use the available money usually reserved for the mortgage payment to maintain higher pension contributions.

As a landlord of 20 years what I wouldn't do is invest in property, not that it hasn't been a reasonable investment for me over the years but due to increased interest rates, ever increasing burdens on landlords, uncertain future tax regimes on property but primarily dealing with tenants, unless you have excess time on your hands and really want to give it a go and have a thorough business plan developed for it I'd avoid it.   

NSG666

Crikey you must have a very stressful job that has aged you from age 38 when you posted in July last year to 41 this year!

bloke91

fcjf said:

In your shoes I would be looking at the following;

• Contribute more to your pension to get below the 40% bracket, if your work scheme is salary sacrifice then via that (if happy with the investment choices available) or if not consider opening a SIPP.
• Contribute more to your Wife's scheme if possible and beneficial.
• The above would reduce tax liability and potentially open up child benefit payments  
• Contribute to yours and your wife's ISA's
• Open S&S ISA's for your children.
• Pay off your mortgage when out of current fixed rate (if you're in one) use the available money usually reserved for the mortgage payment to maintain higher pension contributions.

As a landlord of 20 years what I wouldn't do is invest in property, not that it hasn't been a reasonable investment for me over the years but due to increased interest rates, ever increasing burdens on landlords, uncertain future tax regimes on property but primarily dealing with tenants, unless you have excess time on your hands and really want to give it a go and have a thorough business plan developed for it I'd avoid it.   

Very useful and great to get thoughts from a landlord of 20 years. Appreciated, thanks.

bloke91

NSG666 said:

Crikey you must have a very stressful job that has aged you from age 38 when you posted in July last year to 41 this year!

A typo is easily done. Thanks for the useful post :-)

jaceyboy

Always pay your mortgage off…

badger09

jaceyboy said:

Always pay your mortgage off…

Psychologically - maybe
Financially - not always best 

jaceyboy

badger09 said:

jaceyboy said:

Always pay your mortgage off…

Psychologically - maybe
Financially - not always best 

Financially not best? I would rather own my house and no one can take it from me, also I’m immune to mortgage interest rate rises…