Inheritance money advice please

Leeslady

Hi,

Im looking for some general advice please regarding inheritance.
I’m coming into some money -approx 150k. Once I’ve paid off a few bits, put aside money for kids and a rainy day fund of three months pay, I’ll be left with about 120k.

I am 51. Retirement age is 67.

I have a new mortgage over 23 years (started again after a nasty and expensive break up a few year ago). Mortgage is circa 215k on a fixed 5 year deal.

I have an adequate but not amazing nhs pension and also full state pension. Hubby has no pension apart from state pension (I know. We’ve not been together long)

I’m almost hitting threshold for higher rate tax. Husband is self employed and doesn’t earn much.

id love to be able to invest this money in something interesting, like a holiday let.

BUT I think I need to pay a huge chunk off the mortgage don’t I? The MSE calculator reckons if I pay 100k off the mortgage I’ll shave 13y 8m off the mortgage, meaning it will be cleared when I’m 60 instead of 74. I’ll save 112k in interest, and won’t pay 211k in mortgage payments. 

It’s a no brainer, right? Put it in fixed term savings to the end of the fixed rate deal, then clear a chunk? 

xylophone

I’m almost hitting threshold for higher rate tax. 

Consider AVC?

https://www.nhsbsa.nhs.uk/member-hub/increasing-your-pension/money-purchase-additional-voluntary-contributions-mpavc

Hubby has no pension apart from state pension

Consider opening personal pension?   

https://www.litrg.org.uk/tax-guides/tax-basics/do-i-have-join-pension-scheme/do-you-know-how-tax-relief-your-pension

Something like  this might suit?

https://www.vanguardinvestor.co.uk/investing-explained/what-are-target-retirement-funds

With regard to paying off some of the mortgage, if you can get a higher rate (ISA/ non ISA) than you are paying on your mortgage, you could consider it.

https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

https://www.moneyhelper.org.uk/en/savings/types-of-savings/tax-on-savings-and-investments

km1500

what interest rate is your mortgage?

Leeslady

km1500 said:

what interest rate is your mortgage?

Currently 4.78% fixed for five years. I won’t get the inheritance for probably six months as going through probate, by which time mortgage will have four more years at the fixed rate. 

Leeslady

Thanks xylophone. Lots to think of. I will certainly look to increase my pension contributions as soon as I get over the higher rate threshold. 

Trying to say the next bit in a sensitive way…..that doesn’t make me sound like a horrific !!!!!!, cause im not, just pragmatic……
we’ve not been married very long and have kids separately. I have no contact with his kids. Im not buying him a private pension from my inheritance. 😬 

Exodi

Leeslady said:

I have an adequate but not amazing nhs pension

Leeslady said:

Hubby has no pension apart from state pension

If you both had fantastic pensions, then maybe you could have fun punting money on things like foreign property, but given your circumstances putting a significant amount in pensions seems like a no-brainer to me.

If you are approaching higher rate tax, then making AVC's sounds like a win/win.

Paying off the mortgage doesn't sound like a bad second option.

Leeslady

Exodi said:

Leeslady said:

I have an adequate but not amazing nhs pension

Leeslady said:

Hubby has no pension apart from state pension

If you both had fantastic pensions, then maybe you could have fun punting money on things like foreign property, but given your circumstances putting a significant amount in pensions seems like a no-brainer to me.

If you are approaching higher rate tax, then making AVC's sounds like a win/win.

Paying off the mortgage doesn't sound like a bad second option.

Thanks. Lots to think about. My only anxiety about adding to pensions is that we don’t get to retire until 67. 75% of our parents were dead by 65. If I pay down the mortgage it will be paid off at 60. 100k won’t give me enough income in a pension to bring that forward at all

Keeping a huge mortgage which won’t end until I’m 74 (if I get that far) worries me far more than living on my nhs pension. 

I think I need to speak to an IFA to see the different options, and the impact of those decisions. 

Albermarle

id love to be able to invest this money in something interesting, like a holiday let.

It might be interesting but can be a lot of hassle and not necessarily very profitable. Probably best to do something boring with the money, like adding to your pension or paying off your mortgage.

I am 51. Retirement age is 67.

There is no such thing as a retirement age in the UK. You can stop work at 50, 60, 70 or even 80.When you retire is of course affected by health and financial issues, but there is no fixed date.

I think I need to speak to an IFA to see the different options, and the impact of those decisions. 

IFA's are usually more for when you need advice about investments, pensions etc. Normally someone with a public sector pension, looking for one off advice about an inheritance, with the options mainly being mortgage or cash savings, may not be of great interest to them. Also you would have to pay maybe a couple of grand and then you might not follow the advice anyway.

Keeping a huge mortgage which won’t end until I’m 74 (if I get that far) worries me far more than living on my nhs pension. 

As you can see what feels right for you is as important as making the exactly correct financial decision ( if such a thing exists) 

Leeslady

Thanks Albermarle. Yes of course you are right about pension age, I meant to say state pension age. I *think* my public sector pension mirrors that routinely, although can obviously take it early if I want/need to. 

I think I’ve probably answered my own question, thanks to those on here for the space to talk it through. 

I suspect I’ll liaise with the mortgage people once the money comes through, with a view to clear half the mortgage or so, keeping payments the same, so that’s clear when I’m 60. I may invest the money until our fixed rate comes to an end in a savings account if necessary.

I will free up several hundred pounds a month (I have a car loan that I’ll also clear) and will liaise with the pension people to start to plough some of this extra money into the pension. This should then reduce my tax liability and stop me tipping into the higher tax rate.

Will also keep 3-6 months worth of income in a savings account long term. 

Does this sound sensible? Thanks all 

badmemory

It may be worthwhile to leave him with enough income to contribute to a pension.  If you have been married long enough & divorce you could be looking at pension sharing anyway.  With AVCs in your own name you could nominate your children to inherit.  Just things to think about.

IanManc

Leeslady said:

Thanks Albermarle. Yes of course you are right about pension age, I meant to say state pension age. I *think* my public sector pension mirrors that routinely, although can obviously take it early if I want/need to. 

Check with your employer's HR department when your pension is payable. The age at which your whole pension becomes payable will have increased over your working life, but  some earlier years of pension contributions may be payable earlier than others. That may mean you could retire before 67 with a work pension being paid to you based on the earliest years contributions, and then that pension would go up as you reach the payment threshold for later years contributions.