Inheritance money advice please

BooJewels

Leeslady said:

BooJewels said:

@Leeslady - if I may ask - were you offended by the post I made yesterday afternoon and complain about it?  I wondered why it had been removed?

I didn't see a post? Was at work so didn't check that often. Am curious though....I'm not easily offended! 

I'm glad that I didn't cause offence, at least to you, but someone clearly had it removed - so I'll not repeat the content.

badger09

@Leeslady
If you can pay additional 10% off your mortgage annually, I’d give that serious consideration. Especially if some of the interest on your inheritance savings will attract 40% tax. 

Leeslady

badger09 said:

@Leeslady
If you can pay additional 10% off your mortgage annually, I’d give that serious consideration. Especially if some of the interest on your inheritance savings will attract 40% tax. 

Yes, of course. Hadn't even considered that. Thanks.

r6mile

Even if you only were paying 20% tax, the N&SI 6.2% gross equals 4.96% net, which is very close to your mortgage rate.

So if I were you, I might:

1) pay just enough AVCs (or additional pension somewhere, ie via a SIPP) to avoid entering the higher rate band.
2) pay 20k per year into an ISA - probably a long-term cash ISA that pays more than your mortgage rate 
3) overpay your additional 10% mortgage per year
4) put the rest into a high interest one year fixed-rate savings account like the 6.2% bond.

And then every year, funnel from 4 into 2 and 3.

Once you get to the end of your mortgage term, you could see how much you have into 2 and 4 to then pay off a big lump sum to your mortgage.

Albermarle

Leeslady said:

Thanks all. Have checked mortgage and only 10% repayment allowed fee free, so will pop it in savings for a few years when it eventually lands and then pay a chunk off when we re-fix.

I will need to explore the tax implications of sitting 120k in savings for 3-4 years as suspect this will cost me though.

Will explore AVC pension options once money lands and loan is cleared, my current pension payments bring me under the 40% threshold, but I go to top of my pay band in 18 months which will take me well above the threshold so even with my current pension payments I'll be into high rate tax.

Anticipating keeping 20k in an ISA anyway, as a rainy day fund. 

For a 40% taxpayer you should also consider Premium Bonds. Although you get a random number of prizes each month, if you have the full £50K allowed for a few years, it should all average out. The current effective prize rate for a large holder is about 4% with no tax to pay.