What to do with £250,000

SavvySaver24

I'm looking for some starter advice on how to best increase the value, over the medium to long term (around 12 to 18 years), of £250,000 (part inheritance, part bonus / savings).

I'm not sure whether it's worth seeking IFA for this amount of money or whether Financial Advisors are more for people with a lot more money than this?

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Bit more information to hopefully add context....

1. I am early 30's, getting married this year, no plans to ever have children.

2. I jointly own a property with my partner, which has a mortgage of around £280,000 left on it, and while we overpay around £250 a month on the mortgage I don't want to use the money to pay off the mortgage at this stage. Including our overpayment the mortgage should be paid of by the time we're 48 (early if we up our overpayment which we plan to do).

3. To date I have managed to get around £80k into ISA's and will get another £40k in the 2024/2025 Tax Year (I use my partner's ISA allowance as well as my own). All ISAs are currently earning between 4.8% to 5.1% in interest.

4. Money not in ISAs is sitting in various savings accounts earning between 3.8% to 4.6% interest rates. I'm a higher rate tax payer so paying 40% tax on the interest earnt.

5. My employer contributes 11% to my pension and I contribute 7%. I don't want to increase this amount as I want to retire early (and be able to access the cash I've put away, not have to wait until 58, or potentially later by that point). Current projected value is around £600,000.

6. We're happy in the property we're in and don't need to move to upsize though in about 8 years may consider an extension.

7. I earn reasonably well and can save around £600 a month from my salary so don't need to draw on this £250,000 in the short term. This is on top of around £800 a month between us that goes into joint savings after all bills are paid.

8. I will always keep at least £25k in an easy access savings account should I need it (I.e. if I was to be made redundant). 

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Main goal is to be able to stop working in a 9-5, 5 days a week by 45 to 50. It's not that I don't want to work but we want the freedom to be able to travel when we want for as long as we want without being beholden to Annual Leave. Travel is hugely important to us, and definitely our biggest expense but we are fairly frugal in all other aspects of day to day life.

I've been looking into Stocks & Shares ISAs but with interest rates still reasonably high the difference doesn't seem as significant as I had expected? Is it better to consider Stocks & Shares ISAs when Cash ISA Rates aren't as favourable?

In general I have a medium appetite to risk and would much rather "spread" my risk even if the returns aren't as high. But I'm hoping the length of time I'm talking about (12 to 18 years) with counteract that.

Any starter advice greatly appreciated as I don't want to realise 10 years down the line my money could have been working a lot harder and growing.

MX5huggy

You’re clearly an investing genius, you started with £250k by point 7 you’ve got £300k!

You should be investing more (I say more because you’re pension is certainly already is) in Stocks and Shares. If want / need and IFA to hold your hand to get going then I’m sure you would find one that would be interested in you. But I don’t think it’s necessary. Here, YouTube, couple of websites and maybe a book or 2 should be enough to get the basics.

3 things that didn’t know, built my confidence in investing:-

Stockmarket risk is reduced by time over the longer term (10 plus years) stock markets always rise.

Index funds (more accurately Global Index funds) the choice of funds was bewildering, all this talk of, past performance is not an indicator of future, don’t choose the “fashion investment” look for a good investment manger/ don’t follow a manger etc. Index funds get rid of all this, you’re going to get bang average returns, (average is good) and they are cheap. 

Don’t think about timing the market, just invest what you can when you can. Pound Cost averaging smooths out the ups and downs. You must not react to the market the best performing investors are those that just leave everything alone. When markets fall comfort yourself that that means there’s a sale on and what you buy is cheap. 

So I would invest your new ISA allowances in a global index S&S ISA whether  £40k on April 6th or decide to do £3333 per month for the year is up to you (it’s all up to you). 

Pension- don’t dismiss putting more in the 40% tax relief is such a good offer. And while £600k seems a good pension it’s at best a guess and does it consider inflation? Inflation basically halves the value of anything over 30 years. 

Understand what your pension is invested in do you want to change?

Mortgage- when’s the rate expire? What’s the plan?. 

SavvySaver24

Sorry the difference was down to a) in my head removing the £25k as I'm not including that as that's just staying in emergency funds b) not including my forecast bonus and c) Rounding down (it's actually £265k but some of that will be going towards upcoming wedding and honeymoon).

Will read through all your advise and respond - thank you.

SavvySaver24

Mortgage has 2 years fix left to go and then we'll remortgage. Not sure yet what the plan is as will depend on rates how long we fix for.

Pension, I admit I'm clueless here, it's managed by L&G through my workplace pension.

That makes sense re riding out the ups and downs and that if you can hold your nerve for the long term then you'll see the returns. I assume in that same thinking whether it gets stuck in one lump sum, or per month really doesn't make much difference?

I'm tempted by the Stocks and Shares ISAs that are managed for you - I don't think I understand anywhere near enough to do it all myself. Any recommendations aside from Nutmeg, Vanguard and Wealthify?

jay_ftw

SavvySaver24 said:

Pension, I admit I'm clueless here, it's managed by L&G through my workplace pension.

I'm tempted by the Stocks and Shares ISAs that are managed for you - I don't think I understand anywhere near enough to do it all myself. Any recommendations aside from Nutmeg, Vanguard and Wealthify?

Re: pension you’ll be in a default fund, I’d address that first and quickly. Seeing as you’re in early 30s the difference in pot size come retirement could be 10s of thousands. 

Re: S&S ISA just spend a week or so doing some research, as previously mentioned YouTube, podcast’s, books even here will teach you a lot. It’s not hard and why pay extra in fees when you really don’t need to. Again over your estimated horizon we’re talking thousands again! 

On-the-coast

I’m puzzled by what you mean by a S&S ISA that’s managed for you?
over your timescales by far the least risk option (least risk even than cash savings) is to buy a stock index tracker inside any ISA (like VLS100). Most ISAs will support this. There’s no managing required. 

For simplicity I just opened an ISA via Lloyds - you can probably save a few pounds elsewhere, but that’s immaterial to the main point - ie starting now!  Before the end of the current tax year. 

jay_ftw

 On-the-coast said:

I’m puzzled by what you mean by a S&S ISA that’s managed for you?
over your timescales by far the least risk option (least risk even than cash savings) is to buy a stock index tracker inside any ISA (like VLS100). Most ISAs will support this. There’s no managing required. 

For simplicity I just opened an ISA via Lloyds - you can probably save a few pounds elsewhere, but that’s immaterial to the main point - ie starting now!  Before the end of the current tax year. 

I assume he means a robo type investment or maybe a major banks balanced/adventurous fund. All of which will have have higher fees attached than the VLS you suggested which again will have fees double the cost of a global tracker.

Pretty sure OP has maxed out current financial years isa allowance so a couple of weeks to get a plan in action.

barnstar2077

Don't use a robo investor.  I use Vanguard's FTSE Global All Cap index fun on their own platform (I have an ISA and a SIPP.)  With your timeframe it would be ideal.

LHW99

There's the option to put part into premium bonds for a year or so. The nominal "interest" rate is low, but there is always a chance of a big prize, and it would be tax free.

Albermarle

I'm not sure whether it's worth seeking IFA for this amount of money or whether Financial Advisors are more for people with a lot more money than this?

You would probably be a typical client for an IFA. Having £250K now in your 30's and adding significant amounts each month will put you in the Top few per cent of society financially anyway .

Main goal is to be able to stop working in a 9-5, 5 days a week by 45 to 50

Retiring as early as that is relatively unusual,  and means a very large pot of money needs to be built up to potentially last both of you 50 years, OR you can live off a relatively modest income for the last 50 years of your life.

I would think the earlier you want to retire, the more you need to understand investing better, and/or employ an IFA.

If you were looking to retire say at 60, then probably with your salaries and some basic common sense, you could 'drift along' a bit more, and still be OK.

Higher rate tax relief on pensions is a 'gift' that should be utilised as much as possible. Although the money is not accessible until your late Fifties, you will still need plenty of money then for the rest of your retirement.

JonnieF

Yes from a purely financial pov the higher rate tax relief on pension contributions is the biggest bang for your buck. And better than overpaying on your mortgage. 

On the other hand …it’s much easier to pay down your mortgage when the amount is a specific target that you can aim to overcome.  Our minds are never particularly logical. I know I was hugely relieved to stop paying a mortgage- even when I didn’t have enough pension saved at the same time.

if you want to travel more the easiest way to do that is to change to being self employed in your 40s. That’s more a question of what you do for a living than your finances. Or maybe you just want to reduce your hours? 

Either way - you are already doing amazingly well for your age. Well done!