Savings, Investment or Pension???

Hexham

I am 61 and am a home owner with no mortgage. I am currently employed full time. and putting around £800 a month to my pension which sits at around 100K just now. I have about 10k in a easy access savings account. Due to a family bereavement, I am expecting between 150and 180K when probate has ended. What  suggestions do people have as to the best way to use this windfall please?

george4064

Best way to use the windfall would be to put it all into your pension, provided you have sufficient unused allowance over the last 3 tax years.

When do you plan on retiring?

sausage_time

Personally I'd max out pension first.  Depending on your earnings, I'd look at fixed term cash ISA to avoid tax on interest, and possibly premium bonds (for a bit of fun and some tax free earnings). 

Dazed_and_C0nfused

george4064 said:

Best way to use the windfall would be to put it all into your pension, provided you have sufficient unused allowance over the last 3 tax years.

When do you plan on retiring?

Unless the op is a high earner unused annual allowance isn't going to be of any help, the amount they can contribute will be constrained by their earnings.

Getting extra into the pension over a number of years is likely to be more realistic.

400ixl

As you have a decent rainy day fund already.

Options could be:

As much as your salary will allow into a pension
ISA (S&S if you plan to invest for a few years)
High interest account up to interest tax limit
Premium Bonds for anything left over

Move the interest accounts and premium bonds into pension & ISA over the next few years, keeping what you may need to spend before retirement outside of the pension.

Sarahspangles

Hexham said:

I am 61 and am a home owner with no mortgage. I am currently employed full time. and putting around £800 a month to my pension which sits at around 100K just now. I have about 10k in an easy access savings account. Due to a family bereavement, I am expecting between 150and 180K when probate has ended. What  suggestions do people have as to the best way to use this windfall please?

We (OH and I) are in a similar position. Ultimately the best return is from a pension, which you can achieve by making contributions up to your earned income until you retire.  In the short term to minimise 20% tax on savings interest over £1k you can also move £20k a year into ISAs and hold £50k in premium bonds.

In fact if your £10k savings isn’t currently in an ISA, then consider moving it. As soon as you’re expecting to go over £1k interest within a tax year then an ISA at 4% returns the same as a savings account paying 5%.

The problem with the same calculation with Premium Bonds is that the prize fund rate is currently 4.4% but it’s statistically possible - and OH has proved this! - to get a much lower return even on full holding.

There may be ‘invest to save’ opportunities to consider like capital spend on solar panels depending on the payback period. We also checked that we weren’t paying extra for anything due to spreading the cost. But at best you’re saving £10s with those.

Albermarle

400ixl said:

As you have a decent rainy day fund already.

Options could be:

As much as your salary will allow into a pension
ISA (S&S if you plan to invest for a few years)
High interest account up to interest tax limit
Premium Bonds for anything left over

Move the interest accounts and premium bonds into pension & ISA over the next few years, keeping what you may need to spend before retirement outside of the pension.

As above but also spend some of it !

Albermarle

Sarahspangles said:

Hexham said:

I am 61 and am a home owner with no mortgage. I am currently employed full time. and putting around £800 a month to my pension which sits at around 100K just now. I have about 10k in an easy access savings account. Due to a family bereavement, I am expecting between 150and 180K when probate has ended. What  suggestions do people have as to the best way to use this windfall please?

We (OH and I) are in a similar position. Ultimately the best return is from a pension, which you can achieve by making contributions up to your earned income until you retire.  In the short term to minimise 20% tax on savings interest over £1k you can also move £20k a year into ISAs and hold £50k in premium bonds.

In fact if your £10k savings isn’t currently in an ISA, then consider moving it. As soon as you’re expecting to go over £1k interest within a tax year then an ISA at 4% returns the same as a savings account paying 5%.

The problem with the same calculation with Premium Bonds is that the prize fund rate is currently 4.4% but it’s statistically possible - and OH has proved this! - to get a much lower return even on full holding.

There may be ‘invest to save’ opportunities to consider like capital spend on solar panels depending on the payback period. We also checked that we weren’t paying extra for anything due to spreading the cost. But at best you’re saving £10s with those.

The 4.4% includes the infinitesimally small chance of winning a Million. If you exclude that then a more realistic return is around 3.8% .

Hexham

Thank you everybody for your advice. I have made an appointment with my Pension provider to discuss contributions,

Albermarle

Hexham said:

Thank you everybody for your advice. I have made an appointment with my Pension provider to discuss contributions,

Normally you can just increase contributions without telling them in advance, but no harm in contacting them.
Be aware that they can not offer you any personal financial advice ( you have to pay for that).