Inheritance advice - £350k

Qwerty1_23

Good morning, 

I'm looking for some advice following an inheritance of £350K - how do people advise we invest for best return. 

Current situation; 

Married - early 40s, both working approx £100k joint annual income 
2 children - primary school 
Mortgage - due to be paid off next year - have looked into paying early but would be charged
Savings - approx £30k 
Debt - no other debts

We're thinking of savings accounts and maxing out ISA allowances but wondered what else people might advise. 

Thanks 

JJ

Alistair31

Pensions, perhaps?

Qwerty1_23

Alistair31 said:

Pensions, perhaps?

Feels a little bit too long term - agreed it would make sense to put some in pension but we were planning to use our incomes to top up pensions when mortgage is paid off next year

jimjames

Depending on the split of incomes for that £100k then pension could definitely make sense if it helps move tax bands especially if you can salary sacrifice even if you use some of the inheritance to top that wage money back up.

Why not use the incomes after mortgage paid to top up savings/investments rather than the other way round?

If not pension then at least some into S&S ISA for you both, £40k now, £40k in April if you both use allowances.

El_Torro

If either of you is paying 40% tax then it's worth putting enough into a pension to become a 20% tax payer. 

Is £30k savings enough? Is it too much? A typical emergency fund will cover between 3 and 6 months worth of outgoings.

Definitely max out your ISA allowances, this won't make too much of a dent in the money though. 

With this kind of money it's probably worth finding an IFA. Have a free consultation with 2 or 3 IFAs and decide then if you want to pay one of them to manage your money for you.

Albermarle

The usual general advice is as follows, although for specific personal advice you will need to pay for that.

For money you will need within 5 years - put it in cash savings, ( or premium bonds) .
Savings - All Guides - MoneySavingExpert

For saving for retirement ( maybe even early retirement) put money in a pension. ( where it will get tax relief and be invested)

For money you will need in 10 years time or longer, but not for retirement, investments are normally better. Using a S&S ISA, or a JISA for your kids.

In the end some kind of mixture is the solution. 

The 'problem' with £350K is that you will struggle to get it all into pensions or IsAs, so will end up paying tax on it for some years probably.

dunstonh

You havent given what your objectives are.  So, asking for solutions to unknown objectives is going to result in pot luck answers.   It also explains why pension was mentioned as for most people, pensions are the best tax wrapper to use (better than ISA).

Also, what you have said so far, indicates you appear to be looking at short term solutions.  i.e. you plan to spend all the money in the next 1-3 years.     If that is not the case, you need to clarify.

MEM62

Qwerty1_23 said:

Alistair31 said:

Pensions, perhaps?

Feels a little bit too long term - agreed it would make sense to put some in pension but we were planning to use our incomes to top up pensions when mortgage is paid off next year

It is supposed to be long term.  If you have no immediate / mid-term use for the money nothing beats a pension for providing for your retirement.  But these decisions do not need to be all or nothing, you can use a combination of ISAs, a GIA and your pension to squirrel the money away.  In my opinion, it would be short-sighted not to put a good chunk of this into your pensions.  You future self will be extremely happy that you did and you would still have plenty left for short  and mid-term plans.      

Bostonerimus1

In order of importance

Put 6 months spending in the bank for emergencies
Pay off any high interest debt
Contribute more to your pensions, invest in low cost index funds
Contribute to ISAs, invest in low cost index funds
Contribute to general investment accounts, invest in low cost index funds
Make extra mortgage payments.

Qwerty1_23

dunstonh said:

You havent given what your objectives are.  So, asking for solutions to unknown objectives is going to result in pot luck answers.   It also explains why pension was mentioned as for most people, pensions are the best tax wrapper to use (better than ISA).

Also, what you have said so far, indicates you appear to be looking at short term solutions.  i.e. you plan to spend all the money in the next 1-3 years.     If that is not the case, you need to clarify.

Morning - I should have clarified our plans a little more, you're right.

We're not looking to spend the money in the short term no - but equally may need access to some of it. 

We're thinking; 

Putting money aside for children education/uni - 10 years away 
Potentially some money for an extension 
Some nicer holidays 
Then consider use of the some of the money in later life.  

Qwerty1_23

jimjames said:

Depending on the split of incomes for that £100k then pension could definitely make sense if it helps move tax bands especially if you can salary sacrifice even if you use some of the inheritance to top that wage money back up.

Why not use the incomes after mortgage paid to top up savings/investments rather than the other way round?

If not pension then at least some into S&S ISA for you both, £40k now, £40k in April if you both use allowances.

We are both paid via business dividends, low salaries so income tax band savings won't work at the min I don't think.