What to do with £110k

swindiff

I am in the fortunate position of potentially coming into around £110k in the near future, so the question is what best to do with it.

Wife and I are both 54, both want to retire around 60-61
I have a DB pension which will pay about £22.5k/year at 61 plus £67.5 Lump Sum
I am also paying into a DC with Salary Sacrifice, currently Sacrificing 23% which is £1065/month
This DC pot is currently at £110k projected to be £240k at 61 assuming 4% growth.
Wife has an NHS pension worth about £6k/year at 60 with an £8k lump sum
Wife is also paying into a SIPP projected to be worth around £60k at 60
We have a mortgage of £94k with 19 years left to run, repayments £602/month @4.29%
We have around £15k in easy access savings, neither of us have an ISA

My initial thought was pay off the mortgage, that will leave us with £16k and an extra £602/month

I then thought would it be better to put some in an easy access cash ISA.  Trading 212 have a cash isa currently offering 5.17%

I could put £40k in ISA's and pay the mortgage down to £25k

Paying off the £25k mortgage in 5 years would cost around £460/month, leaving us £142/month better off

Thoughts?  Anything else I have not considered?

dunstonh

Anything else I have not considered?

a) you are looking at solutions without stating what your objectives are.
b) you have ignored the pension wrapper (which financially, for most people, is the best option)

tacpot12

Putting £40k into two ISAs and paying down the mortgage is a good option. It would be better to keep the repayments the same at £602 and reduce the term as much as you can. Consider increasing the mortgage payments if you can to further reduce the interest you are paying. (4.6% isn't awful, but it isn't great either). 

Once the mortgage is paid off, pay the mortgage payments into your DC pensions/SIPP to get the tax relielf.  

Newbie_John

Your £602/month mortgage over 19 years = £137k, at rate 4.3% so roughly around savings accounts these days.

I would plan to pay it off as soon as possible - whenever your fixed period ends.
In the mean time ISAs, savings etc.

Marcon

swindiff said:

I am in the fortunate position of potentially coming into around £110k in the near future, so the question is what best to do with it.

Wife and I are both 54, both want to retire around 60-61
I have a DB pension which will pay about £22.5k/year at 61 plus £67.5 Lump Sum
I am also paying into a DC with Salary Sacrifice, currently Sacrificing 23% which is £1065/month
This DC pot is currently at £110k projected to be £240k at 61 assuming 4% growth.
Wife has an NHS pension worth about £6k/year at 60 with an £8k lump sum
Wife is also paying into a SIPP projected to be worth around £60k at 60
We have a mortgage of £94k with 19 years left to run, repayments £602/month @4.29%
We have around £15k in easy access savings, neither of us have an ISA

My initial thought was pay off the mortgage, that will leave us with £16k and an extra £602/month

I then thought would it be better to put some in an easy access cash ISA.  Trading 212 have a cash isa currently offering 5.17%

I could put £40k in ISA's and pay the mortgage down to £25k

Paying off the £25k mortgage in 5 years would cost around £460/month, leaving us £142/month better off

Thoughts?  Anything else I have not considered?

Possibly consider getting proper financial advice (the sort you pay for) to help you define your objectives? Doing so could be an excellent investment.

rnj

I'd personally do a SIPP as you can retire soon and pull it out if needed. The mortgage rate is ok, I wouldn't imagine rates going any higher so I'd bet on the payment going down and leave it as it is.

Cobbler_tone

No one will ever go too far wrong by paying a chunky mortgage off…then worry about what to do with all that spare cash. There’ll always be the ‘optimum’ solution but that is what I’d do….as you asked. 

Sarahspangles

swindiff said:

Wife has an NHS pension worth about £6k/year at 60 with an £8k lump sum
Wife is also paying into a SIPP projected to be worth around £60k at 60
We have a mortgage of £94k with 19 years left to run, repayments £602/month @4.29%

If your wife can defer taking her DB pension at 60, she could invest more into her SIPP. She would get tax relief and would be able to take 25% tax free plus taxable income up to her personal allowance. And/or she has scope for more savings interest, so you’re not limited to ISA for your savings.

A combo of money in a SIPP and clearing the mortgage faster gives you both more scope to retire a little earlier.

swindiff

Thanks for all the replies already.  It's always good to get other points of view as there may well be a good option that I had not even considered

A bit more info for context
The wife already thinks I pay too much into my pension and keeps saying we should live a bit more for the day, so locking more money away into pensions I suspect would not go down too well.  I know I could access it from next year but I also would not want to trigger the MPAA until I actually decide to retire.
Objectives are a bit woolly really, the thought of no mortgage is very appealing.  Financially, probably the best thing would be to salary sacrifice down to minimum wage and live off the £110k until it ran out, but as I say, I really don't think this would go down well with the wife lol.
Trying to get a mix of being better off now and to make the money work the best for our future.

swindiff

Sarahspangles said:

swindiff said:

Wife has an NHS pension worth about £6k/year at 60 with an £8k lump sum
Wife is also paying into a SIPP projected to be worth around £60k at 60
We have a mortgage of £94k with 19 years left to run, repayments £602/month @4.29%

If your wife can defer taking her DB pension at 60, she could invest more into her SIPP. She would get tax relief and would be able to take 25% tax free plus taxable income up to her personal allowance. And/or she has scope for more savings interest, so you’re not limited to ISA for your savings.

A combo of money in a SIPP and clearing the mortgage faster gives you both more scope to retire a little earlier.

I don't quite understand how deferring her pension would help her pay more into her SIPP?  She is mainly in the 1995 scheme, so there is no benefit to waiting until after the age of 60 to draw at least that part of the pension.

Sarahspangles

swindiff said:

Sarahspangles said:

swindiff said:

Wife has an NHS pension worth about £6k/year at 60 with an £8k lump sum
Wife is also paying into a SIPP projected to be worth around £60k at 60
We have a mortgage of £94k with 19 years left to run, repayments £602/month @4.29%

If your wife can defer taking her DB pension at 60, she could invest more into her SIPP. She would get tax relief and would be able to take 25% tax free plus taxable income up to her personal allowance. And/or she has scope for more savings interest, so you’re not limited to ISA for your savings.

A combo of money in a SIPP and clearing the mortgage faster gives you both more scope to retire a little earlier.

I don't quite understand how deferring her pension would help her pay more into her SIPP?  She is mainly in the 1995 scheme, so there is no benefit to waiting until after the age of 60 to draw at least that part of the pension.

It’s really common for couples to fund one partner’s pension more than the other and then be in a position where the partner with better provision is paying tax on their pension - possibly even higher rate tax - while their partner is not fully using their personal tax allowance.

When your wife is 60 she will have her personal allowance, currently 12,570. If she contributed 16,000 to a SIPP HMRC will add 4,000 tax relief. Then she could withdraw 12,570 and pay no tax plus take the associated 25% tax free lump sum. That’s £16,760 tax free and there’s still 3,240 in the SIPP for a future year. 16,000 becomes 20,000,  plus investment growth.  However your scope to use this is limited if your wife has to draw her pension at 60 i.e. if she would lose the money, rather than it growing in deferment.