What to do with £40k?

Maj15

Hello

I have around £40k sitting in a cash ISA.

just curious as suggestions what you would do with it?

Bit of details:
live in a property worth £240k, have a repayment mortgage of £160k on it at 3.16%.

Have a rental worth £130k, with a mortgage of £90k on it, interest only at 3.70%. Interest and service charge a month = £300. Rent = £700.

Both mortgage deals expire June 2026. 

Wondering whether I should pay off a lump of each mortgage or one? Or invest the £40k elsewhere? Should I be overpaying on both mortgages anyway? 

I usually save around £700 a month from work salary.
The profit from the rental I have in another standard bank account that is just building up, around £7k in that. 

If age is important, I’m 40.

Appreciate any advice and apologies if in the wrong sub forum.

Thanks.

Paul

ColdIron

What rate of tax do you pay? How is your pension provision?

Flugelhorn

hang onto it in case you are unemployed?

Maj15

ColdIron said:

What rate of tax do you pay? How is your pension provision?

Hi, 
40% tax.
I am currently looking at my pension which I’m told is low. Workplace pension is 6% matched, and current pot value is around £80k. 

Thanks 

Maj15

Flugelhorn said:

hang onto it in case you are unemployed?

I have savings not included in the £40k which is set aside incase of un employment. 

5-6 months salary. 

Thanks 

Albermarle

Maj15 said:

ColdIron said:

What rate of tax do you pay? How is your pension provision?

Hi, 
40% tax.
I am currently looking at my pension which I’m told is low. Workplace pension is 6% matched, and current pot value is around £80k. 

Thanks 

On the one hand having £80K in a pension at 40 is probably better than average.
On the other hand most people have inadequate pension provision, so it could be better.
One thing for sure 12% going in is not enough, unless you are a high earner and happy to live off a lot less in retirement.
Pension tax relief is especially generous for 40% taxpayers, so sounds like you are probably not making the best use of this. Are you just about a 40% taxpayer or are you well above the threshold ( £50K) ?

Maj15

Albermarle said:

Maj15 said:

ColdIron said:

What rate of tax do you pay? How is your pension provision?

Hi, 
40% tax.
I am currently looking at my pension which I’m told is low. Workplace pension is 6% matched, and current pot value is around £80k. 

Thanks 

On the one hand having £80K in a pension at 40 is probably better than average.
On the other hand most people have inadequate pension provision, so it could be better.
One thing for sure 12% going in is not enough, unless you are a high earner and happy to live off a lot less in retirement.
Pension tax relief is especially generous for 40% taxpayers, so sounds like you are probably not making the best use of this. Are you just about a 40% taxpayer or are you well above the threshold ( £50K)

Basic salary £53k. I also get an annual bonus of around 75% of my salary. This amount is not guaranteed but has been the case for the previous 2 years, was approx 50% the year prior. 

Thanks 

Flyingkidney

With 40 K sitting in an ISA,   - open another ISA..

I'd say prioritise..  Are there other things you need to put in place, funeral plan, updated will.  My own view is paying off mortgages is wise..   You never know when 'the worst' will happen..

Can't advise on pensions as I'm not in that situation  

lr1277

Edited: Posted without having reading all of OP's posts.

Albermarle

Maj15 said:

Albermarle said:

Maj15 said:

ColdIron said:

What rate of tax do you pay? How is your pension provision?

Hi, 
40% tax.
I am currently looking at my pension which I’m told is low. Workplace pension is 6% matched, and current pot value is around £80k. 

Thanks 

On the one hand having £80K in a pension at 40 is probably better than average.
On the other hand most people have inadequate pension provision, so it could be better.
One thing for sure 12% going in is not enough, unless you are a high earner and happy to live off a lot less in retirement.
Pension tax relief is especially generous for 40% taxpayers, so sounds like you are probably not making the best use of this. Are you just about a 40% taxpayer or are you well above the threshold ( £50K)

Basic salary £53k. I also get an annual bonus of around 75% of my salary. This amount is not guaranteed but has been the case for the previous 2 years, was approx 50% the year prior. 

Thanks 

Maybe every time you know you are going to get a bonus, make a lump sum payment into your pension.
40% tax relief is the gift that just keeps on giving.

El_Torro

Excluding your bonus you are currently a 20% tax payer, due to 6% of your salary going into your pension. Can you afford to live without the money from your bonus? If so I would be tempted to put most of it in my pension, or at least enough to not be a 40% tax payer. As you say £80k at 40 isn't a great pension (not terrible either though), so you could do with boosting this in the coming years.

Regarding the £40k you have spare (after your emergency fund) it might be a good idea to pay it into your mortgages when the terms expire in 2026. Might be worth keeping it as cash for now and seeing what interest rates look like when you come to remortgage.

One option would be to put the £40k into a Stocks & Shares ISA. Over the long term this should do a lot better than cash, with the downside being that you don't want to cash it in when stock markets aren't doing well.