Best short/medium term home for £200k as higher rate taxpayer

Wonka_2

I’m in the lucky position to turn 55 in a few weeks and be able to take my pension and start to enjoy the fruits of a long corporate career. 

Given I’ve taken an enjoyable p/t role then with that + £30k pa pension I’ll be on the cusp of higher rate tax before any interest payments. 

I’ve a £200k TFLS due that I’d like to put to good use at minimum capital risk whilst sorting out its future use (kids house deposits/round the world cruise etc)

Immediate thoughts are 

£30k car loan/CC pay off
£20k ISA (don’t have one for this year yet)
£50k Premium Bonds
£60k Savings account to cover outstanding mortgage (1.9% fixed with 3yrs to run)
£40k ???

Any other areas to look at before I start with IFA discussions ? 

NoMore

You have a partner ? Use their allowances as well

eskbanker

Just because you're able to access a pension at 55 doesn't necessarily mean you should, so is deferral an option?

Wonka_2

eskbanker said:

Just because you're able to access a pension at 55 doesn't necessarily mean you should, so is deferral an option?

It’s an option - but given compromises I’ve made over the years it’s a decision I’ve made to take it now. I may regret it in the future but given how the world’s going I’m comfortable in my decision 

Wonka_2

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

masonic

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

Ladies, form an orderly queue

EthicsGradient

You should still be able to contribute up to £10k/yr gross (that being the money purchase annual allowance) into a SIPP, while you're part-time employed with a salary more than that; that gets tax relief on the way in, and as long as withdrawing it doesn't put you into the higher tax band, you'll come out ahead. You can invest it in money market funds inside the SIPP, which get roughly the same return as savings accounts, and are minimum capital risk, and are tax free and don't count towards whether you're in the higher rate band. This roughly allows you to do the same as with your ISA, but with another half of it.

Your £60k in a savings account may get you £2,700 a year in interest, so you'll pay tax on some of that. An advantage of contributing to a pension is that it's worked out by increasing the size of the basic rate band by the gross contribution - so if you're on the cusp of higher rate without it, you ought to be comfortably below after the contribution. In fact, you could then put the entire £150k from Prem Bonds+mortgage payoff+??? into savings accounts, and still not reach the increased top of the band.

aroominyork

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

If you ask on a romance forum for guidance on finding a partner, you might need to explain why you search during the fiscal year.

Wonka_2

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

masonic said:

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

Ladies, form an orderly queue

aroominyork said:

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

If you ask on a romance forum for guidance on finding a partner, you might need to explain why you search during the fiscal year.

Slight misinterpretation of my original comment -  Mrs Wonkas allowance is already used this year but her reducing hours next year will free some up 😉

zagfles

Wonka_2 said:

I’m in the lucky position to turn 55 in a few weeks and be able to take my pension and start to enjoy the fruits of a long corporate career. 

Given I’ve taken an enjoyable p/t role then with that + £30k pa pension I’ll be on the cusp of higher rate tax before any interest payments. 

I’ve a £200k TFLS due that I’d like to put to good use at minimum capital risk whilst sorting out its future use (kids house deposits/round the world cruise etc)

Immediate thoughts are 

£30k car loan/CC pay off
£20k ISA (don’t have one for this year yet)
£50k Premium Bonds
£60k Savings account to cover outstanding mortgage (1.9% fixed with 3yrs to run)
£40k ???

Any other areas to look at before I start with IFA discussions ? 

£60k in a non-ISA savings account if you're a higher rate taxpayer doesn't sound sensible, what about buying a 3 year low coupon gilt eg TN28 (matures end Jan 28) then most of the gain will be tax free capital gain with just a small coupon. You'll need to do the sums but it's unlikely a savings account after 40% tax will beat that. 

The other £40k could use low coupon (poss index linked) gilts or equities/bonds or a mix depending on how much risk you want to take. 

zagfles

Wonka_2 said:

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

masonic said:

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

Ladies, form an orderly queue

aroominyork said:

Wonka_2 said:

NoMore said:

You have a partner ? Use their allowances as well

That’ll be in the 26/27 plan 

If you ask on a romance forum for guidance on finding a partner, you might need to explain why you search during the fiscal year.

Slight misinterpretation of my original comment -  Mrs Wonkas allowance is already used this year but her reducing hours next year will free some up 😉

Income tax allowance, ISA allowance and PB allowances too? Also if you use taxable savings if she's a basic rate taxpayer and you're higher rate it's a no brainer to put taxable savings in her name (obviously you need to trust her, but that's generally important in a marriage  )