Using inheritance to boost retirement - please sense check my plan

LeopardPassenger

Hi there,

My husband and I recently inherited £550K. Some context: My husband is 51 and works as a freelance creative. He previously earned an average of £40-50K pa, but for the past 4 years he has been caring for his Mum (who died in Feb 2025, leaving us the inheritance), and his income fell. During this time his income was supplemented by his Mum, who lived in our home until she died and contributed housekeeping money. In the current financial year he will probably earn around £25K, and next year we hope that his earnings will return to normal. I am 42 and work 30 hrs a week at a charity and earn £38K pa FTE. We have two children aged 12 and 14.

We own our own home (worth around £750K in a desirable area) and have no mortgage (we bought the property 12 years ago for £280K and paid it off when we were both working full time). We live a simple lifestyle, well within our means, but would like to use some of the inheritance to fund some things that we have been unable to afford: a new car, some upgrades to our current home to ensure it retains its value. We would like to prioritise family travel before the kids leave home, as we've only ever done UK based holidays.

Our retirement savings are low, but we hope to have ticked off any long haul travel before retiring and don't have any other major goals. We're comfortable with a pretty frugal retirement and neither of us wants to retire early, but we know that this should still be a priority for us. I have £30K in a LISA and £20K in a workplace pension scheme and a small teaching pension from the start of my career. He has £30K in a SIPP. 

In 6-8 years our children will (almost certainly) go to university, and we would like to move to a home in a more rural location (although still well connected so the kids can return home after graduation if they want/need to). We are not planning to be able to support them financially through university (although they do have £25K each in a Junior ISA to help them out post graduation). The sorts of houses we are considering are generally around £850K in the current market and we can be flexible about when we move to maximise returns on investments.

Here is our plan for our inheritance: 
£85K into savings for short to medium term planned expenditure eg. a new car, home repairs & maintenance etc (joint Monzo savings pots 3.25% interest)
£115K into savings, specifically for family travel over the next 6-8 years, ticking off our big bucket list trips (Moneybox 95 day notice account 4.08% interest)
£40K to continue to top up my Moneybox LISA by £4K a year for at least the next 10 years (kept in the same 95 day notice account in the meantime)
£40K in an emergency fund to access in the case of loss of earnings or unexpected expenses that can't be covered elsewhere (First Direct Fixed Savings Account 3.7% interest)
£150K invested to fund the house move (I'm looking at Vanguard accounts and would be grateful of any input)
£120K into husband's SSIP (this is where I need the most advice)

Some questions:
Am I planning to keep too much in savings? Should I be doing something else with the emergency fund?
What should I consider when investing the £150K - I was thinking that we should each max out an ISA every tax year and then put the rest in a general investment account?
What is the best way to add the £120K to my husband's SSIP to maximise tax breaks and return on investment, especially given that his income is variable and unpredictable?

Any help in response to those three questions is appreciated, although please don't tell me that we should be putting more aside for retirement, as we're comfortable with those numbers.

SVaz

He can only add as much as he earns in any tax year and given that he hasn’t earned over £60k then carry forward is not an option either. 

He will be able to add the £120k over a few tax years, starting with £25k this year - he puts in £20k and it gets tax relief of £5k on top.  I’d do it in March to be sure of his earnings. 

kimwp

I think you should be provisioning to help your kids at university, particularly over spending £115k on holidays.

I wouldn't put anything that you are hoping to have available in the next 5-10 years into stocks and shares.

Keep_pedalling

Do you both have wills in place? If not you need them, as dying intestate could be disastrous as 50% of anything over £322k goes your children not the surviving spouse. This would require trusts for your children and a potential IHT liability on the first death. 

Albermarle

A few first reactions:
Do you have a workplace pension? If so I would consider adding to this as well as your husbands pension,
Although you are financially overall in a good position, your pension pots are painfully small. I appreciate you are not too concerned about building up  very large retirement funds, but pensions are a tax efficient way to save/invest for later.
Topping both up will also mean you get the money invested earlier.


We are not planning to be able to support them financially through university 
That is relatively unusual for a family with the resources to help. Even if they take the full student loans available, there is a significant shortfall of day to day living/accommodation costs.

£115K into savings, specifically for family travel over the next 6-8 years, ticking off our big bucket list trips (Moneybox 95 day notice account 4.08% interest)
You might consider having some of this in longer term fixed rates, as interest rates are on a downward path.

£150K invested to fund the house move (I'm looking at Vanguard accounts and would be grateful of any input)
As you are probably looking at a house move in a 5 to 10 year period, then  medium risk type investments would probably be best. Some would say you should keep it in cash, but you already have a lot of cash.

LeopardPassenger

Keep_pedalling said:

Do you both have wills in place? If not you need them, as dying intestate could be disastrous as 50% of anything over £322k goes your children not the surviving spouse. This would require trusts for your children and a potential IHT liability on the first death. 

Thank you, that's really helpful. It had crossed my mind, but need to get on it!

LeopardPassenger

SVaz said:

He can only add as much as he earns in any tax year and given that he hasn’t earned over £60k then carry forward is not an option either. 

He will be able to add the £120k over a few tax years, starting with £25k this year - he puts in £20k and it gets tax relief of £5k on top.  I’d do it in March to be sure of his earnings. 

Super helpful, thank you.

LeopardPassenger

Albermarle said:

A few first reactions:
Do you have a workplace pension? If so I would consider adding to this as well as your husbands pension,
Although you are financially overall in a good position, your pension pots are painfully small. I appreciate you are not too concerned about building up  very large retirement funds, but pensions are a tax efficient way to save/invest for later.
Topping both up will also mean you get the money invested earlier.


We are not planning to be able to support them financially through university 
That is relatively unusual for a family with the resources to help. Even if they take the full student loans available, there is a significant shortfall of day to day living/accommodation costs.

£115K into savings, specifically for family travel over the next 6-8 years, ticking off our big bucket list trips (Moneybox 95 day notice account 4.08% interest)
You might consider having some of this in longer term fixed rates, as interest rates are on a downward path.

£150K invested to fund the house move (I'm looking at Vanguard accounts and would be grateful of any input)
As you are probably looking at a house move in a 5 to 10 year period, then  medium risk type investments would probably be best. Some would say you should keep it in cash, but you already have a lot of cash.

Sorry, yes, I do have a workplace pension that I'll continue to pay into, and which isn't factored into this plan. My husband also routinely puts £100 a month into his SSIP and will continue to do so. Sounds like we're best off checking his income towards the end of the financial year and then working out how much more we can add.

Thank you for the tip re: longer fixed term rates. It seems to be (on a minimal amount of research) that the best rates are on solo, rather than joint accounts - is this the case? 

Medium risk is what I was thinking - if the markets are down when we're planning to move then we could happily delay moving for another few years.

Marcon

LeopardPassenger said:

My husband and I recently inherited £550K.

There's a limit to how much a site like this can do, especially based on just a few paragraphs of information.

Maybe one of the best investments you could make would be getting some proper (paid for) financial advice to  maximise the chances of ensuring this welcome windfall works to best advantage for all the family?

LeopardPassenger

kimwp said:

I think you should be provisioning to help your kids at university, particularly over spending £115k on holidays.

I wouldn't put anything that you are hoping to have available in the next 5-10 years into stocks and shares.

Thanks, yeah you're probably right. I think because we've all had a tough few years caring for an elderly relative, and the kids have never had an international holiday, we thought it would be nice to use some of the inheritance for a few dream trips together before they leave home. But this is more sensible. Probably a stupid question, but how much would you recommend? I'll also do some research into living expenses, even if they end up getting student loans for the fees.

Cairnpapple

Martin's article is a good description of how much parents are expected to contribute to students.

https://www.moneysavingexpert.com/students/student-loan-parental-contribution-tool/