What to do?

El_Torro

30andcounting said:

El_Torro said:

Pensions and ISAs are two of the most powerful tools we have for investing for the future. Normally I would suggest paying into these over overpaying the mortgage. One issue with pensions and ISAs though is that you are constrained by how much you can efficiently pay into them. Having £800k suddenly dumped in your lap and with a £450k mortgage debt I think that paying off the mortgage entirely (while avoiding Early Repayment Charges) is the best way to proceed. 

Do you plan to work as an employee? Or set up a new business? Either way I would concentrate on putting as much as you can into a pension in the next few years. You can live off the £350k (or however much you have left after feeding your pension and ISAs) for the foreseeable future. 

Of course this is just my suggestion. Sounds sensible to me, though depends on what your goals are. When you plan to retire, how quickly you want to be financially independent, how much readily accessible cash you want to have, etc...

Thanks - that's interesting and helpful. Yes plan to work for a decent amount of time, maybe 20 years further? I could end up quite easily going over the lifetime allowance on pension though if I go too hard with it now?

I am not setting it up, should be ok for a role for ~£150k p.a. 

If you're going to be earning more than £100k a year, say £150k, then there's a strong argument to say that you should put enough in your pension every year to get below £100k, i.e. £50k. You may have heard of the £100k tax trap where you essentially pay 60% tax on anything above £100k. There are some highly sensationalist articles about it to be found on the internet, nonetheless the trap is real. 

The Lifetime Allowance isn't really a thing any more, though yes, it is possible to have too much in your pension. I think with £125k in your pension at the moment you're some way off from worrying about that now though. 

I'm not the kind of person to jump to suggesting an IFA, though since you are about to come into £800k in cash and potentially start a new job earning £150k a year then I think talking to an Independent Financial Advisor would be beneficial for you. They will be able to come up with more creative homes for your money than the typical pensions and ISAs. 

30andcounting

El_Torro said:

30andcounting said:

El_Torro said:

Pensions and ISAs are two of the most powerful tools we have for investing for the future. Normally I would suggest paying into these over overpaying the mortgage. One issue with pensions and ISAs though is that you are constrained by how much you can efficiently pay into them. Having £800k suddenly dumped in your lap and with a £450k mortgage debt I think that paying off the mortgage entirely (while avoiding Early Repayment Charges) is the best way to proceed. 

Do you plan to work as an employee? Or set up a new business? Either way I would concentrate on putting as much as you can into a pension in the next few years. You can live off the £350k (or however much you have left after feeding your pension and ISAs) for the foreseeable future. 

Of course this is just my suggestion. Sounds sensible to me, though depends on what your goals are. When you plan to retire, how quickly you want to be financially independent, how much readily accessible cash you want to have, etc...

Thanks - that's interesting and helpful. Yes plan to work for a decent amount of time, maybe 20 years further? I could end up quite easily going over the lifetime allowance on pension though if I go too hard with it now?

I am not setting it up, should be ok for a role for ~£150k p.a. 

If you're going to be earning more than £100k a year, say £150k, then there's a strong argument to say that you should put enough in your pension every year to get below £100k, i.e. £50k. You may have heard of the £100k tax trap where you essentially pay 60% tax on anything above £100k. There are some highly sensationalist articles about it to be found on the internet, nonetheless the trap is real. 

The Lifetime Allowance isn't really a thing any more, though yes, it is possible to have too much in your pension. I think with £125k in your pension at the moment you're some way off from worrying about that now though. 

I'm not the kind of person to jump to suggesting an IFA, though since you are about to come into £800k in cash and potentially start a new job earning £150k a year then I think talking to an Independent Financial Advisor would be beneficial for you. They will be able to come up with more creative homes for your money than the typical pensions and ISAs. 

Thanks for your help, I'm putting most of what I earn above £100K atm into a pension - not all as I have a chunky mortgage and expensive kids. I'll probably do that and speak to an IFA. 

Thanks for everyone's responses - this isn't a brag, I'm not going to be buying a porsche or anything, just after a home for a decent windfall I've worked hard for, one of my kids is disabled so I need to make sure we have enough set aside for them. Cheers

Albermarle

InvesterJones said:

30andcounting said:

El_Torro said:

Pensions and ISAs are two of the most powerful tools we have for investing for the future. Normally I would suggest paying into these over overpaying the mortgage. One issue with pensions and ISAs though is that you are constrained by how much you can efficiently pay into them. Having £800k suddenly dumped in your lap and with a £450k mortgage debt I think that paying off the mortgage entirely (while avoiding Early Repayment Charges) is the best way to proceed. 

Do you plan to work as an employee? Or set up a new business? Either way I would concentrate on putting as much as you can into a pension in the next few years. You can live off the £350k (or however much you have left after feeding your pension and ISAs) for the foreseeable future. 

Of course this is just my suggestion. Sounds sensible to me, though depends on what your goals are. When you plan to retire, how quickly you want to be financially independent, how much readily accessible cash you want to have, etc...

Thanks - that's interesting and helpful. Yes plan to work for a decent amount of time, maybe 20 years further? I could end up quite easily going over the lifetime allowance on pension though if I go too hard with it now?

There is no lifetime allowance for pension I thought.

Correct, there is now instead a limit on how much tax free cash you can take out of a pension. The LSA ( lump sum allowance) is currently at £268K, and frozen for the foreseeable future.
If you can not take any tax free cash out from your contributions, then a pension looks a less attractive place to invest for most.
Plus as it is frozen in real terms that limit gets smaller every year.

redpete

30andcounting said:

Isthisforreal99 said:

30andcounting said:

Yes continue to work - no plans to stop that and not enough money to live off anyway through to retirement. 

Interest rate on mortgage is about 3.5% blended and comes up for renewal in 18 months. 

Currently pay in about £20K into SIPP per annum

Have you used your ISA allowance?

What's the ERC on your mortage if you settle early?

I have this year but the transaction wont go through until after April.

About £10k ERC which is less than the interest I'll pay between now and renewal. 

Can you pay off most but not all of the mortgage and avoid the ERC?

dharm999

Lots of things to consider.  I’m guessing the business is formed as a limited company and you are the owner?  Have you looked at gifting shares to your partner?  Does your partner have a role in the business, if so, can part of the sale proceeds be used to pay in to your partner’s pension?  Also redundancy payments could be considered as part of a settlement agreement with the company

i’d get some advice about the best way to structure your deal, so you then know how much money you are going to get after tax, and then work out a plan for what to do with it, as it may end up being more than you think.

Pension payments are an obvious one to look at, for you and your partner (if that’s a realistic option).

30andcounting

redpete said:

30andcounting said:

Isthisforreal99 said:

30andcounting said:

Yes continue to work - no plans to stop that and not enough money to live off anyway through to retirement. 

Interest rate on mortgage is about 3.5% blended and comes up for renewal in 18 months. 

Currently pay in about £20K into SIPP per annum

Have you used your ISA allowance?

What's the ERC on your mortage if you settle early?

I have this year but the transaction wont go through until after April.

About £10k ERC which is less than the interest I'll pay between now and renewal. 

Can you pay off most but not all of the mortgage and avoid the ERC?

Yes or can just wait until 12 months time and pay the whole lot off as the ERC will of expired, its a 2 year fix. 

30andcounting

dharm999 said:

Lots of things to consider.  I’m guessing the business is formed as a limited company and you are the owner?  Have you looked at gifting shares to your partner?  Does your partner have a role in the business, if so, can part of the sale proceeds be used to pay in to your partner’s pension?  Also redundancy payments could be considered as part of a settlement agreement with the company

i’d get some advice about the best way to structure your deal, so you then know how much money you are going to get after tax, and then work out a plan for what to do with it, as it may end up being more than you think.

Pension payments are an obvious one to look at, for you and your partner (if that’s a realistic option).

Only a part owner and no partner not involved. I work in private equity. I know roughly how much I will get after tax which is ~£800K. I'm not the PSC so its out of my hands re the structure of the deal.

dharm999

Do you work in the business as an employee/director or just a minority shareholder with no day to day involvement in running the business?

30andcounting

dharm999 said:

Do you work in the business as an employee/director or just a minority shareholder with no day to day involvement in running the business?

Director and minority shareholder

dharm999

Will you be exiting the business when it’s sold?  Is there the possibility of taking part of your share of the sale proceeds as redundancy and/or notice pay, if that’s isn’t in your t&cs of employment.  Given the values involved, it’s worth asking.