£50k - what to save/invest in

molit

Right, although this seems to be a fairly common 'problem' on these boards I cannot find a good answer to the question I have. In short I have some redundancy ~ 50k, and I want to know peoples advice on it. There are a few things to consider:

I have a mortgage of 80k, fixed at 4.7% for the next year and a bit. It costs a lot to overpay. I would like to be mortgage free quickly, but it is not the be all and end all.

This FY I will be liable for higher rate income tax on my savings, as I have managed to get a new job immediately

Next year I will not be liable for higher rate tax (unless I get a really massive pay rise from my new place)

I have a company pension from both places.

I am young <30, have no dependents, and do not mind some degree of risk/investing for long term.
However, I might want to move closer to my new place of work in a few months/year. The area is not much more expensive than here, and I have no need to get a bigger place so could avoid touching long term investments if needed.

My thoughts are as follows:

Put 7.2 k in an equal split between cash and equity isas - equity being made up of different funds with varying levels of risk
put about 7k into a stakeholder pension to negate the high rate income tax, and to top up contributions - with a slightly higer risk profile as its some time away

Does this sound reasonable, and what should I do with the rest?

Sorry for a bit of a repeat for the question

bob2007

Yes.
Stick the rest in a high interest bond especially if you can afford to put it away for X months.
Unless you want to invest it which is another option.

molit

its the investing which is quite tempting - part of me is tempted to wait a few months and maybe buy a btl at auction depending on what happens, or invest it more in shares - i know you can get lucky in terms of share purachse over the short term, but I'd be looking longer term.

In a way I would quite like to invest most of it in managed funds, to avoid the exposure to individual companies, but accept that this will limit returns potnetially (but also losses).

What kind of rate of return could I realisistically hope for fior either a btl, individual shares, and a managed fund - I would guess at the moment it would be anout 1% short term btl, in spite of having about 66% ltv, individual shares about +-15%, and managed finds heading in around the 6-8% mark. Are these figure way off?

chesky369

I think you need to consult an IFA - you're in a very fortunate position and a good adviser would be able to build on that, after judging your attitude to risk, etc.

molit

Hi, Thanks for the advice - I am intending to consult an IFA, but like a good boy scout, I like to be prepared, and have an idea of what might be recommended before going, so I know quickly if I am being sold a pup. I also welcome the views of people on this board, as there is such a wealth of experience

chesky369

come back to us when you've been to see the IFA and tell us what they suggest - then everyone will tear it to pieces.

Joey122

50 K redundancy and then will be on a lower tax rate?

- Unless you ve been working for ten years at this company then I smell a troll

chesky369

Don't think he's controversial enough for a troll.

carlrom

A few days ago, while researching for my ISA, I came across a very useful chart that highlights how important is the rate of return. They give an example of saving a fixed amount (5000) every year for 20 years:

http://www.proactivesaver.com/html/the_case.htm

Something to consider if you can put some part away for the long term.

molit

cheers for the advice - will go and see an IFA soon.

Carlrom, thanks for the link, v interesting reading.

Joey122 - I have been at comapny for close on 10 years, have civil service t&cs which is why the amount is so high