Doing the right thing?

Inadilemma · 16 April 2019 at 7:29AM

Hi there, I’m after a bit of advice/validation. Bit about myself...Mid 40’s married with 2 older kids, one working and one may go to Uni in next couple of years.
Financially I’ve a mortgage of just under 170K, no cc debt or loans, £100k plus in shares/unit trusts and a couple of pensions, one is a final salary that will pay out around a third of salary and the other is a standard company pension that company pay in 15% and I pay in 6%. Currently transfer value of final salary one is £650k and company is £150k.
I have a nest egg coming to me via a sad inheritance which consists of 3 properties (all mortgage free) and just over £200k in cash/shares, am I doing the right thing in using the cash to pay off the mortgage, save the remainder somewhere and live happily ever after....or should I be thinking differently? Thanks in advance.

MallyGirl · 16 April 2019 at 9:58AM

I'd certainly be pushing extra into the pension for the tax relief (although you need to keep an eye on LTA). And into wife's pension.
You haven't said enough about your plans really - do you plan to retire and live off the cash/properties till you can access the pensions?

colsten · 16 April 2019 at 11:54AM

The sums involved sound big enough to justify paying for professional, tailored advice by an Independent Financial Adviser, or preferably even a Chartered Financial Adviser.

Inadilemma · 16 April 2019 at 12:23PM

MallyGirl wrote: »

I'd certainly be pushing extra into the pension for the tax relief (although you need to keep an eye on LTA). And into wife's pension.
You haven't said enough about your plans really - do you plan to retire and live off the cash/properties till you can access the pensions?

Thanks. Plans haven't changed really. I don't plan on stopping working or changing roles so income will remain the same for the forseeable future. At least for the next 10 years.

Linton · 16 April 2019 at 12:36PM

No-one cannot tell you what you should do - it all depends on what you want to do. Once we know that then perhaps we can suggest how you can best achieve it. Though as has been suggested you may prefer to talk to an IFA rather than a group of strangers on the net.

Your options are of course very much governed by what your total wealth will be. Is it enough to stop work now and live in a style to which you always wanted to become accustomed?

Inadilemma · 16 April 2019 at 12:49PM

Linton wrote: »

No-one cannot tell you what you should do - it all depends on what you want to do. Once we know that then perhaps we can suggest how you can best achieve it. Though as has been suggested you may prefer to talk to an IFA rather than a group of strangers on the net.

Your options are of course very much governed by what your total wealth will be. Is it enough to stop work now and live in a style to which you always wanted to become accustomed?

Thanks and fair points. Its certainly not enough to stop working from my perspective so perhaps the question should be more around:
1) Is paying the mortgage off the sensible thing to do, am I missing a trick by potentially keeping the mortgage (2.49% offset tracker) and not using the lump sum for other investment use?
2) If I do pay off the mortgage what would be the best place for the remaining lump sum and the rental income.

Appreciate me seeing an IFA is best route, just thought I'd see if anyone had any opinions/thoughts.

redux · 16 April 2019 at 1:05PM

Is there inheritance tax on this estate? Will there be on yours in future? You might want to consider having a deed of variation (with the agreement of all beneficiaries) to pass some of this direct to your kids now, save the taxman having two bites eventually, or other tax mitigating measures in future, but on the other hand don't give too much away too soon.

steampowered · 16 April 2019 at 2:26PM

It sounds like the mortgage you have at the moment is perfectly affordable and you have a fair way to go until retirement so there is really no rush to get rid of it.

Mortgages are pretty cheap debt where you will be paying say 2%.
Yet, the long term return on investments (e.g. in a pension) is about 8-10%.

You could think about putting some of this money into a pension
so that you get the tax relief. Especially if you are a higher rate tax payer. In the long term that's probably going to be more productive than paying off a cheap mortgage.

You could also use some of this money to max out your stocks & shares ISA contributions for the tax year, again a very good idea from a tax perspective.

Reed_Richards · 16 April 2019 at 2:40PM

If you pay off your mortgage now, the worst-case scenario is that the stock market performs really well over the next 15 years (say) and you find yourself regretting that you you did not invest the money you used for the mortgage and make yourself a lot more wealthy. Only you know how bad you would feel under those circumstances.

Doing the right thing?

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