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Good Morning.

This is my first time posting and I'm not sure if I have this in the right category so I shall apologise in advance if not.

So I'm 41 years old, married and have two young children and I own a very small business that I run from home, it's been running 12 month and is not running st a profit yet but will be. My wife works full time and our house is currently valued at £240,000 - £250,000

Anyway I'm about to receive some money in the region of £600,000 and £700,000 which basically has to last me the rest of my life. So my mortgage is with the Halifax and because of the Bank of England base rate I'm hardly paying any interest. I can pay off as much of the mortgage as I want without any fees so if I wish to pay £10,000 of I can and there are no fees or penalties etc.

Anyway as it stands I owe at the last mortgage statement £118,000 and I have a loan which I got for my extension and that is £21,000 I have £2000 on my credit card and that's pretty much it apart from my car which I pay £350 per month for and then after 3 years I can pay the remaining balance or use the vehicle to trade in or hand it back and walk away.

So in my head when I receive this money the best thing to do would be to pay the mortgage and loan and credit card off then I'm own nothing to nobody.

If I worked of getting the minimum which would be £600,000 then that leaves me with £459,000 we would want to put £10,000 away to finish our house off (fitted bedrooms, four of them) and £10,000 away for a family holiday to Florida when my two young boys are older, currently 8 and 5.

As you can see it still leave a good chunk of money, we think we would need to open several bank accounts so that we are covered up to the £85,000 but we are not sure what to do with it once we have distributed it into the bank accounts. I say I'm doing this because I bank with HSBC and I asked them if I could open several accounts to put the money into and they said yes but as an individual I'm only covered up to £85,000 or £170,000 joint account.

We have briefly spoken to an adviser who was talking about isa and children's pensions but in all fairness it went over my head. I know I can put £20,000 in an USA per tax year but it still leaves a lot of money lying around.

I suppose my question is this, I need the money to work for me, I'm not expecting or wanting a great return of it but enough so that my pot doesn't dwindle to nothing so I'm after any ideas that some of you may have. We have briefly spoken about buying a property and renting it out and managing it ourselves, we've head about the Santander 123 account I think it was called and that's pretty much it. We don't really want very high risk and I suppose we are looking at long term investment as we will put aside from the £600,000 a certain amount as a rainy day fund. We could at worst case scenario live off my wife's wages as we would only have utility bills to pay and my car. We go away for 3 weeks once a year, we like to eat out but I'm only talking Nando's and TGI's nothing to extravagant. We are a young family and we obviously want to do the best for our boys and ourselves.

Any advice or ideas would be greatly appreciated
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  • redmalc
    redmalc Posts: 1,431
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    Dave you have not mentioned any pension provisions ?
  • Sorry do you mean do I have a pension? I have an army one but won't be worth much (5 years service) and one from a company I worked with for 10 years so again not much, I suppose effectively this money is my pension
  • BLB53
    BLB53 Posts: 1,583 Forumite
    I suppose my question is this, I need the money to work for me, I'm not expecting or wanting a great return of it but enough so that my pot doesn't dwindle to nothing so I'm after any ideas that some of you may have.
    First thing I would consider is setting up a pension for yourself and also wife. It is possible to do this yourselves via a low cost SIPP...get hold of a copy of 'DIY Pensions' by Edwards and see if you can follow the simple steps. If not you could employ an IFA to set something in place.

    Secondly you are best investing the bulk of the remaining money for the longer term as cash returns are not currently keeping pace with inflation. So a stocks & shares ISA for you both and something like Vanguard Lifestrategy 40 may be a suitable option.

    Again you can do this yourselves or if you are not confident then use your IFA or look at using a lower cost Robo Advisor.
  • kidmugsy
    kidmugsy Posts: 12,709
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    edited 15 September 2017 at 11:11AM
    I'm about to receive some money in the region of £600,000 and £700,000 which basically has to last me the rest of my life. So my mortgage is with the Halifax and because of the Bank of England base rate I'm hardly paying any interest. I can pay off as much of the mortgage as I want without any fees

    Anyway as it stands I owe at the last mortgage statement £118,000 and I have a loan which I got for my extension and that is £21,000 I have £2000 on my credit card and that's pretty much it apart from my car which I pay £350 per month for and then after 3 years I can pay the remaining balance or use the vehicle to trade in or hand it back and walk away.

    So in my head when I receive this money the best thing to do would be to pay the mortgage and loan and credit card off then I'm owing nothing

    As you can see it still leave a good chunk of money, we think we would need to open several bank accounts so that we are covered up to the £85,000

    We have briefly spoken about buying a property and renting it out and managing it ourselves, we've head about the Santander 123 account I think it was called and that's pretty much it. We don't really want very high risk and I suppose we are looking at long term investment as we will put aside from the £600,000 a certain amount as a rainy day fund. We could at worst case scenario live off my wife's wages as we would only have utility bills to pay and my car.

    "which basically has to last me the rest of my life": that means that some of it ought to be invested in stocks-and-shares so that it might grow - however erratically - for the rest of both your lives. The question is how to do this in a way that suits your cautious nature. Redmalc has given you a clue: "rest of my life" implies look at pensions.

    But first, short term issues. Rather than opening a heap of smaller accounts to use the £85k/£170k protection, move a large chunk to suitable accounts at ns&i; that has a Treasury guarantee. Then the small loans: get rid, as you say. Then the mortgage loan: for someone else in a different position and a different personality it might be wise to keep the mortgage in hopes of making more money by investing. For someone as cautious as you it might be sensible to pay it off. What is your present interest rate? If you were to buy a BTL would paying off the mortgage limit you too much in choice of property to buy? Your children are young: would you like to move to a bigger house that will suit better as they get bigger? If so now might be a good time: it uses part of your wealth fruitfully.

    Longer term. While you are earning nowt your maximum sensible annual pension contribution is £3600 gross: you actually pay your provider £2880 and they claim the tax relief of £720 from hmrc and add it to your "pot" - even though you don't pay income tax at the moment. Good, eh? The money should, I suggest, be invested for example in a cheap "passive" fund or ETF that simply "tracks" the performance of, say, global stock markets. Then check how it's doing once a year and otherwise leave it alone until your next contribution in the new tax year. For your wife, I propose she make a large annual pension contribution. How big? We'd need to know more about her position. For her invest the pension money too. After all, this money is still a tiny fraction of your wealth so you can well afford to take some stock market risk. Also, if your wife is under 40 years old she should open a LISA: it takes £4k per tax year which hmrc will boost to £5k. Again, invest the money. She can keep contributing until she is 50.

    Note that so far all the money you will be investing gets a boost from hmrc which gives you some protection from stock market falls. Before the end of tax year 17/18 (05/04/2018) you need to decide whether to open S&S ISAs: you could subscribe £20k, your wife £16k. No hurry.

    This still leaves an awful lot of capital. You might like to weigh up the advantages of investing in a BTL versus investing more in the stockmarket. For example you could use your own current status as a non-taxpayer to advantage. You could aim, say, to invest in investment trusts that prioritise protecting your capital over growing it.

    As for BTL, the recent changes in tax treatment for BTL owners might mean that deferring entering that market for two or three years might be good idea. Who knows?

    The usual advice for investing is (i) keep the charges down, (ii) avoid tax, (iii) diversify. BTL isn't diversified - you'd be putting a large chunk of your wealth into one or a few properties. Do you have any advantage in that field? Trade skills, legal skills, a source of good tenants? The latter might be particularly valuable. Also, here's a thought. Move to a bigger house and then let out the current house. At least you are thoroughly familiar with the strengths and weaknesses of the current house. If you find you don't like being a landlord then sell the current house: at least you shouldn't have much or any Capital Gains Tax to pay. And if you are going to pay cash for the new house rather than be in a "chain" you might have useful bargaining power. Get a full structural survey, of course.
    Free the dunston one next time too.
  • Ok this is going to sound bad but I don't mean it to. Yes my priority is my family and making sure we are all going to be financially secure. Now I'm not saying it's going to happen but both my wife and me have been in failed realationships before. I'm not saying it's going to happen with my wife and myself but you just never know so why would I put money into her pension when if something did happen which touch wood it doesn't that would be money lost. I also have her brother who is hinting at me to give him money so he is mortgage free. I've taken risks with my life to get this money and I just don't want to be stupid with it
  • For instance we have seen a property in our area, 1 & 2 bedroom apartments the lowest is £100,000 and the same properties are being rented out for £500 & £600 per month it a good area with good schools etc we thought this may be a good idea as it's only a small chunk of the money and we do want to diversifie and have the money in different things
  • fiisch
    fiisch Posts: 509
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    Ok this is going to sound bad but I don't mean it to. Yes my priority is my family and making sure we are all going to be financially secure. Now I'm not saying it's going to happen but both my wife and me have been in failed realationships before. I'm not saying it's going to happen with my wife and myself but you just never know so why would I put money into her pension when if something did happen which touch wood it doesn't that would be money lost. I also have her brother who is hinting at me to give him money so he is mortgage free. I've taken risks with my life to get this money and I just don't want to be stupid with it


    It's more tax efficient to spread across you and your wife - for example, ISA's have a limit of £20,000 input per year, and likewise for pensions if you earn more than £22,000 annually from your pension or if you exceed the £1m lifetime allowance (very possible if you invested a large proportion of the money coupled with your army pension).


    However, you are dead right that you will not have a claim against any of the money in your wife's name, and I can understand you being cautious in that regard.


    It's a balance between what is tax efficient and what you are comfortable with.
  • I'm just honestly thick when it comes to stuff like this because I've never had an interest in it. I worked in Iraq in private security and I'm a live for today kinda guy but now I have two young boys I want them to have a great upbringing where we can have nice things and also for them to be ok for the future if any of that makes sense
  • Malthusian
    Malthusian Posts: 10,898
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    Ok this is going to sound bad but I don't mean it to. Yes my priority is my family and making sure we are all going to be financially secure. Now I'm not saying it's going to happen but both my wife and me have been in failed realationships before. I'm not saying it's going to happen with my wife and myself but you just never know so why would I put money into her pension when if something did happen which touch wood it doesn't that would be money lost.

    No it wouldn't. Unless you've been married for a short time it would be taken into account in deciding how to split the assets of the marriage and the default would be a 50/50 split between you. Same for your ISAs.

    Her brother sounds worth crossing the road to avoid. Why on earth is it your responsibility to pay his mortgage?
  • AlanP_2
    AlanP_2 Posts: 3,250
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    To start with if the adviser you saw was talking about things that went over your head you probably do not have the right knowledge at the present time to make the most sensible decisions about what to do with such a large sum.

    Find an INDEPENDENT FA who you can build a relationship with and who will take the time to explain things in a way that make sense to you.

    Whether you DIY or use an IFA you need to consider the whole situation and that includes your wife and children. Think about what your family objectives are.

    Get State Pension forecasts for both of you, and get up to date forecasts from your 2 existing pensions, that will at least give you (or the IFA) an indication of the level of retirement income you have "in the bag".

    What is your wife's pension situation / prospects?

    NS&I for the cash in the meantime with the treasury protection as said already.

    An IFA is unlikely to suggest BTL property as it is outside their field of professional competence.

    Leaving the sum in cash will mean it dwindles in value over time as inflation eats away at it.

    If inflation was only 1% higher than the return you got from a cash savings account it would lose 1/4 of it's value over about 30 years - NOT GOOD.

    Investments of some kind is what you need to have any chance of preserving it's buying power, probably in a mixture of:

    SHORT TERM / EMERGENCY CASH + S&S ISAs + PENSIONS (maybe + BTL).

    You say you "own a business" - Is it a Ltd company? If it is the company can contribute to your pension (and your wife's if she is an employee / director) rather than you paying into a pension form your "wages".
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