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  • FIRST POST
    • missseej
    • By missseej 13th May 18, 11:40 AM
    • 2Posts
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    missseej
    £20k inheritance and overwhelmed by options!
    • #1
    • 13th May 18, 11:40 AM
    £20k inheritance and overwhelmed by options! 13th May 18 at 11:40 AM
    I've been lurking on this site/forum for a while but there are so many options that I'm not sure what to do to make the best of my money.

    Firstly, thanks to MSE, within the last 12 months I paid off all outstanding credit card balances and have built up an emergency fund of 3 months salary I'm now using the monthly funds I'd allocated to those causes to overpay the mortgage a bit each month.

    I've never been in massive debt but I've also never really had savings before. A recent death in the family has meant I've received £20k inheritance and I have no idea how to best make it work for me in terms of investing; I've tried to diligently research but have ended up completely confused by all the options out there.

    I'd like to take around £5k of that to spend on 'fun stuff', e.g. a holiday and some home improvements, which I think would be best placed in a couple of 5% savings accounts until I need it?

    As for the remaining £15k, as I can lock it away, am I better off putting this into an S&S ISA or overpaying the mortgage (I believe I can pay in up to 10% without penalty in one year)? £143k remaining on mortgage, 30 years @ 1.59%. Or is there another option I'm missing?

    Thanks in advance for your brains!
Page 1
    • george4064
    • By george4064 13th May 18, 11:46 AM
    • 1,019 Posts
    • 1,071 Thanks
    george4064
    • #2
    • 13th May 18, 11:46 AM
    • #2
    • 13th May 18, 11:46 AM
    I'd like to take around £5k of that to spend on 'fun stuff', e.g. a holiday and some home improvements, which I think would be best placed in a couple of 5% savings accounts until I need it?
    Originally posted by missseej
    All best saving accounts are here: http://www.moneysavingexpert.com/savings/savings-accounts-best-interest?_ga=2.72358995.1550413682.1526208158-901705484.1520349272

    As for the remaining £15k, as I can lock it away, am I better off putting this into an S&S ISA or overpaying the mortgage (I believe I can pay in up to 10% without penalty in one year)? £143k remaining on mortgage, 30 years @ 1.59%. Or is there another option I'm missing?
    Your mortgage is at a decent rate, so you're better off not overpaying the mortgage as you will be able to achieve a return greater than 1.59%.

    As you say, you should considering investing this remaining money in a Stocks & Shares ISA. This will have risk involved but remember that the potential returns are much higher here as you are taking a bit of risk. With investments diversification is the key, so consider global funds (think of having a finger in every pie, but in terms of investments all over the world!)

    There is a huge range of global funds out there, but here are some popular ones:

    - Vanguard LifeStrategy 60% (this is also available at 100%, 80%, 40% and 20%)
    - L&G Multi Index Funds (similar to Vanguard they have a range of funds with different levels of risk and potential return)
    - HSBC Global Strategy Funds (again they have a range of these a set above)

    You will also need to select an investment platform, whether it be for your ISA or SIPP. I personally use AJ Bell YouInvest who have been great, but note that there isnt a perfect platform for everyone. Also its important to remember that the cheapest platform isnt necessarily the best, the saying you get what you pay for certainly holds true with investment platforms. Here is a good website that compares platforms and their costs: http://monevator.com/two-ways-to-help-you-find-the-best-online-broker-or-investment-platform/
    "If you arenít willing to own a stock for ten years, donít even think about owning it for ten minutesĒ Warren Buffett

    Save £12k in 2016 - #045 £10,358.81/£12,000 (86%)
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    • FatherAbraham
    • By FatherAbraham 13th May 18, 11:55 AM
    • 870 Posts
    • 636 Thanks
    FatherAbraham
    • #3
    • 13th May 18, 11:55 AM
    • #3
    • 13th May 18, 11:55 AM
    I've been lurking on this site/forum for a while but there are so many options that I'm not sure what to do to make the best of my money.
    Originally posted by missseej
    One begins by analysing one's liabilities, and when they fall due (e.g. home or car maintenance, retirement income generation, expected gifts to relatives or children, unexpected loss of income for a limited period).

    That helps one structure one's investments into short-, medium- and long-term horizons. Clearly, one can demand higher returns from longer-term investments, where there's little current liquidity, but one must ensure that short-term liabilities can be met, even though that costs in terms of return level.

    Then, with this strategic framework in place, one can look for the best asset to invest in which matches each class of liability.

    Warmest regards,
    FA
    • xylophone
    • By xylophone 13th May 18, 1:04 PM
    • 26,478 Posts
    • 15,721 Thanks
    xylophone
    • #4
    • 13th May 18, 1:04 PM
    • #4
    • 13th May 18, 1:04 PM
    You might consider making a beginning with a stocks and shares ISA - this might suit. You could begin with a lump sum and invest monthly thereafter.

    http://monevator.com/using-vanguard-lifestrategy-funds-life/

    https://www.vanguardinvestor.co.uk/investing-explained/stocks-shares-isa
    • greenglide
    • By greenglide 13th May 18, 1:30 PM
    • 3,164 Posts
    • 2,059 Thanks
    greenglide
    • #5
    • 13th May 18, 1:30 PM
    • #5
    • 13th May 18, 1:30 PM
    What about pensions?

    If you don't already have a sensible level of pension savings the pensions tend to be much, much more important than overpaying the mortgage.
    • missseej
    • By missseej 13th May 18, 3:02 PM
    • 2 Posts
    • 0 Thanks
    missseej
    • #6
    • 13th May 18, 3:02 PM
    • #6
    • 13th May 18, 3:02 PM
    Thanks everyone, some really useful information here.

    There is a huge range of global funds out there, but here are some popular ones:

    - Vanguard LifeStrategy 60% (this is also available at 100%, 80%, 40% and 20%)
    - L&G Multi Index Funds (similar to Vanguard they have a range of funds with different levels of risk and potential return)
    - HSBC Global Strategy Funds (again they have a range of these a set above)
    Originally posted by george4064
    Thanks so much for these and the links too - I'd seen Vanguard LifeStrategy recommended before for newbies in order to ensure a diverse portfolio so it's useful to also have the other two examples for comparison.

    What about pensions?

    If you don't already have a sensible level of pension savings the pensions tend to be much, much more important than overpaying the mortgage.
    Originally posted by greenglide
    I've got an OK pension pot (NHS pension) and from what I've been told there is no benefit for me to pay extra into the NHS pension.

    I've no short-to-medium term goals but my long-term goals are to pay off the mortgage and to retire early, though I'll admit to not having a solid plan in place to achieve this except some loose numbers on what I should be putting into savings each month. I'm putting that into mortgage overpayments for no other reason than not knowing where else to put it! I'm aiming for a retirement age of 55 yrs old maximum, which is why I haven't looked into SIPPs, but perhaps there are options available which allow me to make pre-tax contributions but access before 55yrs, or should I look to invest in a SIPP plus something else to tide me over between access to SIPP at 55yrs and NHS pension at 65yrs?

    Does having these long-term goals make a difference to what you would suggest? Perhaps I should have led with this
    • kidmugsy
    • By kidmugsy 13th May 18, 6:58 PM
    • 11,576 Posts
    • 8,100 Thanks
    kidmugsy
    • #7
    • 13th May 18, 6:58 PM
    • #7
    • 13th May 18, 6:58 PM
    Your NHS pension scheme is a cracker - much envied by most of the population. That probably means that making extra pension contributions isn't particularly attractive unless it would let you avoid higher rate tax.

    Your mortgage at 1.59% is so cheap that there's probably little point overpaying it.

    One thing you could do is open a Flexdirect current account at Nationwide. If you follow the rules it would pay you 5% p.a. interest for the first year on up to £2,500 and it would allow you to open a regular saver that also pays 5% p.a. - that could absorb your monthly excess of money for a year. Once the TSB fiasco is settled you could also open a current account there, paying 5% p.a. on £1,500 if you obey their rules.

    If you are prepared to invest some money with a view to accessing it at age 60, consider a LISA. You invest £4,000 and the taxpayer pops in another £1,000. You have penalty-free access at 60; if you want access before that there is a penalty to pay and, although it would sting, it's not draconian.

    The LISA is a "tax wrapper": once you've subscribed your money what matters next is what you invest it in. george4064 mentioned some possibilities.
    Last edited by kidmugsy; 13-05-2018 at 7:28 PM.
    Free the dunston one next time too.
    • bostonerimus
    • By bostonerimus 14th May 18, 3:48 PM
    • 2,251 Posts
    • 1,553 Thanks
    bostonerimus
    • #8
    • 14th May 18, 3:48 PM
    • #8
    • 14th May 18, 3:48 PM
    I would not spend anything on a holiday. When people are presented with a windfall many will see it as an opportunity to spend......that's one approach, but IMHO it is the wrong one.

    First pay off all your high interest debt.
    Next put enough money in an immediate access saving account to live off for 6 months to a year. This is your emergency fund to pay rent/mortgage if you lose a job, make large repairs to your car etc.
    If anything is left put it in a multi-asset fund in an ISA.

    Contribute as much as you can to a work place pension, try to put something each month into your ISA and then if you can stretch to it make some extra mortgage payments.
    Last edited by bostonerimus; 14-05-2018 at 3:52 PM.
    Misanthrope in search of similar for mutual loathing
    • cloud_dog
    • By cloud_dog 14th May 18, 4:37 PM
    • 3,838 Posts
    • 2,280 Thanks
    cloud_dog
    • #9
    • 14th May 18, 4:37 PM
    • #9
    • 14th May 18, 4:37 PM
    I'm aiming for a retirement age of 55 yrs old maximum, which is why I haven't looked into SIPPs, but perhaps there are options available which allow me to make pre-tax contributions but access before 55yrs, or should I look to invest in a SIPP plus something else to tide me over between access to SIPP at 55yrs and NHS pension at 65yrs?

    Does having these long-term goals make a difference to what you would suggest? Perhaps I should have led with this
    Originally posted by missseej
    I think this should be your main focus, in my opinion. Unless, you have other plans, such as pay off the mortgage and use the free cash to save and bridge the gap between chosen retirement date and NHS pension date.

    You've not provided your age, as this may assist in offering opinions, but, with a 30 year mortgage I'm going to assume you are around the age of 30. You need to weigh up the pro's and con's of flexibility of access to the money between an ISA and a pension (SIPP). It would make sense, with this inheritance, to actually make plans for retirement so that you can retire on your terms.

    If you are a higher rate tax payer then I think pension (SIPP) would probably be the route to take. Even if you are a lower rate tax payer you may prefer to pay in to a pension rather than a (L)ISA. If you are in the age bracket I mentioned then you absolutely need to be looking at investing your money. Perhaps a combination of ISA and LISA/pension so as to allow flexibility.
    Last edited by cloud_dog; 14-05-2018 at 4:40 PM.
    Personal Responsibility - Sad but True

    Sometimes.... I am like a dog with a bone
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