Downsizing - what to do with £150k

[thisgirlrides]

We are in our mid-40's have 2 dc 9&12, both self-employed with variable income. We've been feeling the pinch for years & never seem to have any spare cash for holidays, major repairs etc and have zero savings or pension and both lower rate tax bracket.
On the plus side we do have sizeable equity in our house so decided to move to free up some equity. We've finally agreed a sale/purchase and if it goes through should have around £150k to invest after fees & reducing our mortgage enough to make a difference day-to-day.

Do we need an IFA? Our only must haves are:

1. Pension contributions
2. Access to £10k pa for 5 years to overpay mortgage
3. £5k holiday

Any suggestions most welcome

[MyBrilliantDisguise]

Can you pay off the mortgage with that?

[mixture]

If you're already mid-40's maybe look into how best to save for your pensions? (How, what, when and where).

[thisgirlrides]

@MyBrilliantDisguise we are tied in to a deal for another 4 years so can only pay off 10% pa without penalty. Once that deal ends we may we'll look to using a bigger lump sum to reduce it but we're hoping lower living costs and increased income (ive recently upped my hours) will allow a buffer.

[JoJoSM2]

When it comes to pensions, you could use an IFA or your could get one yourself. It's very easy - you can choose an online platform for your Self Invested Pension ( SIPP). You pay in and the platform sorts out the tax back with HMRC. For example, you transfer 8k in, and a few weeks later HMRC will transfer 2k for you. If you only pay basic tax rate, you'll be sorted. If you're in the 40 or 45% you'll get the rest of the tax refunded when you've done the self assessment.

Then, the only difficult bit is choosing from the thousands of investment options.

When you're ready to retire, you can either draw some money down whenever or buy an annuity with your lump sum (so that a company pays you a fixed monthly amount). However, it'll be up to you what you do with the pot and when. If you die early, all of the money will be inherited tax free.

Just make sure you read he small print on your mortgage and triple check portability criteria. For example, to check that you'll still have the required LTV when you've moved.

[TheletterZ]

You use tax free ISAs for a start.

Then break the money down into categories,
How much do you want as a treat - holiday, new car etc...
How much do you want to have as easy access savings - new car again, house repairs, unexpected costs, buffer in case one of you can't work
Then look at how much you can tie up in longer term investments.

[MummyShah369]

Wow is that 150k after all mortgages and debts have been paid off?

[thisgirlrides]

@MummyShah369 all debts yes but not mortgage as we can only over pay by 10% a year for the next few years due to being tied into a deal. We are very fortunate to have benefitted from crazy house price rises and can move without massively compromising on our quality of life - if anything we hope to be happier in a smaller house & 'less desirable' area as we won't have the same financial burden.

[PaperdollCartoon]

See an independent financial advisor and discuss retirement plans.

[MummyShah369]

Worth seeing an IFA we use Chase devior but there are lots... in our case we are doing better out of investments so worth keeping our mortgage and taking a chance on the return... which after fees has been over 10% obviously economy has been doing ok since 2008

[Sophiesdog11]

I wouldn't use an IFA, but then I was badly advised by one years ago and don't trust them at all.

Before investing in the stock market, make sure you have some easy access savings too, minimum 6mths living costs. Yes, interest rates are crap, but you do need them.

We have been investing in stocks and shares ISAs and SIPPs for many years, all DIY. We made 1 or 2 mistakes initially (see my advise below) but we have made a lot of money from them overall.

We use an online broker called Hargreaves Lansdown, who have a very good online platform but aren't the cheapest fees-wise. You could maybe look at HL for investment ideas (they have a comprehensive list of funds and website easy to use) then look at other brokers for comparison costs.

Have a look at this website for advice and comparison of online brokers.
monevator.com/category/investing/passive-investing-investing/

There are many different funds you can invest in, plus each broker will also offer some tracker funds with varying degrees of risk.

You can also buy shares in individual companies, but you really need a crystal ball to know which will be a success. DH bought Amazon many years ago and has made a bomb (on paper at least!), but others he has lost on! I prefer to stick to funds only.

The main advise I would give is:

Split between ISAs and SIPPs in both names

Whilst former doesn't have tax advantages, it has flexibility on when you access the money compared to the SIPP and can be withdrawn tax free. You never know what life events may happen and you want access to money, which wouldn't be possible if all locked into a SIPP.

Split the money into more than one fund, ie diversify, to spread the risk.

We have UK funds, European, US, Russian, Far east and a number of speciality funds too. But some UK and European funds are probably good as starters. (The HL website allows you to see top 10 companies that each fund invests in)

We made the mistake of not diversifying in first year or 2 of investing in ISAs, in late 90s, and whilst some funds increased spectacularly, I was burnt with a technology fund in dotcom crash!

Drip feed the money monthly, so that you even out the peaks and troughs of the stock market.

Again, we didn't do that initially, we invested full allowance in April of each new tax year and quickly learnt it was the wrong thing to do. If you invest all money on same day into a stock whose price is in a trough, all your money will grow, if the stock price is at a peak, it will drop - the difficulty is knowing whether it is in a peak or trough on that particular day. By drip feeding monthly, you even the risk out.

If you need a 'home' for the money whilst you wait to drip feed it, then look at 1, 2 and 3 year savings accounts. They tend to have higher interest rates. My DC both have an inheritence which they are drip feeding into ISAs. DS (20) has his spread across a number of 1 & 2 yr accounts, to access in March of each year then transfer into easy access a/c to drip feed throughout following tax year.

[Uniglo18]

Would you consider buying a house in the north west like Manchester or Liverpool to let out long term? Any profit made can be reinvested into pensions, holidays, diy etc? You could then keep or sell the property if your circumstances change.

[Flexoset]

I would be tempted to buy to let.

[Mymadworld]

We have got a better handle of the figures now and our sale/purchase is moving along well. We will actually have £135k left after moving costs and want to keep £10k for paying off overdraft, holiday, carpet in our new house etc a further £15k will immediately go on mortgage overpayment. So, actually left with £110k.

DH has already suggest BTL and although it's tempting (I used to work in lettings & property management!) I'm nervous about pooling all our resources into the property market plus am all too aware of the pitfalls of being a landlord especially being miles from the property. That said, we do have family we visit regularly in NW so not totally inconceivable plenty to think about.