What to do with inheritance?

[NextPrimeMinister]

In the fortunate/ unfortunate position to have received a large sum. Approx £220k.

I've never invested beyond Premium Bonds and Child trust. No idea what to do and would like to use it for retirement and possibly having something to pass on.

I'll likely see an IFA but don't trust them to be impartial and that would be the opinion of only one person.

Randoms on the Internet - what would you do?

We're early mid 50's with a healthy income which covers all our day to day spending with £1,500 per month available to invest. (Once mortgage paid off see below. We are massively overpaying currently).

Current mortgage is £55,000 which would leave £165,000 to do 'something' with.

I have a workplace pension on track to pay out £3k per year (I know).

DH has a frozen final salary / 50k in a workplace pension which has stopped and he's joined a new company and started new contribution pension. He'll get £9k per year.

Do we buy properties (it's cheap where we are so we'd get two outright or more if mortgaged).

Invest in ......what is there?
Increase pensions...how?

We also have 10k in PB's so classing that as our easy access emergency fund.

I am a higher tax rate payer if that makes a difference, but only on the cusp. Increasing my pension contributions could easily bring me under but would then impact my take home pay, but then we'd get CB?

DC x 1 likely to got to uni in 6 years.

I've no idea what to do for the best but also carry the weight of ensuring I do the right thing with this money due to where it has come from.

I think you need to think about your goals and work back. Do you want to retire at 55? Work till you’re 70? Is £12k a year pension income enough? How do you want to spend retirement? How will DC be supported at uni? Suggest listening to podcasts, or the Rebel Finance School videos.

if it were me, I’d focus on retirement income. Invest in a SIPP, in something like Vanguard global all cap index fund - low fees and well diversified. Max out the annual contribution to that, each, same with an S&S ISA up to its limit, and anything else in Premium Bonds or a GIA. All this assumes expensive debt (ie probably not the mortgage) is paid off. If saving for uni, a Junior S&S ISA (again, in low fee broad based index funds) could build towards uni in 6 years.

As the poster above said a lot will depend on your retirement goals but also to balance where to put it eg accessibility and tax free on withdrawal (stocks and shares isa) versus locking away, tax relief (pension). You’d need to run the numbers but SIPP in your name rather than your husband’s might be better given pension difference. Also factor in tax on the way back out. Eg if your husband already has £9k a year plus the state pension he’ll be paying tax on the way back out from state pension age.

you definitely need to see a financial adviser. You could go to your bank or approach an established firm. Do you have a friend who could recommend someone.

You don’t have to take the advice of a IFA, just because you have seen them.

you also don’t have to make your mind up today.

work out where you want to be and when you want to retire and work backwards.

paying off mortgage and increasing pension provision seem like good ideas, and you haven’t mentioned a fund to fund your child at university. Keep it in your name and dole out weekly, monthly, termly as your child’s money sense determines.

set aside a holiday fund

consider increasing pension provision, or consider other investments so you can retire early if that is what you want

new car ? Jewellery to remember the person, people by ?

take at least a year to just think about what you want.

The only thing I would NOT do is buy a second property and become a landlord. Too much hassle and too risky, and would use up all your capital.

Don’t become a landlord. We’ve just sold our most troublesome rental property and locked the money into a savings account for 3 years at 4.8% interest, which is a better return than we’ve ever had on that property.

Thanks for all the ideas and suggestions. I truly appreciate you all taking the time to consider my options and give your thoughts.

Am going to create a spreadsheet to start working out my retirement plans and work back from that in the first instance.

What savings account pays that and how long is money tied up for please?!

Could I have the information about the savings account too. That’s a fantastic deal.

Hargreaves Lansdowne Active savings I imagine although I may be wrong

I do t think 4.8% over 3 years is fantastic is it?
I mean it's pretty good goven chrrent rates, but it is not the best and I wouldn't class it as fantastic given inflation is running at 10%+.

OMG that was ful of typos!

Ah I thought it was 4.8% per annum which I think would be good for instant access (but maybe it’s not that).
I wasn’t suggesting that is the right thing for the OP, just wanted to know what the good account was.

Look at Meaningful Money, he had a video today about now being a good time for investing (not watched it yet).

Definitely don't buy property. Put aside some of the money to do/buy something to remember your loved one.

Give me 20k 😂😂🙈🙈 so many things need doing in my damp house, and I’d be helping you out

This afternoon I've set up a spreadsheet, monthly income / outcome until we're 75, with a tab showing retirement at 55, 60 and 65 (couldnt face the thought of 67). Well that was depressing.

Feel almost panicked by the huge gap and cannot believe how blase I've been thinking what retirement would have looked like.

I really need this inheritance to plug the gap. I feel so foolish.

Don’t feel foolish, it is a massive piece of accounting work to see what you need at the different ages, and it is only thanks to a money wise relative I have known my numbers for a few years now.

Gap plugging is possible in your time scales, and you have choices you didn’t have because of the inheritance.

and the information is out there on the web, so take your time, and Plan the heck out of your retirement

@LiveintheNow
It’s TSB, 4.88%, interest paid monthly. They had a higher interest rate account if you would take the interest annually rather than monthly. We’ve locked the money away for 3 years.

And yes it’s 4.88% per annum.

I would:

1. do something lovely. A family holiday, some home repairs - buy a picture - a new flowerbed or whatever. Doesn't need to be hugely expensive. Maybe spend 5K.

2. be aware that if you have a child going to uni - and you are a higher rate tax payer - they will be able to take loans for tuition fees but they will only get probably 50% of the max maintenance loan. There is an expected parental contribution of approx. £400 per month. Look at your timings and think if you want to (1) pay from income or (2) want to save a chunk (@ 20K for a 4 year course). If you want to save put in a fixed rate cash isa or fixed rate bond (divided between you and husband so you don't pay tax on interest). I did this and am pleased I did as had lost my job by the time mine started at Uni so we could live on my husbands income but this would have been a stretch. Not the most efficient use of funds though given inflation is 10%.

3. Use the rest for pension saving. I would do this in preference to paying off the mortgage (depending on your interest rate) or at least maximise your yearly contributions of pension first and then overpay mortgage. This could be your workplace pension or a SIPP - you can make total pension contributions up to 40K per year but this includes your work place contributions. This is very efficient as you get all the tax back. The advantage of a SIPP is you can take earlier (from 55) whereas you workplace pension may be more strict but there are some rules about tax which are a bit complicated but you can read up on.

(4) Maximise ISAs - I might do cash at the moment but could do S&S.

Be aware it could be a few years before you can get it all invested tax efficiently. And be aware of the 85K limit on financial compensation from a single bank (but I thyou have six months higher cover after receiving an inheritance).

Pension or retirement planning would be my priority, after that putting some money aside to help your DC buy a place later on.