Investing £30k

[hungryKat]

I’m looking for advice on what to do with a £30k inheritance. We have emergency savings of £20k and our DS 18months has £25k we have set aside in our savings/JISA for him we are saving £300 a month for him. I (age 38) have £150k in my DC pension (contributing £18k a year) and DH (age 43) has a DB pension.

We earn £60k and £70k and have no debt apart from a mortgage of £770 per month with £110k left to pay.

I guess the options are:

• put into pension for DH to see him through the period of 60 (when he hopes to retire) to 68 (when he will access his DB pension with no penalty)
• pension for me
• extra into LISA/ISAs
• extra into DS savings
• over pay mortgage
• Buy a BTL (this is low down my list as seems a hassle and not as good returns as there used to be). We would also have a lot of tax to pay as we’d lose the child benefit and pay HR tax.

Does anyone have any advice?

From that lot I would overpay mortgage but I’ve learned how financially out of date I am so will watch others’ comments with interest!

I’d put it in a high interest account ( if such a thing exists anymore) and over pay the mortgage.

I would put it into "a" pension. Bearing in mind that £30k, even with 17 years of investment growth, is unlikely to fund 8 years of retirement so your DP should consider dripping in additional pension contributions.

I assume you are married so that it is less important "whose" pension this goes into and pick whichever is most tax efficient.

Your family is still relatively young, so you may need funds in future (house move, private healthcare, loss of job, anything can happen). It's probably not a good idea to put it all in a pension where it can't be accessed early without penalty.

What is your £20k emergency money saved in?

To start with I would make sure your savings for DS are in investments, not cash.

It sounds like you are definitely committed to "sharing" the inheritance between you. Definitely don't put it all in your DH pension (you never know what's going to happen down the line....).

If you are not going to need the money until 60+ then either split equally into your workplace pensions or SIPPs and invest sensibly (You might need to check your DH defined benefit pension & annual allowance).

Or you could split into a LISA and S&S isa each and invest sensibly, maxing out the LISAs. No tax saving now but not going to pay tax on it later down the line..

If you might want to use the money earlier than that then S&S ISA each is a sensible option.

If thinking even more short term, then
tax free cash savings are about parity with mortgage interest rates at the moment in terms of overpayment. You'd also need to check your overpayment allowance as that would be a high % of your total mortgage remaining.

All depends on when you might want to use the money really.

Probably should have said we overpay the mortgage with £600 a month so this should be cleared in 7 years when DH is 50, the plan was then to save the mortgage payment to cover the gap between 60-68 for him.
The £20k is in a mix of cash ISA and a 2 year bond (which was paying 5.2% when I opened it), savings for DS are all in accessible S&S ISA with £6k in a JISA S&S.
This £30k is just extra that we weren’t expecting and we can pay it off the mortgage but it would only reduce our payments from 7 years to 5 years and I wondered whether we were better investing it.
I know you can’t guarantee it, but I run a business that my share should sell for at least £300k (what it’s worth now) and could be up to £1m if it grows as we hope. It’s professional services so easily saleable.

Sounds like you're doing really well! You don't say what your mortgage rate is, but if you're already overpaying, you may as well stick to your existing plan unless you're on a high interest rate.

If it was me, I'd be tempted to put £20k into a S&S ISA, choosing a low-cost fund with a broad base of investments - something like the Vanguard ESG developed world equity index tracker. Or one that's mixed (say 60% equities 40% bonds), according to your tolerance for volatility. Or you can build your own portfolio, which is fun, though slightly nerve-racking.

Then the other £10k could go on the mortgage or into your cash savings if they're not ISA-wrapped. Or towards a really nice holiday!