What would you do with £60k?

[marcellab]

Single parent mid thirties. Mortgage of £230k.
One DC who is not far off needing car/driving lessons.
House is fine but there could be some "nice to have" improvements.
Never really done a big holiday but would like to.
Pension is neither great, nor piss poor. Probably about £70k in pot at moment.

How would you allocate the money in my shoes?

30k off the mortgage and the rest in savings for the holiday/extras you need and some security?

I’d go o. one nice family holiday, send £10k to my pension and send the rest to pay off the mortgage

Sorry just re-read I’d def save £5-£10k too.
Is university fees a concern?

Pension on 70k isn't much at all at your age. I'd consider putting most of it there and against mortgage

Maybe take 5k for a holiday.

Holiday then mortgage
Definitely

Holiday and pension. There seems to be a mismatch between your salary and pension (assuming you must be on £50k+ to be able to get a mortgage if £230k). What sort of projections are you getting?

Given how many years pensions need to support... say 25 yes.

Pot of 70 now might be 100 by then depending on too ups.

100/25 doesn't leave much per year at all. 5k a year !?

I'd say pensions all the way.

Mmmm. With interest rates threatening to rise I'd say mortgage. But no reason why you can't do half mortgage half pension.

I’d take £10k out of that to pay for driving lessons and holidays for a few years.
The rest can go on your mortgage.
You can start contributing to your pension when you have no more mortgage payments.
But I have no accurate idea about that so look into it.

Either pension or pay down the mortgage.
DC can get a job to buy their own driving lessons.
Holidays needn't cost that much.
Ultimately, the quicker you pay off your mortgage, or at least get it to manageable levels, the quicker you'll have money to choose what to do with.

Will this DC be going to university? If so, you'll be expected to contribute to their living costs, so you need to look into that.

Pension would also be another priority, as I agree that it looks very low if you're a decent earner although you have time on your side.

Will downsizing be a possibility towards releasing money to fund your retirement?

How's your day to day budget, can you afford to live and add to your savings and investments to fund the things you mention?

@Kite22

Either pension or pay down the mortgage. DC can get a job to buy their own driving lessons. Holidays needn't cost that much. Ultimately, the quicker you pay off your mortgage, or at least get it to manageable levels, the quicker you'll have money to choose what to do with.

But unless you have an awful mortgage rate, any investment is likely to grow faster than the interest rate on your mortgage in the medium to long term, plus you get tax relief so that should lead you strongly towards your pension while you let your mortgage run its course.

People keep talking about interest rate rises but they're unlikely to rise by much at all in the short to medium term.

Mortgage, pension, holiday, savings.

£40k - mortgage
£10k - driving lessons, uni, treats, holiday
£10k - rainy day pot

Thanks all. Further info that I wasn't sure would be relevant to OP but perhaps was:-

• I already have a rainy day pot of 3 months expenses and no desire to add to that

• pension pot is really low despite paying into it for over 10 years. I've only been a higher earner for 2 years and am now paying in £1k per month (including very low employer contribution) so hopefully this will rise quite a bit but if for any reason I have to leave work in the next few years, this is a worry

• DC isn't going to uni

• I already invest/overpay mortgage £750 a month

• I have enough money for fun things, days out, takeaways, but never allocate money for bigger purchases or holidays so writing all that out I think I probably do need to have a bit of fun and a holiday is on the list

I would put aside what you need for the car, holiday and home improvements. Put the rest in your pension, which (unless you have a terrible mortgage deal) will grow at a higher rate than your mortgage interest rate and you'll get the tax benefit.

Is your current £1K a month into pension enough to get tax relief on all your earnings above threshold? (and get your child benefit back!)

I would definitely max the 40% relief, and drip feed annually from the £60K to do so.

I wouldn’t pay off the mortgage at current rates - and as you can afford to overpay now and have sizeable pension contributions, I wouldn’t worry about interest rises. Obviously they’re not good - but you can take some stress. What I would do though, is look to see whether a partial mortgage payment would change your LTV and open up better rates. Then I might consider that.

I’d go:

1. Maximise 40% pension tax relief
2. Use £20K ISA allowance (higher end risk investments if your pension are lower end)
3. Remortgage (using some of the money to get best LTV rate if applicable) onto a fixed rate for 5 years + offset
4. Put what’s left into the mortgage offset account. This is likely to be a far lower return (as an interest saving) than the ISA, but it’s guaranteed, and psychologically I like it. It’s also totally liquid so it’s ready to go into next year’s ISA if you prefer that, or pension, or driving lessons. I’d add my 3 months emergency fund to this too.

I wouldn’t bother with non essential house stuff - but that’s just my priorities! I would take £5K for a great holiday though. It’s not often in life you get a big windfall, so it’s nice to do something more than just sensible 😀

Definitely spend 10k on a great holiday, especially if DC are getting older so this could be your last chance to have a family holiday. We have done 2 big holidays at times when money might have been better spent elsewhere and I have never regretted it. We all talk about those holidays years later.

I was going to write a detailed reply but Cocomarine has said exactly what I would have said (only much better!). Do that. Especially the max the pension relief point.

French- what type of holiday make would you recommend?

From reading your last post it sounds to me like you're doing all the right things! Book that big amazing holiday for yourself, you deserve it! You can put some aside for the car and driving lessons too and maybe a few home improvements. In your situation I wouldn't be inclined to be too sensible.

Does your mortgage have an offset account option? If so, put the money there for now whilst you look at options, as you will be saving money on mortgage interest straight away and you can get the money back as soon as you decide where to put it long term.
We had a similar situation and eventually decided to add to our pension rather than pay off mortgage - if you are a higher rate tax payer its a no brainer if you don't think you are going to need to use the money before you are pension age.
In your shoes I'd prob keep 5k for driving lessons / car, 5k for a holiday then the rest in a pension.

Id take 40K + equity in my house to buy a bigger house, whether that be towards deposit or home improvements. And then the rest in savings. Id probably have a modest 2K holiday as well.