What to do with pension lump sum?

[Sober23]

I'm getting my pension lump sum next month and just wondered what most people do with theirs? I plan to pay off my mortgage, which is 33k. But I don't know what to do with the rest, which is about £80k. I'm mid 50's so it will hopefully have to last me some time....

Any suggestions?

Yep sure debt repayment is always good. Maybe look at utilising you ISA allowance so you make a bit of money on part of it and work out how much you would like to put away and likely to need for bills.

Definitely pay off your mortgage.

I would put £20k into an ISA (this is assuming you don’t have one for this tax year)

I would then put the rest in a savings account and wait for the budget to see what might be your best long saving & investment options.

funeral plan

Pay off debt
Mortgage
Isa
High interest savings
Premium bonds
Sit and wait

In that order

This

Why are you taking your lump sum if you haven’t already decided exactly what you’re going to do with it?

Are you getting a monthly pension now as well? Do you need it for bills etc or is it purely “fun money?”

What kind of scheme are you in? Just wondering why you are taking all the lump sum now with no plan for it. If you have a DC scheme you could take the £33k to pay off your mortgage now and leave the rest invested so you have some tax free money to take later too. That way the rest could continue to grow with your pension.

are you retiring? If not it could also limit how much pension you could save going forward too

Took early retirement a couple of years ago, started drawing on one of my pensions (DB scheme so no option to leave it in) and had the TFLS arrive in my bank. No mortgage or other debts so had to put it all away.
£20k in my ISA and £20k in OH name, a few weeks later (new financial year) I did exactly the same again. Made sure both our PB's were maxed out (easy accessable fun money) and put another £40k in NS&I tax-free savings ready for the following years ISA allocations.
The rest we already had earmarked for a large purchase.

I wouldn't do this, personally. Too many people been left without the monies they put in when company goes bust taking your money with them.

I'd rather keep it in the bank.

Again, my preference.

It's tax free and assume well invested. Surely best left where it is, unless:
You need it.
Your mortgage rate is high.
Want to feel debt free.
You think upcoming budget will take it away.

Edit:assuming it's a defined contribution pension.

oh that is a worry i didnt know about

When I was made redundant I saw a financial advisor, 20k went in an ISA to claim the allowance and FA invested the rest.
This was during covid so I wasn't expecting great returns (I just wanted it out of my account so I didn't fritter it away on important stuff like shoes and handbags 😜), the FA asked me what figure I would like to make by the time I retire, I've already hit my target four years later.
Might be worth talking to a financial advisor

If the op has a DB pension there maybe an automatic lump
sum that is paid immediately when you claim
your pension.

For such large amounts you need proper financial advice from a qualified person imo

Travel places you wanted to go which you're still able to. My husband is the same age and he's just been diagnosed with ab illness. He's gone from fit and healthy to having. Life limiting disease in the space of months and can barely even walk now.

Quite hard to decide tho what you could do as mid 50s is still very young.

Wow, now that is a grand sum! We firstly made sure the mortgage was paid off We downsized (paid cash for a doer upper) my lump sum paid for new doors and windows. DH is 7 years younger than me,so he retired 2 years ago,we used his lump sum for solar panels. We have made sure we are future proofed.

DH is about to receive his lump sum. We've had a holiday which he's paying off next month (times constrained due to his new job and retirement dates) and the rear is going in the bank and Premium Bonds. No other plans.

I was going to say this.

My sister has an NHS DB pension. There isn't a choice when to take the lump sum. It's just paid into your bank account when you reach 60

She is then paid a monthly figure .....its like a dream....wonderful ! (I don't have a DB pension)

Yes, it's a DB scheme (LGPS) and unfortunately I'm taking it early because it's ill health retirement, tier 1. Yes, I will also get a monthly income.

Sorry, should I have said that in my OP?

My illness has dictated this, so it doesn't feel like a choice, sadly.

Thank you for the suggestions. I will feel better when I'm mortgage free. I'm too risk averse to be looking at stocks and shares ISAs, but will definitely get a cash one and I think the rest will go in premium bonds or growth bonds with NSI.

Do you have a spouse OP?

for the 80k - I’d put 20k in a cash ISA, and another 20k in DH name (if you have a DH)

Then I’d put maybe 5k in an easy access account for general savings and 10- 20k in some kind of fixed rate bond. Depending on yours and DH earnings as to how much in each name for tax reasons.

I’d probably put the rest in premium bonds and then add to cash ISA next year. Or hopefully be lucky and stick with premium bonds.

Also the suggestion for stuff for your house is a good one - solar panels, new windows, new kitchen etc?

No spouse, but I could put another ISA in DD's name, she's 16 so maybe you have to be 18 for an ISA?

I'm not sure whether I want to move (downsize) in a couple of years so wouldn't want to spend money I wouldn't recoup on the house.

I would not put 20k in an ISA for a child unless you are gifting it. As much as no parent wants to think it sometimes they may not be as sensible as you would like. I would however gift her 4k for a LISA when 18 if they still exist. That’s max per year and they can only be used for a house deposit or retirement and it’s 25% interest

DH is retiring next week, we have no mortgage to pay, stocks and shares ISA are fine very long term it’s not like investing in a single stock.

What I would say is after mortgage paid off and your ISA allowance. Then all extra in to NSI etc but make sure you can withdraw 20k easily as come 6 April next year move 20k straight in to your ISA. Plus do wait for budget. Unless you were dreadful with money for that amount I can’t see an FA being much use.

Wishing you well op.

Whatever your health allows once you have got used to finishing work find something you love however small. I have some health issues and took up tai chi which is gentle and relaxing.

Thanks for this; very clear.

What would I be sitting and waiting for?