What can I do with 50k

[Thatsinteresting]

I'm about to inherit approximately £50k. Both DH and I are mid 40s with 3 dc. Our mortgage is around £150k and we overpay around £1000 a month. My pension pot is 40k, DH 250k. We only have around 10k in savings. I know I should see a financial advisor but I don't even know where to start, do they even deal with such small sums? Inheriting feels like an opportunity that we shouldn't waste. DH says we should pay it towards the mortgage but we have a 10 year low rate fix so I think the money could do more elsewhere. Should I look at BTL or is that just ridiculous?

I'd be very grateful if someone could help me understand what I should be thinking about and if it's worth me seeing an advisor?

PS stop overpaying the mortgage! You could get more in a savings account then just pay off a big chunk when your fix ends and pocket the difference.

I’d put 20k into an ISA. Probably cash cos it doesn’t look like you have much accessible savings.

I’d probably put 20k into premium bonds and then move to the ISA next tax year and 10k into pension.

I’d also look into whether you’re better off stopping overpaying your mortagage and saving that money in an ISA or high interest account instead. Then you have some cash for emergencies plus you’re making more interest. Then pay down mortgage with lump sum when time comes.

Are you able to make a lump sum payment off a fixed rate mortgage? Make sure there is no penalty.

I don't think you should stop overpaying your mortgage: it's a really good thing to do to reduce the term or monthly payments. I might reduce the amount though, and pay off £500 a month and then save £500 a month.

In terms of the £50K I would (if no penalties) pay off £20 k, save £20 k in an ISA (maybe 15k in a cash ISA and £5K in stocks and shares).

If you are over your isa savings remember you will be taxed on interest, premium bond wins are not taxable however and not are gold coins if they increase in value.

You can pay a lump sum when the fix ends. Very bad advice to overpay on a low rate mortgage when you can get a higher savings rate- it’s literally throwing money away.

Whatever you decide to do with the lump sum I think you should really consider the £1,000 a month mortgage overpayment versus saving.

MSE has a calculator where you can compare overpaying against saving.

Ideally, I think you should be making every effort to get your pension savings higher. How much do you contribute a month (all in so your contributions, employer contributions and tax benefit) compared with your DH?

I'm less bothered about "only" having £10,000 in savings. That seems like a lot to me!

I think drip feed all the money into ISAs, fixed rate bonds etc - making sure you have the maximum possible interest rate and sit on the funds for now.

Make your money work for you a little (interest) while improving your safety net.

BTLs are not really a good option now based on everything I read. It seems impossible to earn an income as a landlord unless you have low debt, high income and LOTS of properties. £50 k won't go far in achieving that.

The two weakest points in your current situation are your low savings buffer and your own low pension fund. I think you and your DH should pause the mortgage overpayments until you have £25K cash for emergencies, but that the £50K inheritance should go into your personal pension fund. Hopefully you will receive tax back of at least 20% on top of that assuming you are working.

Thank you for your responses. I'm going to read through them all properly later but I have skim read so to answer a couple of questions;

We don't actually overpay the mortgage, we put £1000 in a high interest account and when the term ends it goes on the mortgage

I work very few hours, so don't pay tax. DH is higher rate tax payer.

We feel comfortable with 10k savings as we have good credit ratings so if really necessary we could put things on credit and repay quickly by pausing the mortgage overpayment. Also, DH gets an annual bonus of around 5k should we need a new car

The plan has always been to pay off the mortgage in about 10 years and then both work p/t until fully retiring around 10 years later.

We don't have savings for dc but gps do

Put half in premium bonds and half in an ISA/high interest account

Great advice

I would each put £20k in an ISA if you've not already got one this year. The interest will be tax free, whereas in a normal savings account it won't. Do one as a stocks and shares (riskier but better returns) the other as a cash ISA (less risky lower rate), and pop the other £10k in premium bonds.

Agree with everyone else. Not really a big enough sum to speak to an IFA. That £1000 mortgage overpayment should be going into a pension where it would get additional tax relief. Then ISA for tax free interest on first £20k of your savings now, another £20k in next tax year then £10K into the mortgage or PB.

Glad you're not actually overpaying your mortgage, that would be ridiculous and throwing away thousands of pounds a year and your good fortune of securing a long term low rate fix. That's like winning the lottery and immediately burning the winning ticket.

You definitely don't need to see a financial adviser you just need to educate yourself a little so you don't ask MN and get a thread full of mostly awful advice.

The financial flow chart sets out a 'to list' to go through:

https://ukpersonal.finance/flowchart/

And the Meaningful Money podcast (which is by a financial adviser who spends his time telling people that most people don't need to see a financial adviser) is good for learning about money. A recent season went through the flowchart in detail so a really good place to start.

https://meaningfulmoney.tv/2023/05/17/finance-os-intro/

I'm about to inherit £50k and dh thinks we should put my inheritance to pay it off the mortgage

dh has a pension pot of £250k and I have a pension pot which is fucking piss poor

put the majority of the inheritance in your pension pot

I agree with this. Even though they are married so in theory the DHs pension is a marital asset it's still a stark inequality caused by the OP raising their joint DC.

However as a low earner it's going to take 4/5 years to get that money into the OPs pension (I believe the limit is whatever her earnings are) so needs to planned for and the money needs to go into a 'holding pen' in the meantime, the best place is likely to be the best paying savings account (instant access, cash ISA or fixed rate account) but it will be worth it for the tax relief.

to add you could ring fence the overpayments of your mortgage at £1000 per month and place them in your pension for the next 4 years. Buying extra pension at a £1000 a month will reduce your income tax on your income considerably - obviously depending on how much you are earning and with the PA being £12,500

you could place the lump sum into an isa for this year and then an isa for next year April 2025/26. £40k paying 5.1% in a trading 212 account would see interest of £170 per month

Bjorkdidit

crossed posts there - It's early and my brain isn't working quick enough to put it all in one post!

trading 212 is a decent enough interest for a "holding pen"

I would want to make sure I had six months living expenses/some funds for boiler/car replacement.

I would prioritise pension over mortgage especially if you have an early repayment penalty to pay. I would add remainder to pension over however many years it takes to maximise income tax relief.

I would keep anything else back in an ISA.

If you only have 150 k left in the mortgage 1000 a month is madness.

Agree £20k S&S ISA now, £20k in April. This is long term savings and can be considered part of your pension (but with no conditions attached).

The other £10k you may want to keep as accessible funds - high interest savings account probably best.

I’d want more than 10k savings so would probably put 40k in an ISA. And the 10k in savings.
I love my premium bonds - something exciting at the start of each month to brighten my sad middle aged existence…but I’m a higher rate tax payer, don’t think they're the best idea for everyone. I use the winnings as my “frittering” money. Some months its £25, others a few hundred, and always the daydream of the 1m while the capital is still safe. Gambling for people who don't like gambling!

I believe the limit is whatever her earnings are

Even if her earnings are zero she can still pay into a pension.

"Even if you have no earnings, you can still pay in up to £3,600 a year to a pension – that’s £2,880 from you, with the taxman adding £720" (that happens to come from AJBell, but it's repeated elsewhere).

Plus, you should check whether you can pay for any missing years of NI contributions.

-Your pension first - drip feed over the next few years
-Your S&SISA next
-Go back to work to help address your pension shortfall 😬

Are your kids thinking of uni? If so, and they only qualify for minimum maintenance loans (it depends on parental income) - be aware that you may need to top up their income. This is about 5k per child per year.

If you are wary of stocks and shares, Trading212 have a cash isa at 5.17% or thereabouts. If you haven't used your isa allowances, I would stick 20k each into one of these, and 10k in premium bonds until the new financial year. All tax free on interest/winnings. It is a variable rate, but with inflation starting to edge up, and last month's budget likely to nudge it higher with extra business costs I wouldn't expect them to drop by much in the short term.

Just as an aside, me and DH have the max in Premium bonds. 2023 we received about 4% return, this year so far running at around 3.8%. But we get the excitement of the monthly win, we win something most months, there is a small chance of a big win, winnings are tax free, we can withdraw money, and put it back whenever we want. And it is safe.