£800,000 lump sum - what to do

[Lovingthesunshinetoday]

Title says it all really!
money is from an inheritance.
me and DH both mid 40’s
2 kids at primary state school
mortgage Is £350,000 at 1% until end of 2026

Both happily work full time.
Combined salaries of around £150k so day to day we are comfortable.

I will use our ISA allowance and premium bonds for all 4 of us.

Still £600,000 and I don’t know what to do with it to make it work for me.

is property investment a good idea for some of it?

any suggestions very welcome!

I’m aware i might need advice but also don’t know where to start.

You can max out your pension contributions for each of you for the last three years - that’s £180k each. Don’t forget to do self assessment to claim back tax (will depend on what your pension provider will claim on your behalf).

And see a financial advisor. Unless your mortgage rate is higher than a savings rate paying off your mortgage is madness.

I would keep a bit aside, go on holiday then consider moving house to a better one with around £500k of it.

Investment in a property is the best way to protect a lump sum. IMHO.

Before you find a financial advisor, join the Meaningful Money Community on Facebook and get a feel for the options/issues that you might have that you can discuss in detail with an IFA (and work out if they know their stuff). There are many free videos which give information about specific avenues of investing. It doesn’t really promote any one product over another (apart from some specific tools and breadcrumbing to their services). It is clear from comments that just because someone is an IFA, they may not be particularly better than you just putting money in the highest interest rate accounts you can find.

This is what I would do:

max out ISA (adults and kids)
starts junior SIPP for kids
max out adult pension contributions
max out premium bonds for all of you

any left after that will be liable for tax on interest earned but I’d probably stick it in a mix of GIA and cash savings if not
going down the property route

Completely agree with this. We found ours by asking friends, who we knew were similarly positioned, for referrals, and spoke to several. The one we wanted wasn't taking on new clients at the time, so we went with a larger, less bespoke firm, until about a year later our original choice was taking on some new clients. The difference has been amazing.

OP. I'm sorry about the circumstances. Inheritance generally has a painful dimension. But I'm strongly recommending you get some professional advice - I doubt any of them would recommend paying off a 1% mortgage for example, but you really need someone who understands your individual circumstances.

Put it in a high interest account to help your children buy their first homes when they are older. And pay for university fees.

With interest rates what they are, the chances are your mortgage will go up significantly next year so I'd be putting the outstanding mortgage amount aside in something easily acessible so that when the mortgage comes up, you can pay it off.

Then get financial advice for the rest, heavily dominated by pensions I would expect.

I agree, get a financial advisor!

One thing you could talk to them about is opening pensions for your dcs. They would thank you a lot in later life!

Too big a sum for the advice of strangers, pay a qualified fa for a financial review and advice. They 'll ask about your attitude to risk etc. you'll lose a wodge in tax if not invested wisely. Sorry for your loss too, inheritances aren't always as straightforward emotionally as say winning the lottery.

Beware financial advisors who get long term commissions on investments they recommend - you can be paying them forever - they can get their commissions deducted directly from any profit you make annually if for example you take an Equity Fund etc.

it’s an inheritance, so whilst it’s a nice problem to have, I would give every penny not to be in this position. Even if it was £100million. Alas here we are.

won’t be paying off my mortgage as it’s only 1% and easily manageable on our income, for now.
happy in our current home as it ticks all our boxes. Not interested in moving just for the sake of it.

We are both higher rate tax payers so I will definitely consider our pension options.

we will both stay happily employed in current roles.

I will consider the property route, a local and smallish rental might be a good option for us. Something to consider anyway.

I have a few appointments lined up with professionals for initial talks to see what they offer etc. interestingly one or two PP’s have mentioned there is no magic ingredient to an IFA, and I do kind of feel like that. I’m interested to see if they can offer me something that I don’t already know. Hoping they can!

Just add, I wouldn't change much lifestyle wise at the moment as it seems you like your jobs, house etc. Make sure it's invested and working for you in the background with proper fa advice. It's security for your lives forever. Have a fun holiday with a set sum but don't start over developing your house with fancy extensions etc. Stay wise 🙂.

@Lovingthesunshinetodayas a minimum you should pay AVC’s to your pension to the level that your employer matches to. It’s literally free money + tax relief on all of it.

Don't buy a rental property. Low yield, high stress, high tax option with no guarantee you'll receive any rent if the tenants choose not to pay. CAB and Shelter advise tenants to stay put and not pay. Courts take min 6 months. LL are expected to fund that. Avoid like the plague.

To answer a PP, no I’m not entirely happy with the kids current schooling, and several of our local friends have moved to a different area or moved to local private schools for this reason. Secondary schools are not great round here. Only one state option which is a shame.

we could use the funds for private school fees, and I think this is what I’ll be looking for advice with, how to maximise our return so if we do use it for private school fees it doesn’t all disappear.

Maximize pensions, ISAs and junior ISAs, using S&S funds - Vanguard index funds are good.

Park some cash in high interest fixed term accounts, with a view to redeeming your mortgage when the 1% deal ends.

do not invest in property/become a landlord. Seriously, just don’t!

keep some money accessible for a bit of fun.

Genuinely.

Look to mitigate your fiscal exposure - as much as possible. That means, if you are not willing to exit the UK, stay liquid and diversify your risk - some cash, some equities, some fixed income.

Labour will look to take it from you.

Pension, SIPP each.. (where you have more control over investments investments)
You can carry forward unused annual allowance from the previous three tax years, allowing you to contribute a larger amount in a single year, up to a total of £240,000 (including the current year's allowance).

Commission was banned some years ago.

watch season 1 of the tv show billions and then look at the stock market

I'd be careful about private school fees.
If you're content with schooling, then private school might be less financially helpful to children compared with using that money to invest for them.

£17000 per year of private school fees between age 4-18 adds up to £238,000 in today's money.

If you instead invest this money slowly for children in your/their ISAs from age 4 until age 18, then stop paying in and allow it to grow until they are age 28, then they may have £460000 as a housing deposit in today's money, assuming real terms growth of 4% annually.

I don't know many jobs that would give a £460000 deposit age 28 plus 4% savings (around £18000 annually in today's money) annually compared to paying mortgage interest on this amount.

When you add mortgage interest saved to housing deposit, they could save an absolute fortune. The financial benefits of private school in terms of opportunity/job prospects usually can't compete with just investing the money for the child's future.

I wouldn't invest in property, as it means all your ££ is wrapped up in one investments

With eg shares, you can sell some here and there if you wish / need to

I'd do a HAPPY DANCE 🙌🙌💃💃