£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.

i can tell you exactly what to do with it:

1. Put most of it in an NS&I bond (4%).
2. Go on holiday.
3. On your return consult a qualified IFA.

Yes I have. At this level they would get real benefit from a decent fund manager. My money, is all dealt with through an excellent wealth manager and is invested for income and growth. I review it with them annually. I wouldn’t manage that level of money myself if I didn’t know exactly what I was doing

I wouldn’t use it for school fees unless you are desperate. I actually did put one of mine through private 6th form but want have committed to more than that unless I felt I had no alternative

I felt like I wanted an IFA a couple of years ago and met with a couple but I was distinctly underwhelmed and didn’t engage one in the end.

I would:
put as much as I could into mine and my husband’s pensions for the next few years
pay off the mortgage when the good rate ends (you might be able to get a higher rate savings account than your new mortgage rate but for me being mortgage free would feel great and be worth it and as higher rate tax payers you might struggle to find an interest rate that would work anyway)
stick at least 50k into premium bonds
put a chunk into S and S ISAs over the next couple of years
have an amazing holiday

We are already paying school fees so that wouldn’t be a consideration for us but it could be a good use for the money.

Just to clarify - you said your mortgage is up for renewal in 2026... that's when you may want to consider your mortgage. The reality is that it's very unlikely to stay at the very reasonable terms you're currently paying.

"Keep your 1% mortgage until it increases, then consider paying it off."

Agree with this. Focus on the highest interest rates - i.e. you'll pay a penalty now to pay back early, but you could earn more than 1% on £350k sitting in an interest bearing account also, so you'll be better off earning money on it.

Once the interest you'd be paying on a mortgage exceeds what you'd earn as a return on an investment, pay off the mortgage.

If you'd consider moving, check whether your existing mortgage is portable as you may not have to wait until the fixed rate deal runs out if it is.

As others have said, pensions. There is an annual limit to the amount you can put in, but you can backdate it a few years if you haven't already used the prior year's limits.

Definitely get the advice of a good independent financial advisor though.

You could put some money in some investment portfolios, though this obviously comes with a risk to your capital too. An IFA can help you spread your money, based on your aversion to risk versus potential reward.

Years ago I would have said property, but I don't think I'd be bothered with the hassle nowadays! It would be treated as income, so taxed at 20%/40% but any investment gains are taxed as Capital Gains so taxed at 18%/24% and the first £3k is tax free.

I’m very sorry for your loss. Remember that your loved one would want you to spend the money in a way that made a difference to your life and your children.

Do you love the house you are in? Would you want something bigger and/or more luxurious? Moving is an option.

holidays? Can you put a chunk in a savings account that you dedicate to holidays. Once a year go on an amazing family holiday that you can call ‘X’s holiday’ - a lovely way of remembering your loved one while spending quality time with your children

As someone who has invested in property over the last 25 years I would say DO NOT buy a rental. BTL returns are not competitive anymore and the stress is not worth it. I think because it's tangible and simply understood it's superficially attractive (and who doesn't love perusing Rightmove!).

I've wanted to sell for the last 5 years but Brexit, Covid, CoL and now Trump are all making the market really uncertain.

I wouldn't pay for private schooling. I'd move to an area which has excellent schools.

I know someone who purchased a holiday home they purchased somewhere that had cheap flights , on a bus route and all year sun. They would pop over Friday and come home Monday early for work school. Worth it ....

It’s due to an inheritance - I’m not sure there’s much to be happy about

The IFA I consulted was at a flat fee of £350 per hour, which I felt was fair for a complete review of my finances, tax advice, asking any questions I had, getting professional advice on what to invest in and modelling for various future scenarios.

Even if you spent half a day with an advisor, say £1200, I’m sure you would save money, you could optimise your decisions now, feel confident that you know what you’re doing is right for your specific circumstances and avoid expensive mistakes which could cost £££ in the future.

A couple of small 2/3 bed property rentals could be good. Friend of mine owns a few and the rental market is buoyant. Property prices go up and up over time and if you thought of it as a long term thing to provide an income in retirement you'd be good.

A bit insensitive given that somebody that OP was close to has passed away, don't you think?

Pensions
Stocks and Shares ISA each depending on available allowance
If you buy property be aware of CGT and extra Stamp Duty etc (could be worthwhile — no experience)
Long term maybe something like a Government Bond.

A fund for anything house related
A super awesome holiday
A fund for holidays next year or two

An independent financial advisor would be best option - specifically wealth management.

Just wanted to apologise for my insensitive comment OP.

It's quite a sum of money but I didn't factor in that it's coming on behalf of someone passing.

Other posters called me out for my 'happy dance' comment & rightly so.
I do apologise.

You already have a load invested in property (your own house), so personally I wouldn't invest yet more elsewhere. It isn't very liquid at all, and being a landlord is a pain. Pensions and some sensible unit trusts maybe?

You are right, BassesAreBest & @rainbowunicorn it was insensitive of me.
I didn't mean it in a mean way,
I was just thinking of how big of a sum of money it is.
But thanks for making me realise it wasn't a nice thing to say.
I have written separate comment to OP apologising.

Where are you based? I used to work for IFAs and can recommend a great one.

Thank you @RedRoss86 — I appreciate your apology. I can see your comment came from a place of good intent, even if it didn’t quite land as intended. it’s not exactly a moment for a happy dance, but I can see how the financial side might seem like good fortune.

If you are even considering being a landlord I'd encourage you to look at the free resources here https://www.housing-ombudsman.org.uk/landlords-info/e-learning/ Even if you employ an agent to manage property you need to know enough to check they are doing the job properly.

You like your house - but would it be better to move to an area with good schools, especially as some local friends have already done so? VAT on fees makes feepaying schools an expensive option. If you do stay in your current home then consider how to reduce future running costs. And paying off the mortgage when the cheap rate runs out will give you security and may exceed what you'd get investing the money elsewhere.

You could also remember your loved one by planting a tree https://shop.woodlandtrust.org.uk/in-memory?utm_source=google&utm_medium=ppc&utm_campaign=spring_dedications&utm_content=ppc_2_in-memory&gad_source=1&gad_campaignid=19466483985&gbraid=0AAAAAo5UF6VoOR7R2BsIwspr6T3A2_SRF&gclid=EAIaIQobChMIxoy_5tn9jAMVz6WDBx1vfyC9EAAYASAAEgKzVPD_BwE

I think many independent advisers just tell you what you can easily find out yourself. A decent wealth manager could be a useful - proper expertise is worth paying for.

Much depends on your goals and attitude to risk. I would prioritise my children’s ISAs, their pensions and create a financial future lmsn for them. Then I would look to my pension and after being sensible would have a big fuck off holiday.

You could pay off 10% per year on mortgage. Appreciate it’s not a priority but it’s an easy thing to do given you’ve got such a healthy sum. Lots of good suggestions. One thing to consider alongside a lovely family holiday might be a holiday home? Might not be your thing but we’ve had a v modest place for 20 years (was not expensive) and we all love going there.

Pay off Mortgage £350,000

Add 100k to both pensions

Ur have £250,000 left

50K to spend on Holiday and Fun money

£200k for the kids when they are older - House deposit help etc

This is what I would do if I was in your position:

1. ISAs
2. Calculate how much your redemption penalty would be if you cheated your mortgage now v what you will pay in interest if you key it run until the end of the fixed period. Either clear it now or set aside £350k in a locked-away high interest savings account to clear it later.
3. Invest the rest with a low-cost platform (I use Vangyard). My split is 20% bonds, 20% S&P 500, 60% in a globally diversified fund.

Every year you can ‘bed and ISA’ £20k each to move money from the taxable investments to your tax-free ISA. Once your mortgage is clear you can use that money for house maintenance, holidays, trips etc. Or save/ invest it.

I personally wouldn’t touch BTL with a barge pole now. I’m a BTL landlord and I’m selling up .