What have you done / would you do with a £windfall?

[WindfallWonderings]

In about a month, I’m going to be hearing about an offer of compensation from a bank, and although I don’t know yet how much it will be, I am finding it difficult to think about much else.

I do know it will be a minimum of £200,000 - could be substantially more.

I’m mid-forties, never had financial security, and am starting to feel anxious about what will be the best way to protect my future with this money.

I’m married with one DC. DH is not expecting or keen for me to pay off the mortgage as then it would feel like my house rather than our house. I’m completely burnt out at work but I don’t actually want to quit - not just for financial reasons, I’ve been in the same organisation for 20 years and there’s genuinely nothing else I’d rather do.

This feels like my one and only chance to have some financial security (which I know is one more chance than a lot of people get) - there’s no inheritance coming my way and little prospect of substantial income uplift from my job.

if you’ve had a windfall, or you’ve dreamed of having one (haven’t we all, I suppose…) - how did you/would you get the balance right between enjoying it and improving your quality of life, and making sensible choices to protect your future?

Premium bonds are tax free, instantly accessible, someone wins a million a month and have an average return of 3.6%. You can have up to 50k and your partner or trusted rellie could open another one for 50k. Plus ensure you've used your isa allowance and that of a trusted rellie.

I would absolutely pay off your mortgage, your husband is being silly.

There are many ways you could proceed, and it has to come down to your own decisions in the end. You would have enough to merit financial advice, but even then you would still have to decide which priorities to address. For example, is 'feeling like my house rather than our house' a sensible reason to pass up thousands of pounds of mortgage interest and its difference to your financial future (let alone present) when the windfall is legally a marital asset? That's one more thing to check by the way. As your priority seems to be financial security and protecting your future, read up and research that so you are armed with options, then seek advice. Investments, wills, powers of attorney, and re-prioritising your financial life will all be within your grasp.

Easy choice for me.
Max S&S ISAs for both you and your DH for the next few years, up pension contributions.
Basically put it away for the long term to enable you to give up work when you are ready / more comfortable retirement.

He isn’t, invested, the return would be making more than the savings on paying off the mortgage.

OP I’d await the amount, max out premium bonds, split it across different banks higher interest instant access savings accounts so that you don’t have more than the protected amount in each banking group (used to be about £85k) and then book in with an financial advisor before you make any decisions at all.

No one can give you any useful advice because no one here knows enough about your wider financial situation, long term objectives or risk profile. So my only advice would be to ignore anyone proposes any particular path because they don't have anywhere near enough info.

Good point, if going down the safe savings route. Even maximising tax-free (NSandI, ISAs etc), you could still be in an interest tax bracket, possibly even having to start doing tax returns, if not already, which can be a PITA.

I would pay off our mortgage, give DD a substantial deposit for a house then re-render the house, upgrade the electrics and make our bathroom more accessible for me. And then put the rest into an ISA and a savings account.

Your DH is daft not to want to pay off the mortgage.

Depends where you invest it. A relatively safe S&S ISA could beat the average mortgage.

Do you have a pension already?
I'd be doing a mix of savings, pension and mortgage overpayment probably

Agree with this too

I’m just interested to know what the bank did to need to offer you so much compensation

Can you say a bit more- how are your pensions looking? What other investments do you have, and savings? How much is outstanding on the mortgage and what's the rate? How much do you earn?

Paying off the mortgage is so short sighted. Maybe you can save a bit of interest but you will lost out a LOT on potential growth. A lot more.

For example, a few months ago I owed 7k on my mortgage and was considering paying it off. I put the 7k in a pie on trading 212. It's gone up 1500 in three months. Obviously, I chose high performing stocks and it's a gamble of sorts. But I wouldn't have made that 1.5k if I had just paid the mortgage off and I still have a bit of time to go. Only 4 payments!

Exactly my point?

You're right, sorry, I quoted your post instead of the one you were replying to.
[edit: hang on though, does your first line say what you meant? He is silly or he isn't?]

Premium bonds are awful, I wouldn't go near them. If not paying off mortgage, maximise your ISA allowance each year and invest in a world tracker ETF. There are providers who make no charges. I don't understand the "our" house argument from DH. Unless you have a very good interest rate on the mortgage, paying it off or vastly reducing it, would be the way to go.

Thanks everyone who’s replied. A bit more info / context: we don’t have any investments, and around £3k in savings. Around £160k left on mortgage, current rate is 5.9%, fixed until April 2029. Joint take-home income c. £75k. No credit card debt. Need to look up current pension pot - won’t be outstanding, although DH is ex-military so I think that puts us in a better position.

Mortgage overpayments (or paying off a chunk in 2029 when our fixed rate term expires maybe) alongside S&S ISAs and topping up pension all sound good…as does re-rendering the house! It would be lovely to have some ‘fun money’ alongside security for the future. Obviously won’t know how best to split the pot until I know how much it will be. Also not sure if I’ll get a big tax bill - on the compensation sum and/or income from investments. Have never dreamed of needing a financial advisor but that would be sensible I think.

Her husband isn’t interested in the financial benefits of paying off the mortgage, he’s worried about the relationship possibly feeling unequal if OP uses the money to pay off the mortgage. Personally I would find that a bit worrying, in a partnership.

I would pay off some mortgage, put some away in pension and put a deposit on an investment house to be rented out that can be later given to my child.

What on earth did the bank do?!

whatever you do, have some as fun money and enjoy it x

Mmm. Me too.

Op my only advice would be to wait...and not get ahead of yourself. Nothing is guaranteed until that credit is in your account or a firm, final offer is made. In your shoes i'd have my fingers crossed but absolutely wouldn't be planning how to spend it at this stage.

Sorry to be a Debbie Downer but...I work for a bank, in an area that has oversight of large financial awards awarded directly or through third parties (legal/FOS etc). £200k + awards DO happen. Very rarely, but they do, usually after an extended legal case.

However...in amongst the handful of large awards, I've lost count of the number of cases I've reviewed where the customer/s clearly expect they'll be paid £X huge figure, especially when they have a legal team involved...and the actual award is substantially lower than requested or expected. Legal cases brought for £150k, award £14,345.65 type differences. Solicitors, daily, fail to give their clients realistic expectations. And banks keep their cards very close to their chest - in 20 years of banking i've never seen a case where the bank have divulged in advance they'll award 'at least £x but we can't say the exact figure yet'. Never. You either hear nothing OR you get an exact offer, to the penny.

'At least £200k but could be a lot more' sounds like solicitor speak. Be cautious.

Honestly, there’s so much more to consider here than interest rates. When we paid off our mortgage, it gave us so much peace of mind, plus a nice extra amount in our bank account every month. I think the advice is always to pay off debt first - if you have an interest rate of 5.9%, you’re not going to get that growth in investments. And no income tax implications

For those recommending S and S ISA, growth has been very good over the last few years but all the indications are there will be a market correction soon and you may be going into a very high market. Are you prepared to see your money go down? As for Premium Bonds, you do realise that’s a lottery and you could win nothing?

Getting rid of the mortgage would be a no brainer to me, emotionally and practically.

@MinervaMouseHunter The compensation is due to negligence by the bank as executors of two wills, which the bank has recently found almost 20 years after death/probate - the two deceased people were assumed to have died intestate and their estate distributed solely to their next of kin. The bank has recently found their wills and myself and my sibling were named as the beneficiaries of almost the entire estate. So the ‘at least £200k’ estimate is based on the value of the estate - not a figure that has been given to me by the bank or their legal representatives. You’re right of course that I shouldn’t get ahead of myself - it’s taking up a lot of head space though!

Whilst working out what to do with it id be tempted to give myself the proper time and mental space for such a decision by going on a lovely holiday.