Generating Income From 200k?
Discussion
Due to some hard work, discipline and dare I say luck, we have reached our savings target of 200k.
The end game for this money is for it to be split between the kids (currently 5 & 6 years old) to give them a good start in life. Until then we want use the money to supplement our income, so we can start really enjoying life.
So here’s my current plan…
150k to offsetting the mortgage
20k in Santander 123 account
15k in my Stocks and Shares ISA
That leaves 15k plus our monthly income which is pretty much earning bugger all.
Any suggestions on better ways of generating income from the 200k? Or what to do with the remaining 15k and our income?
Investments I’m not keen on:
Property – I don’t want to have the cash locked away
Peer to Peer lending and the likes - I have money invested in a new start-up, so feel this is covered already
Other than that I’m open to suggestion.
The end game for this money is for it to be split between the kids (currently 5 & 6 years old) to give them a good start in life. Until then we want use the money to supplement our income, so we can start really enjoying life.
So here’s my current plan…
150k to offsetting the mortgage
20k in Santander 123 account
15k in my Stocks and Shares ISA
That leaves 15k plus our monthly income which is pretty much earning bugger all.
Any suggestions on better ways of generating income from the 200k? Or what to do with the remaining 15k and our income?
Investments I’m not keen on:
Property – I don’t want to have the cash locked away
Peer to Peer lending and the likes - I have money invested in a new start-up, so feel this is covered already
Other than that I’m open to suggestion.
I'm not really sure how much you can take from £200k and still leave it as a worthwhile sum for your kids.
If you take inflation as 3% then you'd need over £310k to have the same spending power in 15 years (http://www.buyupside.com/calculators/inflationjan08.htm)
I think that what you're doing at the moment with the offset is a great idea. Probably the best safe-return that you can get. If you carry on paying the mortgage at the same level then your mortgage will be paid off much more quickly. And it's tax free.
On a minor note, is the santander 3% worth it. After fees and tax I suspect that you'd be better putting that into the offset too.
To actually answer your question: I've done well out of Fundsmith & Woodford funds over the past few years. They can both be ISA'd.
But remember that past performance is no guarantee etc.
Remember that you and your partner have £30k ISA allowance this year and £30k in April. I'd use that if you see investments that appeal.
Also, your children are entitled to tax free ISAs which pay better rates than adult ones usually: http://www.moneysavingexpert.com/savings/junior-is...
Certainly the 3.25% ISAs on that link beat Santander
If you take inflation as 3% then you'd need over £310k to have the same spending power in 15 years (http://www.buyupside.com/calculators/inflationjan08.htm)
I think that what you're doing at the moment with the offset is a great idea. Probably the best safe-return that you can get. If you carry on paying the mortgage at the same level then your mortgage will be paid off much more quickly. And it's tax free.
On a minor note, is the santander 3% worth it. After fees and tax I suspect that you'd be better putting that into the offset too.
To actually answer your question: I've done well out of Fundsmith & Woodford funds over the past few years. They can both be ISA'd.
But remember that past performance is no guarantee etc.
Remember that you and your partner have £30k ISA allowance this year and £30k in April. I'd use that if you see investments that appeal.
Also, your children are entitled to tax free ISAs which pay better rates than adult ones usually: http://www.moneysavingexpert.com/savings/junior-is...
Certainly the 3.25% ISAs on that link beat Santander
I'm not averse to risk. My trading ISA performs well enough with a mix ETF's (All World FTSE, S&P 500, FTSE 100 and UK government bonds).
I could get the wife to open trading ISA and put another 15k in to that, but to be honest that's the most amount of risk I'd like to take in the short term.
I could get the wife to open trading ISA and put another 15k in to that, but to be honest that's the most amount of risk I'd like to take in the short term.
Some good points...
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
nyt said:
I'm not really sure how much you can take from £200k and still leave it as a worthwhile sum for your kids.
If you take inflation as 3% then you'd need over £310k to have the same spending power in 15 years (http://www.buyupside.com/calculators/inflationjan08.htm)
I think that what you're doing at the moment with the offset is a great idea. Probably the best safe-return that you can get. If you carry on paying the mortgage at the same level then your mortgage will be paid off much more quickly. And it's tax free.
On a minor note, is the santander 3% worth it. After fees and tax I suspect that you'd be better putting that into the offset too.
To actually answer your question: I've done well out of Fundsmith & Woodford funds over the past few years. They can both be ISA'd.
But remember that past performance is no guarantee etc.
Remember that you and your partner have £30k ISA allowance this year and £30k in April. I'd use that if you see investments that appeal.
Also, your children are entitled to tax free ISAs which pay better rates than adult ones usually: http://www.moneysavingexpert.com/savings/junior-is...
Certainly the 3.25% ISAs on that link beat Santander
If you take inflation as 3% then you'd need over £310k to have the same spending power in 15 years (http://www.buyupside.com/calculators/inflationjan08.htm)
I think that what you're doing at the moment with the offset is a great idea. Probably the best safe-return that you can get. If you carry on paying the mortgage at the same level then your mortgage will be paid off much more quickly. And it's tax free.
On a minor note, is the santander 3% worth it. After fees and tax I suspect that you'd be better putting that into the offset too.
To actually answer your question: I've done well out of Fundsmith & Woodford funds over the past few years. They can both be ISA'd.
But remember that past performance is no guarantee etc.
Remember that you and your partner have £30k ISA allowance this year and £30k in April. I'd use that if you see investments that appeal.
Also, your children are entitled to tax free ISAs which pay better rates than adult ones usually: http://www.moneysavingexpert.com/savings/junior-is...
Certainly the 3.25% ISAs on that link beat Santander
ObSene said:
Some good points...
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Little off topic, but how does the "protection for savers" work when its a offset savings account. If the bank goes down, your mortgage doesn't go with it?With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
SMar said:
ObSene said:
Some good points...
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Little off topic, but how does the "protection for savers" work when its a offset savings account. If the bank goes down, your mortgage doesn't go with it?With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
98elise said:
SMar said:
ObSene said:
Some good points...
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Little off topic, but how does the "protection for savers" work when its a offset savings account. If the bank goes down, your mortgage doesn't go with it?With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Sadly as an ex Northern Rock mortgage holder I can confirm the debt is alive and kicking!
ObSene said:
The end game for this money is for it to be split between the kids (currently 5 & 6 years old) to give them a good start in life.
Each to their own, but in that situation I would definitely be looking to do stocks and shares ISAs. You can do ISAs for kids as well as in your own name. https://www.fidelity.co.uk/investor/isa/junior-isa...There is some risk involved but at the end of the day if the world goes seriously pear-shaped over the next couple of decades the risk to their savings will be the least of your kids' worries! In contrast if interest rates remain below inflation any cash savings will simply evaporate.
Depends what you interest rate on the mortgage is.
You might be better off with a capital repayment and then offset the rest.
Paying the mortgage down is risk free and tax free in that its guaranteed return. (excepting house price falls, but you are exposed to that either way)
Do the sums. Keep some in cash for emergencies.
SIPP might be better as there is an instant gross up using your marginal tax rate. (via 20% credit and balance on tax return)
You have to know where you want to get to, when and with what risk exposure.
No simple answers, rather a path to enlightenment
You might be better off with a capital repayment and then offset the rest.
Paying the mortgage down is risk free and tax free in that its guaranteed return. (excepting house price falls, but you are exposed to that either way)
Do the sums. Keep some in cash for emergencies.
SIPP might be better as there is an instant gross up using your marginal tax rate. (via 20% credit and balance on tax return)
You have to know where you want to get to, when and with what risk exposure.
No simple answers, rather a path to enlightenment
Thanks for the advice guys!
The below statement pretty much was the deciding factor; we're locked in at 2.89% for the next 4 years, so the offset return was not great. So we're going pay a lump sum, offset some and put the rest in to a trading ISA.
The below statement pretty much was the deciding factor; we're locked in at 2.89% for the next 4 years, so the offset return was not great. So we're going pay a lump sum, offset some and put the rest in to a trading ISA.
ringram said:
Depends what you interest rate on the mortgage is.
You might be better off with a capital repayment and then offset the rest.
You might be better off with a capital repayment and then offset the rest.
ObSene said:
Thanks for the advice guys!
The below statement pretty much was the deciding factor; we're locked in at 2.89% for the next 4 years, so the offset return was not great. So we're going pay a lump sum, offset some and put the rest in to a trading ISA.
Two quick points - for that amount I would get professional advice.The below statement pretty much was the deciding factor; we're locked in at 2.89% for the next 4 years, so the offset return was not great. So we're going pay a lump sum, offset some and put the rest in to a trading ISA.
ringram said:
Depends what you interest rate on the mortgage is.
You might be better off with a capital repayment and then offset the rest.
You might be better off with a capital repayment and then offset the rest.
If you are a 40%+ tax payer - DEFINITELY consider a SIPP.
Other than the requirement that you can't touch it until 55, which is fine if you really want it for your kids, the tax rebate on it makes it a SIGNIFICANTLY better deal than an ISA.
Personally I do BOTH.
You can have the capital in exactly the same products (mostly) in SIPP vs. ISA.
To get £10k into a SIPP costs you £6k (or less if you are on 45% tax).
Then you get 25% of the pot you have accrued by 55 back tax free and the remainder you treat as income so you will be paying the usual 20%, then 40% etc... Which means VERY WORST case you pay an effective rate of 30% rather than 40% on it (25% at 0% tax and 75% at 40% = 30% blended average).
That means you INSTANTLY turn your £6k into £7k.
Your mortgage principal repayment would need more than 5 years to catch up with that!
(6000*(1.0289^5)=6919).
It's not going to be accessible when they're 18, but you could also consider supplementing your plans with some Junior SIPP contributions - up to £2880 per year which gets grossed up to £3600. Some relatively modest contributions made now could significantly boost their income later in life. It could also help foster a savings/investment appetite in early adulthood if they can see this money accumulating but not touch it.
walm said:
98elise said:
SMar said:
ObSene said:
Some good points...
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Little off topic, but how does the "protection for savers" work when its a offset savings account. If the bank goes down, your mortgage doesn't go with it?With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Sadly as an ex Northern Rock mortgage holder I can confirm the debt is alive and kicking!
98elise said:
walm said:
98elise said:
SMar said:
ObSene said:
Some good points...
With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Little off topic, but how does the "protection for savers" work when its a offset savings account. If the bank goes down, your mortgage doesn't go with it?With regards to putting more in to the offset, come January we'll only be protected up to 150K, so don't fancy put more in there.
I'm thinking my best bet would be to take advantage of trading ISA's and invest the remaining 50k in them and put our income into the Santander 123 accounts.
Sadly as an ex Northern Rock mortgage holder I can confirm the debt is alive and kicking!
98elise said:
So if you had 150k mortgage with 100k in an offset account, and the bank went under, you would still owe the bank 150k not 50k?
Actually now I think about it - I have to admit that I am not 100% sure.Scratch that - I just did some Googling.
I am talking b0llocks.
ANY kind of mortgage has the savings automatically netted! (If held with the same bank - so DEFINITELY offsets!)
Only recently has the FSCS given you £85k protection so you can choose to have that NOT offset.
Sorry!
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