What to do with lump sum of money £200k

[einsign]

A friend is being left a cash amount of around £200k after the death of a family member. They could do with probably discussing with a good IFA or similar, or maybe not necessary?

Maybe pay down a large part of their existing mortgage, spread between ISA’s in different family accounts, invest in a business and keep some in a reasonably good savings account.

Any thoughts appreciated.

[marcosgt]

House/Flat? Rent it out?

Income and appreciating asset.

M.

[pidsy]

Pay off mortgage and debts, buy a property for BTL and a caterham for the drive.

[zygalski]

How much to pay off mortgage & how old is the person involved?
If it's at all doable, get rid of the mortgage ASAP, in my opinion.

[einsign]

pidsy said:

a caterham for the drive.

I am seriously pushing them for a track day car

[einsign]

zygalski said:

How much to pay off mortgage & how old is the person involved?
If it's at all doable, get rid of the mortgage ASAP, in my opinion.

39 years old.

probably getting on for £300k owing on mortgage, hence why I thought clear down a large lump but still have some to enjoy.

[raptor600]

No brainer really - clear a big chunk - £170k? ...then get a car and go on holiday with the rest!

[zygalski]

I'd say clear at least 150k from the mortgage, unless they have an extremely well-paid & bullet-proof secure job, which I don't think exists in this day & age.
It just takes such a weight off to clear a large long-term debt at the age of 39.

[groak]

Buy an annuity and pray you don't die?

[sidicks]

groak said:

Buy an annuity and pray you don't die?

That would obviously assume that you wanted a guaranteed income for life...

[groak]

sidicks said:

groak said:

Buy an annuity and pray you don't die?

That would obviously assume that you wanted a guaranteed income for life...

And it would also assume that you wanted your investment to be a 100% write off when you died (which is, of course, a crazy thing to want).

[sidicks]

groak said:

And it would also assume that you wanted your investment to be a 100% write off when you died (which is, of course, a crazy thing to want).

Obiously you'd have a much higher income to compensate.

[groak]

sidicks said:

groak said:

And it would also assume that you wanted your investment to be a 100% write off when you died (which is, of course, a crazy thing to want).

Obiously you'd have a much higher income to compensate.

Obviously. Much higher. So just out of interest, what was the average income from pension annuities purchased in 2011?

[sidicks]

groak said:

Obviously. Much higher. So just out of interest, what was the average income from pension annuities purchased in 2011?

At the risk of repeating myself, the annuity rate for a 65 year old is 6.5%.

Base rate is 0.5%
20 year government bonds yield around 3%.

[groak]

Does anybody else know the answer to the questions sid is too embarrassed to answer?

[sidicks]

sidicks said:

At the risk of repeating myself, the annuity rate for a 65 year old is 6.5%.

Base rate is 0.5%
20 year government bonds yield around 3%.

I'm not embarrassed to answer. I don't know the answer or it's relevance.

[sidicks]

sidicks said:

At the risk of repeating myself, the annuity rate for a 65 year old is 6.5%.

Base rate is 0.5%
20 year government bonds yield around 3%.

A quick spreadsheet shows that buying a 20 year government bond yielding around 3.1%, and seeking income of 6.5% (to match that available under an annuity) would required increasing liquidation of capital so that, after around 20 years, you would have zero 'fund' left.

Sidicks

Edited by sidicks on Sunday 22 April 09:23

[jdw1234]

Why not pay £200k off the mortgage?

[einsign]

jdw1234 said:

Why not pay £200k off the mortgage?

Because that would be too simple and dare I say boring!

[chibbard]

einsign said:

jdw1234 said:

Why not pay £200k off the mortgage?

Because that would be too simple and dare I say boring!

As boring as it is, surely this is the most sensible thing to do. I don't know how people sleep at night with a 300k mortgage.