General finance advice
Discussion
Hi all.
I'm in a very unfamiliar but happily good position and need some guidance.
I've just been made redundant but I'm starting a new role on the same T&Cs on 1st September. It has a 6 month probation period but as I have been working in a professional capacity with my new employer for 10+ years that should hopefully be a formality.
With the redundancy payment and existing savings we now have just over 92k in savings.
I have a small private pension that I could take at the end of this year, (55th birthday) which is worth around £20k.
The outstanding mortgage is 124k at 1.99% that costs 1.1k a month and the agreed redemption date is August 2030. WE WANT TO FINISH THIS IN 5 YEARS.
I have a car loan worth £10,330 at 3.20% that has 40 months to run and costs me £254 a month
Wife has a small loan £1,359 at 3.20% that has 12 months to run, £130 a month.
I have a final salary pension scheme that is worth 20.5k per annum on my 60th birthday. We'll both have state pensions on our 67th birthdays.
That's it for the figures.
The mortgage is the key thing for us right now. When I start the new job, we want to overpay £500 to £600 a month and also pay lump sums off it. According to the Nationwide mortgage overpayments calculator, £500 per month plus around £30k lump sum gets us to around 5 years left. The small pension would seem a good place to start with the lump sums, but you may have other ideas. We're thinking of using some of the savings to pay off the 2 loans and spend the money instead on the monthly mortgage overpayments we'd like to make.
Apart from a few small items totalling no more than £2k, we have no immediate plans for the money, other than some financial security and NOT losing it on investments. This is a life changing sum of money to us and I am feeling very risk adverse. Premium bonds seems a safe bet to me.
Next year if the new role is going OK, we may spend £10k on a new kitchen and ensuite.
Any advice gratefully received as I have nothing other than what is written here.
Thanks all.
I'm in a very unfamiliar but happily good position and need some guidance.
I've just been made redundant but I'm starting a new role on the same T&Cs on 1st September. It has a 6 month probation period but as I have been working in a professional capacity with my new employer for 10+ years that should hopefully be a formality.
With the redundancy payment and existing savings we now have just over 92k in savings.
I have a small private pension that I could take at the end of this year, (55th birthday) which is worth around £20k.
The outstanding mortgage is 124k at 1.99% that costs 1.1k a month and the agreed redemption date is August 2030. WE WANT TO FINISH THIS IN 5 YEARS.
I have a car loan worth £10,330 at 3.20% that has 40 months to run and costs me £254 a month
Wife has a small loan £1,359 at 3.20% that has 12 months to run, £130 a month.
I have a final salary pension scheme that is worth 20.5k per annum on my 60th birthday. We'll both have state pensions on our 67th birthdays.
That's it for the figures.
The mortgage is the key thing for us right now. When I start the new job, we want to overpay £500 to £600 a month and also pay lump sums off it. According to the Nationwide mortgage overpayments calculator, £500 per month plus around £30k lump sum gets us to around 5 years left. The small pension would seem a good place to start with the lump sums, but you may have other ideas. We're thinking of using some of the savings to pay off the 2 loans and spend the money instead on the monthly mortgage overpayments we'd like to make.
Apart from a few small items totalling no more than £2k, we have no immediate plans for the money, other than some financial security and NOT losing it on investments. This is a life changing sum of money to us and I am feeling very risk adverse. Premium bonds seems a safe bet to me.
Next year if the new role is going OK, we may spend £10k on a new kitchen and ensuite.
Any advice gratefully received as I have nothing other than what is written here.
Thanks all.
It's not obvious to me why someone would want to have "savings" and "loans" at the same time. It tends to be inefficient - due to paying interest out of taxed income. A 40% taxpayer has to make 3.3% income to break even on 1.99% outgoings.
On the other hand, if you can borrow at 1.99% and invest in something returning 7% p.a. in a tax wrapper (ISA/SIPP) you're away and laughing - although there could be significant risk. You can get good tax efficiency out of these wrappers even with lower risk investments.
In the scenario you've described the big question is how much income you want in retirement. If you think you've got enough already I'd pay down loans and mortgage. If you think you'd like more you could push pension contributions to the max and look at ISA too - with a level of risk to suit your appetite.
And don't forget that a couple can do this in both names, maximising use of 20% tax bands and doubling-up on tax wrappers. Lots of efficiency there.
On the other hand, if you can borrow at 1.99% and invest in something returning 7% p.a. in a tax wrapper (ISA/SIPP) you're away and laughing - although there could be significant risk. You can get good tax efficiency out of these wrappers even with lower risk investments.
In the scenario you've described the big question is how much income you want in retirement. If you think you've got enough already I'd pay down loans and mortgage. If you think you'd like more you could push pension contributions to the max and look at ISA too - with a level of risk to suit your appetite.
And don't forget that a couple can do this in both names, maximising use of 20% tax bands and doubling-up on tax wrappers. Lots of efficiency there.
Pay off the loans.
If you can find any investment that pays net, of tax and charges, 3.2% per annum with effectively zero risk I’m all ears.
Pay down the mortgage after that. Keep some cash for rainy/day flexibility, but if you’ve spare cash after that, or excess income, then pensions are worth serious consideration.
If you can find any investment that pays net, of tax and charges, 3.2% per annum with effectively zero risk I’m all ears.
Pay down the mortgage after that. Keep some cash for rainy/day flexibility, but if you’ve spare cash after that, or excess income, then pensions are worth serious consideration.
Pay off the 2 small loans. In 30 months you will be back to where you were with savings due to not making the monthlies but you will have also saved the interest. But given your loan is 40 months you would be daft not to do this.
In terms of the mortgage, check for early repayment charges but honestly I would look to get it paid off asap. Then you can start to bank that £1100 a month.
Also, a good tip I was once told is a few years from retirement start to live off your pension sum so you get used to it. I.e if you are going to retire on a pension of £1500 a month then only spend £1500 a month.
In terms of the mortgage, check for early repayment charges but honestly I would look to get it paid off asap. Then you can start to bank that £1100 a month.
Also, a good tip I was once told is a few years from retirement start to live off your pension sum so you get used to it. I.e if you are going to retire on a pension of £1500 a month then only spend £1500 a month.
Some great advice on here already. I agree with all of it.
You are risk adverse, so pay off the loans (unless you can get 3.2% after tax with full guarantees - which you can't!).
As you have taken a redundancy payment the previous 10+ years do not count, so this is not a formality (legally). Don't worry, but keep this in mind.
Speak to Sarnie about the mortgage side of things, he in brilliant at this and can run the numbers for you.
Remember you still have to pay your marginal tax rate on 75% of whatever you take out of the £20k pension.
Contact Nik on the Intelligent Money sticky for the rest of the financial planning/modelling if you would like some additional - free to PHers - input.
You are risk adverse, so pay off the loans (unless you can get 3.2% after tax with full guarantees - which you can't!).
As you have taken a redundancy payment the previous 10+ years do not count, so this is not a formality (legally). Don't worry, but keep this in mind.
Speak to Sarnie about the mortgage side of things, he in brilliant at this and can run the numbers for you.
Remember you still have to pay your marginal tax rate on 75% of whatever you take out of the £20k pension.
Contact Nik on the Intelligent Money sticky for the rest of the financial planning/modelling if you would like some additional - free to PHers - input.
JulianPH said:
As you have taken a redundancy payment the previous 10+ years do not count, so this is not a formality (legally). Don't worry, but keep this in mind.
Thanks for all the advice so far. Julian, can you explain the quoted text above? It's so far over my head it's currently in orbit!
LHRFlightman said:
JulianPH said:
As you have taken a redundancy payment the previous 10+ years do not count, so this is not a formality (legally). Don't worry, but keep this in mind.
Thanks for all the advice so far. Julian, can you explain the quoted text above? It's so far over my head it's currently in orbit!
Just because you have been working for the same company for 10+ years, your new statutory protection starts from the date of your new job as your redundancy package bought your old one to an end.
As I said, don't worry about this as you have already received a pay-out to compensate you for the loss of this and have been given another job with them anyway.
This is probably a much better result for you than just being offered the new position as part of the redundancy procedure (where you would not have been entitled to any cash pay-out).
It was only a minor part in my post really, but if I can explain further just shout or send me a PM!
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