Lump Sum Investment: Mortgage vs Pension vs Property

[grenpayne]

Notwithstanding the fact the last thread about investing a 50k lump sum turned in a slanging match about graphs, I'd be interested to hear the general consensus on the best way to invest a £100k lump sum. Let's suppose you received it at age 45 and wanted to realise any investment gains after 15 years ie age 60. Would you put it in to your mortgage, a new pension scheme or into property? I know the BtL rules have made this a bit of a nightmare but this article made me think it could be a consideration.

I realise this may be a quite vague question but I'm interested on the merits of each nonetheless!

[Behemoth]

grenpayne said:

I know the BtL rules have made this a bit of a nightmare but this article made me think it could be a consideration.

Sky News said:

The study was compiled by the Centre for Economics and Business Research for the National Association of Estate Agents (NAEA) and the Association of Residential Letting Agents.

I think more info is needed on your current finances to give a credible answer. Each and several of those options could be suitable for different people depending on how big/small their current mortgage/salary/pension is.

[Ian350]

It does depend on personal circumstances but if I was in that position, without going into detail, I would put the lot into a pension in such a way that I maximised my income tax relief. (I am assuming investment returns remain higher than mortgage rates over the next 15 years) As regards property then people who know how to invest properly in property do well, those who don't can lose money, and of course its an investment you have to spend time working on.

[Ozzie Osmond]

Two key factors,

1. Why borrow money you've already got? (This usually leads to paying down mortgage. But you may be on a very low interest rate.)

2. Pension contributions income tax relief. (Very attractive if you're a 40/45% taxpayer.)

As others have said, it depends on your overall financial situation. Bit IF you have the potential to get pension tax relief at 40% today and your pension would come out 25% tax free lump sum with a 20% tax rate on annual pension that's vary hard to beat!

[grenpayne]

Thanks chaps. I thought the answers would be 'it depends' as I didn't really want to put my financial circumstances all over the internet! I think I'll go and see a IFA when the time comes

[Sharted]

Offset mortgage?

The money is still yours but you save a binful on your mortgage interest.