Financial Advice
Discussion
Apologies in advance for what might be a stupid question!
Due to the passing of a close family member back in March, I am due to inherit around £100,000. This both exites me and scares me in equal measure as I am terrified of ‘wasting’ the money and not put it to good use. This sort of money is many years earnings for me and my partner and both of our parents are in poor financial situations so can not offer much advice.
We have 2 children and currently live in a shared ownership property (£45k Mortgage remaining on a 25% share - approx £380-400k value). We have around £10k in cash savings already from the first part of the inheritance but the rest will follow after property sale. We have little capacity to further savings from income.
My plan was to give £5k to each of the kids, treat ourselves to a few bits, pay off our mortgage and then put the rest away in a mixture fixed rate bond and Marcus account. Obviously people warn against inflation eroding cash overtime but I am worried about investing poorly and loosing more.
I have a feeling the above is not going to be the best use of this money. I have looked into financial advisors, wealth managers and accountants but most of them seem to offer mortgage, tax, business or pension/retirement advice.
Is there someone I could speak to about my whole situation who can then advise on the best course of action? And who might this be.
If anyone has any recommendations on the Brighton area I would be all ears.
Due to the passing of a close family member back in March, I am due to inherit around £100,000. This both exites me and scares me in equal measure as I am terrified of ‘wasting’ the money and not put it to good use. This sort of money is many years earnings for me and my partner and both of our parents are in poor financial situations so can not offer much advice.
We have 2 children and currently live in a shared ownership property (£45k Mortgage remaining on a 25% share - approx £380-400k value). We have around £10k in cash savings already from the first part of the inheritance but the rest will follow after property sale. We have little capacity to further savings from income.
My plan was to give £5k to each of the kids, treat ourselves to a few bits, pay off our mortgage and then put the rest away in a mixture fixed rate bond and Marcus account. Obviously people warn against inflation eroding cash overtime but I am worried about investing poorly and loosing more.
I have a feeling the above is not going to be the best use of this money. I have looked into financial advisors, wealth managers and accountants but most of them seem to offer mortgage, tax, business or pension/retirement advice.
Is there someone I could speak to about my whole situation who can then advise on the best course of action? And who might this be.
If anyone has any recommendations on the Brighton area I would be all ears.
Something like a Marcus account is fine if you're going to want to get at it again in the next year or two, and at 1.5% seems to be the best you can get on easy access savings, but you can do better if you tie it up for longer.
You can put £20k in to ISA each year, and if you'll get better interest rates if you're willing to tie it up for 3 or 5 years. Money Supermarket or Money Saving Expert have some decent comparison tables.
How old are your kids? Help to Buy ISAs could be worth looking at for them, but check the rules on how much you can gift them before being taxed on it.
Pensions are well worth looking at as the government pay in the tax you've already paid, ie if you're a 20% tax payer, for every £8k you pay in the government put in £2k because they give you back the income tax you've already paid on that £10k.
You can put £20k in to ISA each year, and if you'll get better interest rates if you're willing to tie it up for 3 or 5 years. Money Supermarket or Money Saving Expert have some decent comparison tables.
How old are your kids? Help to Buy ISAs could be worth looking at for them, but check the rules on how much you can gift them before being taxed on it.
Pensions are well worth looking at as the government pay in the tax you've already paid, ie if you're a 20% tax payer, for every £8k you pay in the government put in £2k because they give you back the income tax you've already paid on that £10k.
It depends how much savings you want for the future really. How old are you and your kids? How many kids?
I personally wouldn't invest it all in one time, a market drop will erode it suddenly. It's best to drip feed it into investments, so you balance the peaks and dips.
If I was you I'd pay the mortgage off (£45k) use up my yearly ISA allowance (£20k), then it's quite safe and you can move that to tax free investments later. Allocate some to your kids and yourself an equal amount for enjoyment (£15-20k?) And then with the remaining £5-10k look into buying a bigger percentage of your house or put it in a second ISA for your wife.
I personally wouldn't invest it all in one time, a market drop will erode it suddenly. It's best to drip feed it into investments, so you balance the peaks and dips.
If I was you I'd pay the mortgage off (£45k) use up my yearly ISA allowance (£20k), then it's quite safe and you can move that to tax free investments later. Allocate some to your kids and yourself an equal amount for enjoyment (£15-20k?) And then with the remaining £5-10k look into buying a bigger percentage of your house or put it in a second ISA for your wife.
river_rat said:
Step one - read the Intelligent Money sticky thread on here.
Lots of useful advice on there.
Thanks for the shout mate! Lots of useful advice on there.
OP - How old are the kids?
There are lots of options and they will all depend upon your overall objectives.
I can go over all of these with you but would need to know a bit more (though nothing personal).
Obviously paying off the mortgage is always a winner, but not quite as straight forward when it comes to shared ownership.
No problem with treating yourselves either.
But you are right to make sure you use this windfall wisely and certainly shouldn't rush into anything.
Thank you for the speedy replies everyone.
The mortgage and ISA route seems like the sensible option but I don’t fully understand what ISA’s are. E.g how ‘locked away’ is my money. I don’t suppose I would need access to any money saved in the sort term but I do worry about tying it up for the long term as you never know when you might want to use some.
I would not owe anything on mortgage (currently £180 per month) however I would still be paying £740 per month in rent and service to the housing association.
I am 27 with stable job at a local authority, although currently earning under £30k.
Partner same age but earning circa £12,500
Kids 4 and 2.
When i say treating ourselves it was nothing extravagant to be honest. I was thinking the new iPhone in September and maybe a couple of k towards a wedding - certainly no more than £10k all in absolute top end!
£5k each to the kids.
I have thought about buying more shares but worry about this in the long term. My Shared ownership property is through Clarion Housing association so although it is somewhat ‘mine’ - 7 out of the 10 properties in my road are council tenants. You have to sell the shares you own, which means that if I came to move then the new buyer may have to find 50% of property value and I figured most people on shared ownership want to buy as little as possible to start with.
Shared ownership attracts a premium on property value when buying so I fear that if eventually bought up to 100% then it is unlikely anyone on the open market would want to pay top dollar for a property in a road full of council houses.
I must say I do keep an eye on the IM thread so I appreciate your input Julian. A lot of it goes over my head at the moment so I continue to try and educate myself. If I did choose to invest - which is a strong possibility then I would certainly like to discus with you or Nik in finer detail.
Thanks again!
The mortgage and ISA route seems like the sensible option but I don’t fully understand what ISA’s are. E.g how ‘locked away’ is my money. I don’t suppose I would need access to any money saved in the sort term but I do worry about tying it up for the long term as you never know when you might want to use some.
I would not owe anything on mortgage (currently £180 per month) however I would still be paying £740 per month in rent and service to the housing association.
I am 27 with stable job at a local authority, although currently earning under £30k.
Partner same age but earning circa £12,500
Kids 4 and 2.
When i say treating ourselves it was nothing extravagant to be honest. I was thinking the new iPhone in September and maybe a couple of k towards a wedding - certainly no more than £10k all in absolute top end!
£5k each to the kids.
I have thought about buying more shares but worry about this in the long term. My Shared ownership property is through Clarion Housing association so although it is somewhat ‘mine’ - 7 out of the 10 properties in my road are council tenants. You have to sell the shares you own, which means that if I came to move then the new buyer may have to find 50% of property value and I figured most people on shared ownership want to buy as little as possible to start with.
Shared ownership attracts a premium on property value when buying so I fear that if eventually bought up to 100% then it is unlikely anyone on the open market would want to pay top dollar for a property in a road full of council houses.
I must say I do keep an eye on the IM thread so I appreciate your input Julian. A lot of it goes over my head at the moment so I continue to try and educate myself. If I did choose to invest - which is a strong possibility then I would certainly like to discus with you or Nik in finer detail.
Thanks again!
£100k is a great windfall & you should be able to use it to make some big improvements to your future. Paying off the mortgage would seem to be good starting point (unless there are any issues with shared ownership) as it would in effect give you £180 a month to save without any change in lifestyle.
ISAs are savings account in which any gains are free of tax & you can take the money out whenever you want so it's not locked away. There are two types: a Cash ISA which simply pays a set rate of interest & a Stocks & Shares ISA which is invested in funds (essentially the stock market, although these can be worldwide to spread risk). The Cash ISA generally pays a relatively low rate of interest (often below inflation) but is safe: you can't lose your money. The S&S ISA can give you much better returns, but with more risk. Historically though you would do much better with a S&S ISA as the long term returns are much better. Each adult can invest £20k per year in a ISA.
There's a Junior ISA which you can open for your children which works just like a S&S ISA: they can get the money when they are 18 & you can pay in £4,368 per year. Again all gains are tax free.
Pensions (SIPPs) give you tax advantages when you pay in as the government contributes 20% but are taxed on the way out & it's locked away until you are 57 (or maybe later by the time you retire). However, you have a long time to go & compound interest over a long time can produce some fantastic results (although see later about charges).
The above is a smplified version & JulianPH & Nik will be able to suggest the best way forward but £45k on the mortgage, £30k in adult ISAs, £8600 in Junior ISAs would still leave you with £16k to play with. The next thing to do is to decide how to invest the £180/mo you now have left over & maybe think about regular SIPP/ISA contributions for you & your wife.
One think to be aware of: charges. Charges are key & be very aware of how much you are paying for advice & for the ISA/SIPP providers. You should be concerned about paying much more than 1%.
ISAs are savings account in which any gains are free of tax & you can take the money out whenever you want so it's not locked away. There are two types: a Cash ISA which simply pays a set rate of interest & a Stocks & Shares ISA which is invested in funds (essentially the stock market, although these can be worldwide to spread risk). The Cash ISA generally pays a relatively low rate of interest (often below inflation) but is safe: you can't lose your money. The S&S ISA can give you much better returns, but with more risk. Historically though you would do much better with a S&S ISA as the long term returns are much better. Each adult can invest £20k per year in a ISA.
There's a Junior ISA which you can open for your children which works just like a S&S ISA: they can get the money when they are 18 & you can pay in £4,368 per year. Again all gains are tax free.
Pensions (SIPPs) give you tax advantages when you pay in as the government contributes 20% but are taxed on the way out & it's locked away until you are 57 (or maybe later by the time you retire). However, you have a long time to go & compound interest over a long time can produce some fantastic results (although see later about charges).
The above is a smplified version & JulianPH & Nik will be able to suggest the best way forward but £45k on the mortgage, £30k in adult ISAs, £8600 in Junior ISAs would still leave you with £16k to play with. The next thing to do is to decide how to invest the £180/mo you now have left over & maybe think about regular SIPP/ISA contributions for you & your wife.
One think to be aware of: charges. Charges are key & be very aware of how much you are paying for advice & for the ISA/SIPP providers. You should be concerned about paying much more than 1%.
Is a cash ISA worth it now savings interest is tax free in the OPS situation, up to 1k?
Given he sounds like he doesn't need access to it rather than putting in an cash ISA (at least), or a GS account, may as well stick a chunk in a notice account, current best being Close bros or Investec (10k threshold) which are paying more and have 90 day notice period, (unless he is happy investing in Sharia Banks which are paying above 2%, but many are not happy investing in them).
Given he sounds like he doesn't need access to it rather than putting in an cash ISA (at least), or a GS account, may as well stick a chunk in a notice account, current best being Close bros or Investec (10k threshold) which are paying more and have 90 day notice period, (unless he is happy investing in Sharia Banks which are paying above 2%, but many are not happy investing in them).
Hi Nick
No problem.
An ISA is just a tax allowance into which you can place cash or invest in the markets.
Unless you have chosen a fixed term account you have access whenever you like (and you may have this with a fixed term account, just with an interest penalty).
Cash is obviously stable, but at current rates will usually lose its real value to inflations.
Stock market investing offer the potential for the highest longer term investments, but you will see falls as well as rises.
For the kids (and probably yourself, given your age) stock market investing makes a lot of sense. We offer fully managed portfolios so you don't need to worry about doing this yourself or having to pay a financial adviser. If you want me to expand on this just ask me on the IM thread.
On the face of this, with a stable job at a local authority I assume you have a good final salary pension in place, so take your fun money, talk over the pros and cons of paying off the mortgage with Nik, consider a Junior ISA for the kids, put aside an emergency fund in a high interest bank account and then consider using your ISA allowance for a long term investment to supplement your income in retirement but also to have instant access to this money should you ever need it.
However, the devil is always in the detail so it is worth chatting this all through with Nik if you wish to avoid advice fees.
Cheers!
No problem.
An ISA is just a tax allowance into which you can place cash or invest in the markets.
Unless you have chosen a fixed term account you have access whenever you like (and you may have this with a fixed term account, just with an interest penalty).
Cash is obviously stable, but at current rates will usually lose its real value to inflations.
Stock market investing offer the potential for the highest longer term investments, but you will see falls as well as rises.
For the kids (and probably yourself, given your age) stock market investing makes a lot of sense. We offer fully managed portfolios so you don't need to worry about doing this yourself or having to pay a financial adviser. If you want me to expand on this just ask me on the IM thread.
On the face of this, with a stable job at a local authority I assume you have a good final salary pension in place, so take your fun money, talk over the pros and cons of paying off the mortgage with Nik, consider a Junior ISA for the kids, put aside an emergency fund in a high interest bank account and then consider using your ISA allowance for a long term investment to supplement your income in retirement but also to have instant access to this money should you ever need it.
However, the devil is always in the detail so it is worth chatting this all through with Nik if you wish to avoid advice fees.
Cheers!
Thanks again, Julian.
You are correct in that I currently pay into a very good pension scheme (in today’s terms). Although I have only been making contributions for around 18month - before this I have never contributed to a pension.
Your input has certainly given me some direction and I will continue to look into these options for now. After the property sale is settled and I am in a position to proceed I am sure I will be in touch with Nik and yourself over on the IM thread in due course.
You are correct in that I currently pay into a very good pension scheme (in today’s terms). Although I have only been making contributions for around 18month - before this I have never contributed to a pension.
Your input has certainly given me some direction and I will continue to look into these options for now. After the property sale is settled and I am in a position to proceed I am sure I will be in touch with Nik and yourself over on the IM thread in due course.
wrencho said:
Use the £100k as a deposit to buy a non shared ownership home?
This is absolutely what I would like to do as it frightens me being at the whim of the housing association who have recently hammered us on rent and service charge! Unfortunately with the £100k and the equity in my house £40-50k I would still not be able to buy anything suitable in our area. With 4 times earnings we could stretch to £300k. The house we are in or equivalent has a list price of £400k (90sqm 3bed). With both our jobs being local, the kids starting school/nursery and a wide network of family and friends in the area we are reluctant to move.
I would like to explore changing from shared ownership to help to buy equity loan but I feel that even this is currently out of reach.
I have a couple of months to ponder before the money is released and I do not want to make any rushed decisions.
Thanks again for everyone’s input
Nick_13 said:
This is absolutely what I would like to do as it frightens me being at the whim of the housing association who have recently hammered us on rent and service charge! Unfortunately with the £100k and the equity in my house £40-50k I would still not be able to buy anything suitable in our area.
With 4 times earnings we could stretch to £300k. The house we are in or equivalent has a list price of £400k (90sqm 3bed). With both our jobs being local, the kids starting school/nursery and a wide network of family and friends in the area we are reluctant to move.
I would like to explore changing from shared ownership to help to buy equity loan but I feel that even this is currently out of reach.
I have a couple of months to ponder before the money is released and I do not want to make any rushed decisions.
Thanks again for everyone’s input
Think long and hard about the moving thing. Seriously. This is your one chance to do it IMHO unless you have some significant career progression that you did not mention.With 4 times earnings we could stretch to £300k. The house we are in or equivalent has a list price of £400k (90sqm 3bed). With both our jobs being local, the kids starting school/nursery and a wide network of family and friends in the area we are reluctant to move.
I would like to explore changing from shared ownership to help to buy equity loan but I feel that even this is currently out of reach.
I have a couple of months to ponder before the money is released and I do not want to make any rushed decisions.
Thanks again for everyone’s input
It might be hard to move to a different area but financially it may be very worth while. Shared ownership is not going to give you anything like the returns of owning your own.
Sounds like your kids are young so they wont notice. Could you stomach a bit of a commute - maybe an hour each way? Does that open up any other housing options?
I just feel in 15 years you will look back and think you missed a massive opportunity.
Hi Nick
Having read your latest post I really think that putting this towards buying a house in your own right could be a very good move (no pun intended!).
I would have a chat with Nik and also Sarnie here, to just see what is possible and even if you can't do this straight away you could at least put in place a plan that would allow you to do so as soon as possible in the future.
Knowing you own your own home and that you can pay the mortgage off to effectively live 'rent' free for the rest of your life is pretty powerful stuff when it comes to financial security.
Having read your latest post I really think that putting this towards buying a house in your own right could be a very good move (no pun intended!).
I would have a chat with Nik and also Sarnie here, to just see what is possible and even if you can't do this straight away you could at least put in place a plan that would allow you to do so as soon as possible in the future.
Knowing you own your own home and that you can pay the mortgage off to effectively live 'rent' free for the rest of your life is pretty powerful stuff when it comes to financial security.
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