UKH

In the next 5 - 10 years I will have paid off my mortgage, have trivial credit card debt (only used for online purchases then paid off in a month or two) and have a relatively modest life style save for the odd splurge on a new waterproof or winter boots.

When my mortgage ends it's very easy for the spare cash to be frittered away on.... stuff. I would rather invest it rather than waste it. My first thoughts my options include:

Buy to let - not as secure as previously due to various tax changes but I like the idea of having a physical asset.

Buy to holiday let - mostly seasonal but without the headache of a potentially troublesome tennant, more weekly work however.

Shares - really don't have enough knowledge to risk large amounts of money to invest in individual companies. Presumably an established scheme works be best.

I know a climbing forum is no substitute for professional advice (which I will be seeking in due course) but any thoughts or experiences would be welcomed. 

If you buy to holiday let you can always pay someone to do some of the work, then you have your investment and you are helping someone else out too.  Presumably you'd buy something you could use for your own holidays occasionally too?  

Yes, it would most likely be somewhere in or on the edge of the Lake District. Friends and family could use it. 

I wouldn't discount a foreign purchase in Spain or France but who knows what potential issues are in store for non EU buyers post Brexit.

could you chuck it all into pensions and then retire earlier?

I will have paid my mortgage off in the next 5-10 weeks, let alone 5-10 years, and have put zero thought into what to do next (aside from advice on a thread on here which wasn’t quite about “what to do next” but about how best to pay mortgage off). Aside from one person suggesting “buy to let”, there was a general vibe of “chuck in the pension pot” although that was more to do with better use of the lumps I’ve thrown at mortgage overpayments.

Aside from pensions, I don’t have any “savings” as such. Until six years I was struggling financially so I’ve never really had the inclination to look at “what to do with money” as I never had any! 

I have a reasonable work place pension and that is an option. I'll be in my early 40s when my mortgage is paid off so whilst a healthy pension pot is good it's also locked away until I'm 65.

A buy to let will always involve more work than you can imagine. A perfect holiday home will have a high occupancy rate and are expensive to buy, the opposite doesn't apply; even a holiday home that sees lower occupancy isn't much cheaper because of market prices. Do your home work first. Agencies charge for everything and you'll still spend some time managing the agency, who then manage the tenants. 

Well done on paying off your mortgage. So many options.

Max out on the tax efficiency of putting £40k into your pension every year and get a fat tax rebate when you do your self-assessment. 

Lifetime ISA gets you an immediate 25% return based on the government contribution.

Instant access savings are poor at the moment so consider premium bonds as place to rest cash whilst you consider other longer term options.

Pension investment is from gross income so a major advantage.

You can take the money out from 55 onwards.

Check the above with somebody who knows what they are talking about!

Some of spare cash into pension?

Isn't it 56 now and heading up rapidly, so the younger you are the older you will  need to  be?

I was in the same position about 10 years ago. I went for a salary sacrifice agreement, whereby (put simply) my employer reduced my salary by the amount I was paying into the mortgage, (plus a bit more he saved in NI) but he paid the difference straight into my pension, the benefit being I didn't pay tax on that amount.

I was getting paid the same, my take home without the mortgage was the same, but a big chunk was going into my pension.

Worked for me, I was able to retire earlier, - but take proper advice.

If you're saving for retirement then paying extra into your pension fund makes sense as the money comes off your salary before tax so you get money for nothing.

If you can't then ETFs are worth a look. You're essentially investing in a stock market but can sell your holding at any time. Buy into a spread of funds to spread risk. Here's one place you can do it.

https://www.vanguardinvestor.co.uk/what-we-offer/etf-products 

Forget it, coke and hookers go out in a blaze of horny glory!

I was thinking more along the lines of buy all the shiny kayaks and go on all the holidays, but whatever floats your boat.   

I'm just about to pay off my mortgage. I've given a lot of thought how to best invest for the kids for the future. In the end I decided the best thing was to reduce my working hours and give the new time to the kids education. I'm kind of doing that. 

ETFs as above are a good option. Anothet is to put your money into a stocks and shares ISA. Can find ones which will do it all for you for a fee.

Or just split it all between Apple / Microsoft / Tesla! More risky but all depends on what your goals are long term.

I told him to check with somebody who knows what they are talking about!

Well that does sound like good fun. Not sure if Mrs Kalna will see it the same way...

What Andy said - but without the hookers (unless they are smuggling it in for you - probably a bad idea), massive profit margins...

Whenever I've read investment advice they ask you to identify your investment aims. 

One possible answer: invest in your free time and work less! More time for outdoor adventures while you still can

Bitcoin :p

I recommend a new tent and a new rack.

If you are fortunate enough to be in the 40%tax bracket then pension investment makes sense. If you are in or approaching your 50s it makes sense too. You won't have to wait long to see your money again. There are plans afoot to raise the age you can access a personal pension to 57. Might be wise to get in now to secure some money available at 55.

BTL is good long term. Holiday let's can be risky, house gets trashed early season with a full calendar ahead would be a headache. 

I moved out of the student market and into long term letting, less lucrative but lower risk and less hassle. Agent manages the property. I step in less and less often. For none urgent jobs, get a second quote, agency contractors can be expensive. 

Having learnt the hard way paying £100+ for what must have been a 5 minute job, I gave our agency a list of approved local contractors to cover all trades. 

Thanks everyone for the advice so far. Throwing a certain amount at the pension pot looks like a popular choice. I'll be looking into that in more detail.

I must say, I didn’t look at this in ANY detail so I would be appreciative if you share your findings. Basically I have one those “employer matches your contribution up to a  certain threshold” schemes so I’ve always been putting a percentage of salary each month, into a private pension - aforementioned tax benefits plus that extra bit from employer. Recently I increased my percentage contribution. I’ve not put much thought into this 😃 for context I have no children or other dependents 

Its pretty easy to get your mind round it. As an individual you are allowed to put £40,000 into a pension scheme each tax year " tax free".

Even with your employers contributions it is highly unlikely that you are anywhere near paying in that amount unless you are a high earner.

So make as much use of this as you can, as it is an incredibly tax efficient means of saving into your pension pot.A nd then you can reap the rewards later.

Thanks! I have a feeling that I once knew this and it is, as you sat, quite simple - so simple in fact that I managed to forget it as it “didn’t matter” 😃

to the OP; I am 45 

Make a donation to the Tory party. Can’t be a better investment than that. 

Depending on sums envisaged:

• pensions, esp with employer contributions, very effective and (currently) tax effective.
• ISA (esp Lifetime if you're eligible)
• Premium bonds (might win something, can always have the initial investment back)
• Life insurance if you have dependents (depending on whether you have any cover through work)
• check your Nat Ins contribs for your state pension: if you have any recent years missing that you might want to catch up on

the above can have tax advantages (depending on your tax bracket): optimise those first before looking elsewhere

Depends on your mentality: jam today or jam tomorrow (and bear in mind that pensions are a punt on mortality: will you make it long enough to collect?)

I'd also look at how much you think you want/need  in retirement.  Which do a breakdown for a basic, comfortable and luxurious retirement. We felt the comfortable was appropriate for us, but with significantly extra allocated for holidays. Even before covid we weren't spending that much, and also found that doing a bit of part time work now and then quite enjoyable. With hindsight we would have retired a couple of years earlier.

I agree with most posters, especially if you pay 40% tax, that increased pension contribution are very tax efficient and a "easy" thing to do. My limited experience of, buy to let, has generally been positive, but it is more hassle, and that was before most of the rule changes. I didn't use an agency, no major issues with tenants but travelling 10 miles to sort a problem out seemed a bit of a pain when working full time. If I had used an agency not sure that the rent would have been much more than the costs.  In my experience the difference between the purchase price and selling price was the main contribution to our retirement, rather than rental income.. So renting Mrs J flat out after we got together (1995) enabled us to sell it for three times what she paid for it (2003).  Two other properties I have had since then have only sold for 10%-20% more after several years. I haven't lost money, but am pretty sure I would have been better off putting more into a pension pot.

Note that the 'annual allowance' can change from year to year. You need to keep a general eye on pensions legislation.

I can warn you about a few do's and don'ts from bitter personal experience

1 Beware of buying property abroad either as a holiday home or letting investment unless you have family or good friends living in that country who can keep an eye on it, and a RELIABLE local managing agent. I put the emphasis on RELIABLE because I've had terrible experiences with local agents ranging from pure incompetence to downright dishonesty.  Sometimes a crisis can arise which could necessitate your having to dash out there in person - not easy at the drop of a hat, and expensive as you can't generally get cheap flights, or ferry/Eurotunnel fares, or accommodation just like that. Also beware of the hassles you can meet complying with local taxes, utility bills, and Income and Capital Gain Taxes in the foreign country. Speaking the local language well is also a consideration when dealing with local builders and other tradesmen. You can be at a huge disadvantage if you don't, particularly if you are trying to ring them from the UK in an emergency situation.

If you are considering going out to live abroad, my best advice would be to rent for at least a year in your chosen location before committing to a purchase.

2 Buy to let can be a good long term investment with capital growth to the property, but finding a reliable tenant who is in a secure job is your priority for now. Remember that a reliable tenant at a below market rent is a better prospect than someone in a potentially insecure job paying a full rent. When choosing a suitable property get it surveyed including testing of all services. Repair costs will eat into your income, so modern/new property is attractive, particularly if it benefits from an HHBC guarantee. Keep decorations, and floor coverings plain and simple as you may have to redecorate between tenants. Then of course, you need to be aware that as a landlord you are vulnerable to current and government interference such as the extension of the current ban on eviction for non payment of rent, and the possibility of more severe taxation, both national and local on investment property.

3 Stock Market. A nightmare at the moment interest rates are so low that it's hardly worth doing. You need to think long term, and unless you have experience you probably need advice from a good broker or Financial Adviser, but don't expect much in the short term.

4 Clearing any debt is probably a priority right now, and making capital expenditure like household improvements and upgrading and repairs is probably worth considering and should improve the value of the property in the long run. Also think ahead for things like replacement of your car - carbon fuel/electric or hybrid? And the ways in which depreciation/availability will affect these, not to mention the problem of electrical charging points if you don't have off street parking and your street is already rammed full of others parking there? I'm in this situation right now, no off street parking, and too many cars parking in the street. Do I stay with petrol or go for one of the alternatives with the problems of charging?

5 Don't forget holidays (when you can)!!! After what were have been through and are going through we are going to need them. Unfortunately so is everyone, so when the restrictions are lifted, the flood gates will open! How old are you? Don't forget your health, as you age life has some nasty tricks up it's sleeve, as I found out when I reached my 60s with cancer etc. It's not always wise to keep putting things off, particularly holidays, because you might never do them. It's all a matter of balance when it comes to financial planning

If your employer matches your pension contributions then do that - you're unlikely to get a "100% + investment return on your money + investment return on their money" return from anything else, although there may be a risk that the investment will die with you.  Is your pension pot inheritable?

Aside from that, if you wanted to invest in property is investing in a property fund a sensible thing to do as that will own properties all over the place and reduce the risk of a localised property crash.  Speaking of property crashes, surely now is a bad time to invest?  The market is highly likely to crash post-covid support measures.

https://www.which.co.uk/news/2019/07/the-cost-of-a-luxurious-retirement-420... 

Makes for some useful background reading.

There are really two questions here.

Firstly, whether or not to put it into a pension. Very tax efficient but it locks up the money for a long time.

Secondly, regardless of whether or not its a pension, you have to decide what sort of investment to put it into. I would opt for a basket of unit trusts as a good mid-risk option. Just remember the basic rules of sound investment. For example, spread your risk - don't put all of your savings into the same unit trust. Research the performance, both recent and long-term, of your unit trust before buying. This information is all available on line via organisations like Morningstar. The easiest way to purchase unit trusts is via a platform like Interactive Investor or Hargreaves Lansdown.

Done correctly, renting property irons out market fluctuations. So long as you are seeing a reasonable return on your invested sum, say 5+% pa from rental profit then it just chugs along. You won't get that from a bank. After 10 years it is unlikely the property will have fallen in value.

I'd recommend reading Smarter Investing by Tim Hale, it's a great book and written in laymans' terms. Only takes a day or two to read.

For the majority of people who don't want to spend a lot of time doing research, passive investing (you basically get the return of the global markets, minus fees) in a globally diversified portfolio of tracker funds with very low fees (fees are the main thing you want to minimise, and actively managed funds are high in fees and the vast majority don't beat the market) etc is the way to go in my opinion. Sounds complicated but It's very easy to do if you read the book above. If you want even less hassle, just use a fund of funds such as one of Vanguard Lifestrategy funds. You pay slightly higher fees than building/managing the portfolio yourself, but they're still very low compared to active funds, and they do all the re-balancing for you. You can do this inside the two main tax wrappers, an ISA and a SIPP to get all of the tax benefits. Essentially with a ISA you pay tax on the way in, and with a pension you pay tax on the way out. It's a good idea to use both as they both have other pro's and cons each.

With regards to buy to let etc, that's fine but if you put all of your funds into BTL, you're putting all of your eggs into one basket, which isn't a great idea long term. With the approach above, you essentially take a share of global capitalism as a whole, and you're as diversified as is possible. But like I say, before you do anything, i'd recommend the book above, and then you can make an informed decision.

No one has mentioned the ethics of investing. I don't know if that actually matters to you but it is still worth saying.

There are plenty of ethical funds out there but I'm not currently in a position to invest so I can't say I have done any research lately.

There are also sound financial reasons for thinking about this as for example climate change regulation starts to bite over the next few decades.

For me, managed funds are giving a good return. It’s like playing the stock market but with experts doing the work. Admittedly the managers take a cut (0.75-1% p.a.) but I can’t complain about their choices and their value to me. I accept that there is a degree of risk but the money is from a pension I had thought I had lost in the 90’s (during which my mortgage payments were crippling but my pension was benefiting, although I didn’t realise it at the time) and my real pensions start in about 4 years time, so I feel I can accept the risk. This has given me the option to retire early and even after taking a modest monthly income my fund is continuing to grow. The figures below are from December when I finalised my choices and hope I won’t need to make any significant changes for at least a couple of years. I also have a ‘cash’ account (which is doing better than the bank rate) which covers my monthly income for about the next 18 months when I will start planning for the next 18 months and hopefully will provide a cushion if the global stock market goes into meltdown. I use trustnet[dot]com to keep an eye on how they are doing as it covers all the basic info in a simple and standardised format.

That assumes the big employer in the area hasn't disappeared.  A single property is always at risk of a geographically significant change in the economy.

arms and people smuggling is where the money is

Thanks everyone for your responses, very useful to have a bit more of a feel as to what direction to go in when asked by a financial advisor. Much appreciated.

If ethics are important to you Google "financialisation of housing" for info on why the Buy-to-Let market is rarely an ethical investment.

Also worth Googling "impact of second homes" with regard to holiday lets.

Cheers!