Quick sense check please
Posted: November 26th, 2023, 5:13 pm
Not investment advice, just tell me if I'm missing something obvious or if there's a better way of doing it.
I have three and a half years (give or take) until I can get my hands on my pension money. Prior to that, I'd planned to spend down my cash and not need to sell more than a few grand of unsheltered investments (let's call these my GIA - General Investment Account - for ease of typing). What wasn't planned was that I now want to repay my £75k interest-only mortgage in March when my fixed rate runs out. The original plan was to renew for three more years and then use some of my pension lump sum to clear it. The rationale for the change of mind is that I can't move providers with no income, and to renew I'd be looking at >5% plus a £1,499 fee (it would need to be a three-year fix). This feels daft when the money is sitting in e.g. Premium Bonds which pay a lot less. But there goes the cash that I'd been planning to spend on living costs and leave my investments alone to soar . Drat and double drat.
Here's what it all looks like:
80 cash at bank (mostly at 5.2%)
15 rubbish EIS investments I wish I'd never made, and God only knows when I'll see this (apparently in the next year or so, but yeah)
145 GIA
------
240 Total unsheltered
300 ISA
-----
540 Total available
Now clearly £540k for three years would not be a problem. But I have it in my head that I not only don't want to touch the ISA balance but I also want to add the maximum to it each year.
So here's how the £240k gets spent:
80 to the ISA (I haven't yet paid in for this current year as every time I went in to my GIA to sell it was standing at a loss and I couldn't bring myself...)
75 to repay the mortgage
20 major works on the flat (work is done, still paying it off)
65 for living expenses (finally decided to live a little)
----
240
You will note that despite the absence of a cushion, the massive safety net of the ISA ensures that there is no realistic scenario under which I'm going to starve - or, worse, have to go back to work. So this is the most first-world of first-world problems and one I'm delighted to have. However! Turns out this doesn't stop me from wanting to make this all as efficient as possible. I have nobody I can talk this through with in my real life. So if I'm going wonky with my thinking, please would you all help me make it better!
Potential things I could be talked into/out of:
1. Decision to repay the mortgage.
2. Decision to continue funding the ISA.
3. Timing of selling from the GIA.
4. Things I haven't even thought of.
The third bit is what I'm thinking about at the moment, as I dither over pressing the button to sell from my GIA. My cash flow plan shows me needing the following GIA proceeds each year (ending 5 April):
25 to 5/4/24
35 to 5/4/25
45 to 5/4/26
35 to 5/4/27
Of the above numbers, 20 each year would be immediately repurchased inside the ISA and so I feel like that's OK. That is to say, I don't feel like I need to take steps to protect that £80k from market movements. Obviously if I have to sell low and subsequently get the growth in the ISA that spoils my cunning plan a little, but it isn't the same as crystallising a loss.
The other 5, 15, 25 and 15 would be sell-to-spend. Received wisdom seems to be that you shouldn't invest if you'll need the money in the next five years, but I hate to sell at a loss or a break-even (like I would be if I did it now) when it might increase in value if I leave it and I do have my CGT annual allowance each year. And I feel like I could maybe take some chances, since I do have the ISA if I really need it.
But how much would be sensible to take out, and when? I have the 5.2% interest rate available to me until next September, so the initial £5k can sit in there until it's needed. Beyond that, I'm not sure that there is much available, Regular Savers being the absolute opposite of what I need. Should I be selling the full £60k right now, and putting £15k in a one-year bond, £25k into a two-year bond and £15k into a three-year bond even though I would really need it monthly not in one annual lump? Or stick it into the 5.2% account and see what happens by next September? Or leave it invested until I absolutely need it? Or something else?
My freelance income seems to be tailing off - I've earned about £6k so far this year but there's only about £800 in the pipeline. So I should have some of my tax allowance left each year to cover unsheltered dividend and interest income, albeit not endless amounts.
Thanks for reading, sorry for the length.
I have three and a half years (give or take) until I can get my hands on my pension money. Prior to that, I'd planned to spend down my cash and not need to sell more than a few grand of unsheltered investments (let's call these my GIA - General Investment Account - for ease of typing). What wasn't planned was that I now want to repay my £75k interest-only mortgage in March when my fixed rate runs out. The original plan was to renew for three more years and then use some of my pension lump sum to clear it. The rationale for the change of mind is that I can't move providers with no income, and to renew I'd be looking at >5% plus a £1,499 fee (it would need to be a three-year fix). This feels daft when the money is sitting in e.g. Premium Bonds which pay a lot less. But there goes the cash that I'd been planning to spend on living costs and leave my investments alone to soar . Drat and double drat.
Here's what it all looks like:
80 cash at bank (mostly at 5.2%)
15 rubbish EIS investments I wish I'd never made, and God only knows when I'll see this (apparently in the next year or so, but yeah)
145 GIA
------
240 Total unsheltered
300 ISA
-----
540 Total available
Now clearly £540k for three years would not be a problem. But I have it in my head that I not only don't want to touch the ISA balance but I also want to add the maximum to it each year.
So here's how the £240k gets spent:
80 to the ISA (I haven't yet paid in for this current year as every time I went in to my GIA to sell it was standing at a loss and I couldn't bring myself...)
75 to repay the mortgage
20 major works on the flat (work is done, still paying it off)
65 for living expenses (finally decided to live a little)
----
240
You will note that despite the absence of a cushion, the massive safety net of the ISA ensures that there is no realistic scenario under which I'm going to starve - or, worse, have to go back to work. So this is the most first-world of first-world problems and one I'm delighted to have. However! Turns out this doesn't stop me from wanting to make this all as efficient as possible. I have nobody I can talk this through with in my real life. So if I'm going wonky with my thinking, please would you all help me make it better!
Potential things I could be talked into/out of:
1. Decision to repay the mortgage.
2. Decision to continue funding the ISA.
3. Timing of selling from the GIA.
4. Things I haven't even thought of.
The third bit is what I'm thinking about at the moment, as I dither over pressing the button to sell from my GIA. My cash flow plan shows me needing the following GIA proceeds each year (ending 5 April):
25 to 5/4/24
35 to 5/4/25
45 to 5/4/26
35 to 5/4/27
Of the above numbers, 20 each year would be immediately repurchased inside the ISA and so I feel like that's OK. That is to say, I don't feel like I need to take steps to protect that £80k from market movements. Obviously if I have to sell low and subsequently get the growth in the ISA that spoils my cunning plan a little, but it isn't the same as crystallising a loss.
The other 5, 15, 25 and 15 would be sell-to-spend. Received wisdom seems to be that you shouldn't invest if you'll need the money in the next five years, but I hate to sell at a loss or a break-even (like I would be if I did it now) when it might increase in value if I leave it and I do have my CGT annual allowance each year. And I feel like I could maybe take some chances, since I do have the ISA if I really need it.
But how much would be sensible to take out, and when? I have the 5.2% interest rate available to me until next September, so the initial £5k can sit in there until it's needed. Beyond that, I'm not sure that there is much available, Regular Savers being the absolute opposite of what I need. Should I be selling the full £60k right now, and putting £15k in a one-year bond, £25k into a two-year bond and £15k into a three-year bond even though I would really need it monthly not in one annual lump? Or stick it into the 5.2% account and see what happens by next September? Or leave it invested until I absolutely need it? Or something else?
My freelance income seems to be tailing off - I've earned about £6k so far this year but there's only about £800 in the pipeline. So I should have some of my tax allowance left each year to cover unsheltered dividend and interest income, albeit not endless amounts.
Thanks for reading, sorry for the length.