Ask a planner answers: Pay off mortgage or invest?

Tuesday, June 7, 2016

The question from Campbell, 50, Crawley

I am being made redundant from IBM and I have option of £10k  pension or £8k with lump sum of £56000.  I don't need the cash for anything particular but wondered if worth investing it elsewhere instead or pay some off current mortgage of £350k (19yrs to go)  I have cash ISA but that's all, no shares currently.  What should I do with my pension/lump sum?

The answer, from Marlene Outrim CFPTM, UNIQ Wealth - an Accredited Financial Planning FirmTM

Really, you need a Financial Plan as without looking at the whole picture, it is difficult to advise you what to do. It would be wise to repay some of your mortgage, in case interest rates rise in the future & maintain the same repayments so that you pay off the mortgage earlier.

You could invest the lump sum for capital growth over the long-term and then at least you have that money available to you for future expenditure and you could ensure that it would be tax-free. If you take it as income then you pay tax on the extra £2,000. As I don’t know your tax position this could be 20 or 40%, so in your hand it will either be £1,600 or £1,200 a year. Much depends on your plans for the future which is why you need a Financial Plan. That will solve it for you.

Marlene Outrim CFPTM
UNIQ Wealth