What to do with an inheritance...

Tarser

Hello everyone, I am very inexperienced in money matters as I've never had any. However, my situation has changed after recently receiving a 100K inheritance. I have an ISA with HSBC but apart from that, the money is sitting in my current account. I want to do something with it that involves literally ZERO RISK. I want the money to generate money to bring in as much as possible so that I can cut back on my self employed work as much as possible. I'm 56 and I'm not going to get a state pension for ten more years.

I'm thinking of opening more ISAs but I'm finding it all hard to understand. I saw that Sandander offer 3% on 20K, but the read that the maximum is 15K. I've got 15K in my HSBC ISA. ...

In very simple terms, what ISA's could anyone advise me to open in order to generate maximum return? Is there anything else I could do that has no risk? I have read that I should spread the money out into different banks and accounts. I don't want to lose track of it and want things to be simple. I can leave the money for a long period without touching it.

Any advice would be great as I'm am completely in the dark!

bowlhead99

There is nothing that has no risk.

I mean, if you leave £100k in bank accounts then in twenty years time when you are 76 and have another twenty years to live after that, and you only spend the little bits of interest and not the capital... then you can be sure your £100k will be there but the risk is that it will definitely not have the same spending power.

Assuming 3% inflation a year for the next couple of decades it would only be worth £55k in today's money. So the stash of cash, and the income available from it, would have almost halved.

So, you can call that 'literally ZERO RISK' but of course that is a joke, because you lost half your money.

This is why people who have money which is more than just 'savings for a rainy day' will generally consider investments rather than just savings.

If you are just looking for homes for your cash savings, browsing around these forums will quickly find a lot of threads with the links to the top paying accounts - which are all 'current accounts' or 'regular saver' accounts, rather than ISAs.

The Santander one you heard of which pays interest on amounts up to £20k is a current account, but will get you more net interest than any ISA, even after you've paid tax on the interest which exceeds your annual personal allowance and savings allowance. There are plenty of others which are the same (albeit for less than £20k at a time). This link http://forums.moneysavingexpert.com/showthread.php?t=5374614 covers most.

But over the long term those accounts won't get you as much as a portfolio of investment funds would, so there is a compromise between investment risk and return, if you aim to beat the obvious risk which is inflation.

Eco_Miser

Firstly there is no such thing as ZERO RISK. All UK bank accounts guarantee that you'll get the first £75k back whatever happens, but there's no guarantee that that £75k will buy anything like what it will buy today.

Secondly, cash ISAs are pointless for nearly everyone, and they are no safer than any other bank account. With £100k and no wish to use investments, you may be one of the few for whom they have a role - but only if they beat what you can get elsewhere.
First look at This link to a list of high interest accounts. Using them, including feeding Regular Savings accounts from the lower interest current accounts, should get you over 3% on around £50k, including Sandander's 3% on 20K. For the other £50k Sainsbury's Bank is offering 1.35%. See Martin's Top Savings Accounts article also linked from the top of the page.

Thirdly, if you want your inheritance to beat inflation over the next ten or more years, consider investing. See http://monevator.com/ follow the links in the sidebar to get an idea of the advantages and pitfalls.
The posts by The Greybeard may be particularly relevant (living off investments).

MisterMotivated

To add to the above, it sounds to me like you're considering opening/funding multiple cash ISAs, which is not allowed in one particular tax year. So any new cash ISA would only provide a home for a fraction of the money.

ColdIron

Tarser wrote: »

I want to do something with it that involves literally ZERO RISK

I want the money to generate money to bring in as much as possible

Choose one or the other or something in between

xylophone

Do you have no private pension provision whatsoever?

jimjames

You say you want no risk but the money might need to last 30+ years. To me that says you don't understand risk.

There is no reason why all the money has to be in the same thing and investing at least a portion of it would seem to make sense to me. If you have no pension then that would be an obvious thing to investigate but cash ISAs would be pointless.

kidmugsy

Tarser wrote: »

I'm 56 and I'm not going to get a state pension for ten more years.

I'm thinking of opening more ISAs but I'm finding it all hard to understand. I saw that Sandander offer 3% on 20K, but the read that the maximum is 15K. I've got 15K in my HSBC ISA. ...

You are already past 55 so pensions are a very appealing investment because for you they are not inflexible - you can get the money out again whenever you want. Work out how much you are allowed to contribute this tax year: it's just earnings minus any other pension contributions you've made in this tax year. Your "net contribution" is 0.8 times that answer: the provider claims back relief tax from HMRC and adds it to the pot, which thereby grows immediately by 25%.

The Santander account isn't a Cash ISA, it's a current account that pays much better interest rates than a Cash ISA. It would be sensible to open the Santander account and fill it up. Transfer your direct debits for the bills there: gas, electricity, water, council tax, phone/broadband ... The rebate you get on those is likely to more than pay the fees on the account.

Open a new ISA before the tax year ends: you can subscribe up to £15,240 per tax year. You might prefer to keep the money in cash but if your time horizon is 30 years, at some point you'll want to put some of it into shares. There's no hurry to buy shares but there is a hurry to open the ISA before the tax year ends. Another good idea might be to save into a high interest monthly saver attached to a high interest current account (e.g. TSB, Nationwide, Lloyds). You'll get the interest on the monthly saver tax-free next tax year, and similarly for most of the monthly interest on the current account.

Then next tax year, beginning April 6th, you can do the same thing: open an ISA and start contributing to a pension.

Once you've got the money spread between high-interest accounts and tax shelters, you really will have to learn about investing, or pay an IFA to hold your hand.

McKneff

Could you consider buying a small house outright and renting it out.

Or living in it and saving what you are paying in rent now.

bowlhead99

McKneff wrote: »

Could you consider buying a small house outright and renting it out.

Makes no sense for someone who wants to deploy their cash with "ZERO RISK".

Or living in it and saving what you are paying in rent now.

That can make a lot more sense.

Tarser

I have read all these posts with interest and gratitude. I will certainly be looking into some of the suggestions, although I don't feel at all that I know what I'm doing!

A couple of points:

1. I have no mortgage as I paid it off as part of the inheritance.

2. I have no private pension. I did have three, but after years and years of contributions, they were worth about £200 per year! I have cashed them in.

3. I have decided to put in the maximum allowance into premium bonds whilst I think further of what to do. I might get the £ million jackpot and be back to where I started!