Been left £130,000 net after my mum died, what do i do?

quickquid

Sorry, I would not recommend First Direct for £130,000. The penalty for withdrawal is too great for a return of 5% gross.

codetown

aha, I just noticed the no-interest in the month you withdraw from First Direct.
In that case she should be careful to take money out on the 1st of a month when needed. Or pick another account with reasonable rates. But still act quickly.
Unfortunately I cannot think to accounts with good rates and no limits.
For that amount the Nationwide e-saver would offer 4.65% and no limitations.
But for the rate difference might be worth being careful with FD.

EdInvestor

Actually I'm with those who suggest investing some of the money in a home.There is very little that can compete as an investment with buying your own home in the long term. It is a geared investment ( ie you borrow money for it in the form of a mortgage), which maximises gains, but with little downside risk long term.It attracts absolutely no taxes and it uses mainly money you would have to spend on rent anyway.

Very few people get the chance to buy a home without stress - most people have to struggle to save the deposit and then further struggle with a high mortgage for some years. You're in a position to put down a big deposit (say half the available funds) and get a manageable repayment mortgage similar to your rent.This is a chance few people have to acquire lifetime security quite easily and I would take it.

Now whether it is exactly the right time to buy or not depends on the area you live in and the type of home you might like to buy. IMHO there will not be an overall property market crash, BUT there could be price falls in new built homes, particularly inner city new flats, because there is a glut of them. So I would avoid them.

If after looking around you think it might be better to wait a bit, I would set aside the deposit money in cash on deposit so it's earning a return and bide your time.

Then I would look at how to invest the other half - I would choose equities (stocks), as a long term savings plan for your retirement. I would use ISAs for the money - you can put 7k in an ISA every year - so 14k in the next few months using this year's and next year's allowance. It's better for you as a basic rate taxpayer with no company pension to save in ISAs rather than pensions, which have more advantages for the higher rate taxpayer.

quickquid

[QUOTE=codetown_But_for_the_rate_difference_might_be_worth_being_careful_with_FD.[/QUOTE]


Whatever the case, if she anticipates moving large chunks of cash, it would be advisable to go for an internetbank that allows CHAPS for transfers.

free4440273

if you don't need ready access to the money, put most of it into a fixed-rate risk-free bond. And I do mean risk-free. Do not go for a corporate type bond, where risks are incurred. Nationwide do decent risk-free bonds for 1,2,3,5 yrs.

Juni_3

Unless I'm really missing something here isn't buying a property a no-brainer in this situation?

Rent is completely dead money which could be going towards a monthly investment plan.

kenshaz

codetown wrote:

I would recommend to act very quickly and settle into a saving account which supports 130.000 pounds. Then you will think about a potential better investment. Some saving accounts have limits on maximum allowed (such as A+L Online saver), some have requirements on maximum to put in monthly etc.

For simplicity (i.e. not having to divide money into chunks) I would suggest an online saving account such as First Direct which is at present about 5.0% AER and allows to save up to 500.000.

Just be quick to put money in a saving accoung and remember that for that money at 5% you get: (gross) 6500 yearly, i.e. 541 pounds a month.
if you pay basic rate you get about 14.5 pounds net a day. This is money lost if you leave them in a 'normal' current account (there are some that are better of course, but usually far from saving rates).

But if you withdraw from First Direct ,you loose a whole months interest,which over £400 ,do not put it with First Direct FOR THAT REASON

cheerfulcat

free4440273 wrote:

if you don't need ready access to the money, put most of it into a fixed-rate risk-free bond. And I do mean risk-free. Do not go for a corporate type bond, where risks are incurred. Nationwide do decent risk-free bonds for 1,2,3,5 yrs.

Just to clarify - these are not bonds, which are in effect IOUs. These are fixed term deposit accounts. It is unfortunate that the financial institutions choose to muddy the water like this.

Further, it is a mistake to think of cash on deposit as risk free. On the contrary, there is a considerable risk ( I would say, with rates where they are right now, a *certainty* ) of erosion by inflation over time.

free4440273

technically, they are IOUs. to the average joe they are bonds. bonds will outperform all other fixed (or otherwise) accounts - that is the nature of bonds. Yes, of course there is a risk, as in a risk in property also.

cheerfulcat

No. Bonds, whether corporate or government, are IOUs. They are loans to companies or governments. What the Nationwide is marketing under the name of " bonds " are simple deposit accounts, not bonds.

It is incorrect to say that they will outperform all other deposit accounts - that depends entirely on interest rates. What you are doing when putting money in a fixed rate, fixed term deposit account is gambling that interest rates won't go up during the term of the account.