30k inheritance

jamescredmond

hi, i've just come into an inheritance of 30k. married, both standard rate taxpayers, 2 kids (19 and 11). what's the savings solution? any advice much appreciated.

dunstonh

Depends on what you want the money to do for you and when you will need it again.

jamescredmond

thanks dunstonh
this is the story: looking for max return over 3 years. do not need to access. min/zero risk. sorry,should've made this clearer.

AlexIFA_2

If you want low risk and need access to your capital in three years, you should only be looking at cash accounts. £3k each in a cash ISA (rates around 4.5 / 5%) and the balance in a National Savings product or high interest savings account.

For low to medium risk, ideally you want to leave it for five years and invest in a distribution fund or equity income fund OEIC. If you can leave it for five years there are some guaranteed funds that give you 100% upside of a rise in the equity markets with a 100% guarantee to return your capital if markets go down. Mail me if you want anything more specific.

EdInvestor

Suggest you steer clear of guaranteed equity bonds.

Hard to find a soul on this site who has a good word for them.

It's one of the few subjects on which there's virtually 100% agreement

free4440273

EdInvestor wrote:

Suggest you steer clear of guaranteed equity bonds.

Hard to find a soul on this site who has a good word for them.

It's one of the few subjects on which there's virtually 100% agreement

i will second that - avoid them like the plauge; very risky and riddled with provisos...you could put the money into a building society bond (risk-free) for three yrs - the interest would be decent, but not spectacular:)

cheerfulcat

jamescredmond wrote:

hi, i've just come into an inheritance of 30k. married, both standard rate taxpayers, 2 kids (19 and 11). what's the savings solution? any advice much appreciated.

Have you any debt ( including mortgage )?

jamescredmond

cheerfulcat wrote:

Have you any debt ( including mortgage )?

no debts. no mortgage thank the lordy lord.

Chrismaths

What do you want the money to do for you?
Provide an income? Provide for kids Uni expenses? Become a bigger pot of money? Over what time period?
Once you decide what you want your money to do for you, that may or may not involve taking some risks to achieve the objective.
If you feel uncomfortable with the level of risk you need to take to achieve what you want, then you can either change what you want or accept the risks.
If you ask 50 people what to do with 30k, then you will get 50 different answers (unless they are all old model IFAs, in which case they will all recommend an investment bond ). What is important is what you want to achieve from this inheritance.

jamescredmond

Chrismaths wrote:

What do you want the money to do for you?
Provide an income? Provide for kids Uni expenses? Become a bigger pot of money? Over what time period?
Once you decide what you want your money to do for you, that may or may not involve taking some risks to achieve the objective.
If you feel uncomfortable with the level of risk you need to take to achieve what you want, then you can either change what you want or accept the risks.
If you ask 50 people what to do with 30k, then you will get 50 different answers (unless they are all old model IFAs, in which case they will all recommend an investment bond ). What is important is what you want to achieve from this inheritance.

you are right to ask these questions because I did not make clear my intentions. the (loose) plan is to invest these funds with a view to retirement plans. as retirement is at least 18 years away I can afford the luxury of time and choice. I considered 'buy to let' but indications suggest that the housing market is set to grow by only 2-3% this year with a possible zero growth the following year. better perhaps to invest over 3 years where the capital (at least) remains safe, then review my options. hope this makes things clearer

Chrismaths

OK. Taking what you say at face value, you want to invest £30k for 2-3 years with no risk to capital. For that, you're best off in cash. Even using up your cash ISAs of 6k per year you are going to get a return of between 1-2% after tax and inflation. If you want to beat these returns, you have to accept some kind of risk to your capital.

There seem to be some contradictions here. 18 years to retirement is not a huge amount of time as it first seems - a joint life annuity (2/3 widows benefit) for a man aged 65, woman aged 60, increasing at RPI gives you 3.73% of your fund back each year. So for each £100 of income per month you want in retirement you need to have saved over £32,000 (in today's money). You can work out for yourself how much you need to save to get your required income in retirement.

As for BTL, you are right to be worried about returns going forward - the house opposite me has a rental value of 500-550 pcm, and sold recently for around £120k. 5% of 120k is £500 per month for interest on the mortgage. Add in the cost of insurance, risk of void rental periods, and maintenance of the property, you start to understand that BTL is hugely overvalued at the moment... It requires ongoing growth in the capital values of houses to break even, let alone provide a positive return.

If house prices were to fall out of bed, or rents to increase substantially, it may again become a good investment - but the wealth of unsophisticated investors buying up property seems to suggest it will all end in tears at some point. It seems you want to invest for 2-3 years to buy a house, not 18 years to provide for your retirement. If you adjust your period of investment to 18 years, then you can afford to take some risks in the pursuit of higher returns - the probablility investments being worth less in 18 years is significantly less than that over 2-3 years.

Hope this provides some food for thought,

Regards, Chris