Best investment for compensation award

planetcat

Hi everyone, my son is about to recieve £140,000 in compensation and has no idea what to do with it. He is 19 and still lives at home but is unsure whether he should invest in a property or just put it all in a Personal Injury Trust. I realise that there is no such thing as a safe bet but does anyone have any advice as to the most sensible long term investment for this money? He currently works part time and may, at some point, be unable to work which would make the PI Trust a better option as he would still be able to claim benefits.
Any advice or thoughts on this would be appreciated.
Many thanks

opinions4u

A single property exposes him to a massive risk. All eggs in one basket etc.

I'd suggest he sees an IFA who wil weigh up his benefits situation together with his current and future financial needs and tax status.

www.unbiased.co.uk

juicyjude

Good suggestion. With that sum of money and such a young age he really needs professional advice from an IFA.

cathsmith38

Further to my original post my son has seen an IFA on three occasions now. His plan now is to invest £60,000 in a property and a proportion of whats left in the stock market. The IFA has been very patient and explained the prospects thoroughly and (I believe)fairly. My son has been assessed as a balanced investor and on the basis of this, has recommended investments which are long term and relatively safe.
I suppose my reservations are that this is a once in a lifetime opportunity for my son to have this amount of money and, having little knowledge of the stock market, I'm abit frightened that he will lose it all!
I do realise that no-one can give any guarantee that he won't lose his money but I suppose that I would welcome the thoughts of people perhaps more experienced than myself.
The other issue which is causing me concern is that my sons solicitor who has dealt with his compensation case has been hanging on to the money since July and is quite insistent that he put it in a Personal Injury Trust. He doesnt want to do this and I feel that, as its his money, he should be able to choose. But I wonder if she knows something I don't!!!
Any thoughts would be very welcome
Many thanks

Annisele

Depending on your son's state of health, and likely need to claim benefits in future, a Personal Injury Trust might be a very good idea (but then again it might not - it depends!). The rules surrounding PI trusts have relaxed a little; I know that they used to be ridiculously inflexible but my knowledge on them is a bit out of date.

If you were being very cynical you could think that the solicitor has an eye to the fees he might collect for managing the PI trust - but OTOH (in some circumstances) they are very valuable when they mean people can claim benefits they couldn't otherwise have. If you're not sure why the solicitor is so insistent about the trust, and you wonder if he knows something you don't - ask him what it is! He might well clarify his thinking for your son, and help him to decide.

I'm always a bit concerned by comments like "assessed as balanced" - can he say, in his own words, what he thinks that means? If he lost 20% of his investments in a year, would that send him into a panic?

cathsmith38

Thank you so much for taking the time to reply.
My son suffered a head injury which has affected some of his cognitive abilities but he has still managed to achive 10 GCSE's and 2 A levels so he is certainly able to function. The solicitor, I think, is overly cautious in terms of his vulnerability and is also convinced that a PI trust is the better option due to the benefits situation. However, my son doesnt claim any benefits at the moment and doesnt intend to in the near future. He wants to work.
I must admit, I had similar thoughts in terms of cynicism! I also realise that, whilst the money has been sat in the solicitors bank account it has been gaining interest - none of which my son will see!
The IFA assessed him as balanced after a series of psychmetric tests and has recommended a portfolio of investments which can be classed as low-medium risk. As I say, I have no experience of this kind of investing so am reliant on the IFA's advice. My son likes the idea that, in perhaps 10-15 years he is still llikely to have some of his compensation money through investing in long terms funds.
I can see that it makes sense I suppose. If he stuck it all in a bank account the interest rates would not be very good and of course banks are not always the safe place they were once considered are they?

dunstonh

I have had to get some trusts unwound over the years as they proved unnecessary as the person involved was more than capable of making the decisions for themselves. It has made me a little cynical of the reasons why they were put in trust in the first place. However, it plays it safe. i.e. the solicitor cant really get it wrong if they recommend the trust. Whereas they could potentially leave themselves open to future action if they dont recommend it (although they can recommend it and you overrule them). It covers their backside.

banks are not always the safe place they were once considered are they?

Stick to a high street brand and they are just as safe. The Govt effectively said it would not let a UK bank fail and its actions confirmed that. Of course it doesnt mean it wouldnt act the same way in future but the damage of a failed bank is greater than one rescued.

That said, bank savings accounts for long term are not realistic. You replace investment risk with inflation risk and shortfall risk (low returns not hitting targets for growth or future income).

Baz_2

The solictor must pay you the interest they earn on clients money. However, if it is in a low interest bearing account then that may not be much. Do request that you are paid the interest earned on it.

cathsmith38

I didnt realise that we could request any interest made by the solicitor! Thank you for that!