What to do with inheritance money?

Newly_retired

I would start by setting up an emergency fund as it sounds like you do not have one. Say, the equivalent of 3 or maybe 6 months salaries/wages. Do you both work?
If you have not yet used your ISA allowance, do so quickly, then you can put both this year's and next year's allowance in a cash ISA for each of you, assuming you are both tax payers. That's around £20+K.
You can choose between instant access, for emergencies, but tempting to spend, or a fixed rate deal for 1,2,3 or more years. Use kazza's list on the ISA board for the best deals.
It all depends what else you decide to do.
An inexpensive but reliable second hand low mileage car could be a worthwhile purchase in your circumstances.
A £500 holiday is not unreasonable.
What does your FIL have in mind for you? As he thinks you need it now it could be worth talking it over with him.
Do not go to a Financial Adviser at your bank as their task is to sell you their own "products". A good Independent FA will do a full fact find and determine your level of risk.
I get the feeling ( I may be wrong) that you would not want to take risks with this money, though there are all sorts of risks inherent in any decisions.
Having no pension provision feels uncomfortable ( = risky)to me. Employers are going to be obliged to offer this in the future and if the employer makes a contribution, this is worth having.
If this is not in the offing for you then I would still want to look into a pension as your contributions into a pension will save you some income tax.
As far as your house is concerned, by all means consider using the money to extend or move to a bigger one but do it because you need to, not because you consider it a good investment. It may be, it may not. When you eventually sell your property if it is your main residence you will not have to pay capital gains tax.
Finally make sure that you will not be likely to need to claim Benefits in the foreseeable future. (Any likelihood of redundancy?) Your capital will, quite rightly, prevent you from being eligible for most means-tested benefits. Your house won't, but if you should fall on hard times, do you want all your capital to be tied up in a house?
Lots to think about here.

JuniorSherlock

Thanks very much. Just to clarify, my husband doesn't want a new car, just a decent second hand one for around £3/4k. No trips to Florida, we were thinking an Autumn half term break in Europe. We are not big spenders, hence the lack of debts. Perhaps we are more cautious (stingy?) than most and I really want to make sure that we make the most of this financial gift and aren't left in dire straits once we both hit retirement age as neither of us fancies working until we are 70.

JuniorSherlock

Newly_retired wrote: »

I would start by setting up an emergency fund as it sounds like you do not have one. Say, the equivalent of 3 or maybe 6 months salaries/wages. Do you both work?
If you have not yet used your ISA allowance, do so quickly, then you can put both this year's and next year's allowance in a cash ISA for each of you, assuming you are both tax payers. That's around £20+K.

Yes we do both have ISAs with a couple of grand in both for emergences.

I get the feeling ( I may be wrong) that you would not want to take risks with this money, though there are all sorts of risks inherent in any decisions.
Having no pension provision feels uncomfortable ( = risky)to me. Employers are going to be obliged to offer this in the future and if the employer makes a contribution, this is worth having.
If this is not in the offing for you then I would still want to look into a pension as your contributions into a pension will save you some income tax.
As far as your house is concerned, by all means consider using the money to extend or move to a bigger one but do it because you need to, not because you consider it a good investment. It may be, it may not. When you eventually sell your property if it is your main residence you will not have to pay capital gains tax.
Finally make sure that you will not be likely to need to claim Benefits in the foreseeable future. (Any likelihood of redundancy?) Your capital will, quite rightly, prevent you from being eligible for most means-tested benefits. Your house won't, but if you should fall on hard times, do you want all your capital to be tied up in a house?
Lots to think about here.

I am self employed and my husband works as a truck driver. No pensions with either and no chance of contributions on either side. Yes redundancy is always a threat as is my work drying up.

Yes lots to think about, thanks for your comments.

cte1111

If it were me, I'd spend £5k max on a new (second hand) car, put £5k in a cash ISA so you've got a rainy day fund, then use the rest to reduce your mortgage.

With the spare money each month (from reducing the mortgage) pay into stakeholder pensions and / or paying off the remainder of the mortgage.

JuniorSherlock

Does anyone know when employers will be forced to contribute to a pension or provide a pension scheme as we've been waiting to hear about this for some time. If we do set up some kind of pension provision now and then in the future employers have to make pension provisions for employees, could my husband ask that it be paid into his existing pension or would he need to set up a new one with his employers?

gadgetmind

JuniorSherlock wrote: »

It's a small 3 bed and in time it will be insufficient for our 2 children as the third just about fits in a very small 3rd bedroom. Which is why my husband is also considering the option of using the money to buy a larger house.

You may also like to consider extending/improving your current house. This could be either to avoid having to move, or to boost value. Yes, it's mess and disturbance, but this is why people are prepared to pay more to have the work done before they buy.

Maybe this isn't an option, but it's worth speaking to a local estate agent (or three!) telling them you are thinking or selling, and when they come around ask what's the most cost effective way to add value. Then speak to a few builders.

Even if you think the mess is too much, getting planning permission in place, drawings done, and the job costed, can add value for very little outlay.

JohnRo

A new car is an extravagance given the modest sum involved. I'd look to fully utilise both annual cash ISA allowances at a minimum and put the rest in the highest interest account with easy access.

An IFA despite the description is not so much a financial adviser as an investment adviser looking for a living. I wouldn't expect from what you've said that a speculative punt for financial gain is a high priority so perhaps seeing an IFA really shouldn't be either.

Maybe use part of your stocks and shares ISA allowance to open a popular monthly high income fund from Invesco or similar and drip feed into it over the months with a small regular deposit that lets you at least feel some regular income benefit from having the investment while hopefully preserving most or all of the capital deposited. As the capital builds over time the return will become increasingly significant, all other things being equal, and might then give you the appetite for further investment later.

The problem I have with my investments is that while it's very reassuring to see them doing well and I'm more than happy with the IFA advice and fee I pay. I also don't feel like I get any direct benefit from them either, other than knowing the investment pot is there and watching the numbers grow. While that's reassuring, it doesn't help pay the bills or afford any extras and there is always the concern it can just as easily shrink again.

Some people here seem to imply that using an IFA is for those too stupid or lazy to do it themselves which is a load of arrogant crap to be honest. There's a lot to be said for DIY investment but there's also a significant time and effort requirement to consider and ongoing research needed to keep on top of a well managed portfolio.

I think you'd do better to focus on saving and careful, selective spending for now, rather that investing. Given there is still more to come later from the in-laws perhaps then will be the time to consider longer term investment options.

just my 1½ cents..

cte1111

JuniorSherlock wrote: »

Does anyone know when employers will be forced to contribute to a pension or provide a pension scheme as we've been waiting to hear about this for some time. If we do set up some kind of pension provision now and then in the future employers have to make pension provisions for employees, could my husband ask that it be paid into his existing pension or would he need to set up a new one with his employers?

I've not heard about pension contributions by employers being made compulsory.

On your second question, employers are unlikely to contribute to an existing pension plan that has nothing to do with them, however there is no harm in having more than one pension IMHO. In fact, there is an argument for having your pension spread across different providers, e.g. not having all your eggs in one basket. I think currently you are aware that you need a pension but are prevaricating. Unless you are expecting to become a higher rate tax payer in the future, then you should start contributing to one, as the problem is only going to get worse.

cte1111

Just had a quick google and read this about compulsory pension schemes:
The Pension Act 2008 has slipped under the radar of many employers but is has the potential of adding significantly to costs. It introduces compulsory pension provision which means that from 2012, employers will need to automatically enrol most of their staff in a pension scheme and pay a contribution by 2014 of at least 3%.

http://www.bfm.org.uk/trade/news/news/compulsory_pension_contributions.html

I'd still stick with my earlier advice though about contributing to a personal pension as you are likely to be able to afford to do both.

Ifts

JuniorSherlock wrote: »

The total sum is £65k. We have a mortgage of around £75k on a house that we bought for £121,500 (we used the sum we had saved from a previous sale as a deposit). Our mortgage deal is only a year old and is a good one, so our mortgage repayments are just around £450.

Sorry if you have given the answers already, I couldn't see them.

What type of mortgage is it and what rate are you paying on your mortgage?

Would there be an early repayment charge if you were to pay it off early?