I am inheriting and need advise.

grey_gym_sock

the tax savings on S&S ISAs are minimal unless you are a higher rate tax payer or already have a lot invested. if that doesn't apply, don't pay too much attention to the "tax free" label.

that doesn't necessarily mean ignore S&S ISAs. it means the real choice is more between stocks & shares, or paying off (or reducing) the mortgage and then adding to savings accounts. if you go for S&S (or choose it for part of your money), there's nothing wrong with starting with S&S ISAs.

it depends a lot on your longer-term aims, and the likely resources available to you. e.g. are you comfortably on course to pay your mortgage off? do you have sufficient pensions set up to give you enough income in retirement? would you want to generate extra income from your new capital, as well as preserving its value?

if you keep capital on deposit, you can expect to generate very little income from it while also preserving its value. the interest is rarely much more than inflation (and currently, it's more likely less than inflation).

if you put capital in shares, you can expect gradual but significant growth on average, but occasional big drops in value. over a short time (e.g. 5 years), you could easily win or lose. over a long time (e.g 20 years), there's a good chance that you'll have gained a lot.

so it depends a lot on your aims, attitude to risk, etc.

also (as other ppl have said), on what you current mortgage rate is.

leighfire

Hi all thank you for the great responses, I'm lucky with my rate for mortgage, currently paying 1.25 above bank of England so 1.75%.

The Cheque has just gone into bank, once cleared will be stashing into savings accounts while I see whats best.
I have mine and my wife's ISA for this year to use, I note what you are saying about S&S ISA's.
Would a low risk account S&S not be worth using so i can add another £5k or so into tax free?

The Share idea sounds interesting, I already have a few here and there.

Keep up the advise, thank you

xylophone

http://www.thisismoney.co.uk/money/saving/article-1583859/Best-savings-rates-Internet-branch-50s-savings-accounts.html
If you are saving in cash then you might as well use your cash ISA allowances.

See http://www.trustnet.com/News/376068/what-you-need-to-know-about-fund-management-fees/

If you hold interest bearing securities in your stocks and shares isa, tax will be reclaimed by the provider.

No further tax is due on dividend income within the S&S ISA.

http://www.cavendishonline.co.uk/investments/our-service/
might be of interest.
Trustnet will show you whether a fund pays interest or dividends - see http://www.trustnet.com/Factsheets/Factsheet.aspx?fundCode=GTF91&univ=U&pagetype=dividends for example.

kidmugsy

That mortgage is far too good to pay off.

Another advantage of marking time for a few months in a savings account is that next May it's possible that ns&i may start issuing its Index Linked Savings Certificates again. They are a pretty good investment for protecting your purchasing power, and tax-free. A spread of them, some cash ISAs, some shares and some gold would be hard to beat.

kidmugsy

I see you did mention pensions. They can be a good investment if your own contribution is accompanied by one from an employer. With auto-enrollment coming in, it might be a good idea to hold back some money for contributing if it becomes available to either of you. Another situation when pensions are a good deal is for anyone who expects not to be a taxpayer in retirement. You could always get state pension predictions for the two of you and make an estimate of your retirement incomes.

To return to savings accounts and Cash ISAs: if you build up your cash savings to match your mortgage debt while paying you a higher interest rate than you pay on the mortgage, you have a very low risk way of generating some profit. Keep an eye on the Cambridge BS: from time to time it offers a Cash ISA that tracks BoE base rate: I opened one in early October that pays 3% p.a. above BoE for three years. Yippee!