What to do with large inheritance?

sc00by-d00

Hi all

This is my first post so please be gentle ;-)

My uncle passed away in South Africa last year. My brother and I were lucky enough to inherit his entire estate over there. As I am very fortunate to be in this situation I would obviously like to ensure that I do not waste this inheritance. My share of the Estate is as follows:

1. A house in South Africa worth approximately £120,000 – which is currently rented out for £5000 per annum.

2. A cash total of approximately £600,000 deposited across 3 South African banks in high interest Fixed Deposit accounts – earning 8.5% rate of interest per year

3. Shares worth about £1,200,000 – all in the same South African company - which produce dividends of approximately £30,000 per annum.

My current situation is as follows:

I live and work in the UK. I am 37, single, no kids, but do hope to have kids in the future. I currently own my own home, worth around £500,000 and no mortgage. I also own a BTL property (worth £250,000) which also has no mortgage and I get about £1,200 per month income from this.

I have about £50,000 saved between my Cash and S&S ISAs. I also have about £35,000 in an instant access savings account in case of redundancy or emergencies. My annual salary is around the £50,000 mark. So before the inheritance I was leading a comfortable life and had not been depriving myself of anything.

Although I was born in the UK my family emigrated to South Africa and I lived there for 12 years so I do know the lay of the land quite well but have no family there now apart from my brother.

I have been thinking of how best to manage this inheritance and have done a lot of reading on this forum and other and have decided on the following:

1. To keep the house in South Africa and continue renting it out. My brother will collect the rent on my behalf and will also manage the tenants.

2. I am tempted to leave the £600,000 in the banks over there earning good interest. I was also tempted to bring it over here and use it to buy another property or 2 but not sure that is a good idea. I already have one BTL over here and they can be a headache. With 2 properties here and one in South Africa, I’m thinking that perhaps I have enough invested in bricks and mortar for now??

3. I have also decided to diversify by selling some of the shares and investing in other South African companies.

I’m sure most of you will probably suggest that I go and see an IFA and I am looking into it but I am curious as to what other people on here would do if they were in my position. Maybe you guys can make suggestions that I have not already thought about.

JoeCrystal

Hmm... Personally, if it would me and I have no intention in living in South Africa at all, I would sell everything and bring the money back to UK into pounds. You don't know what the currency are like in ten years time, so it is quite a bit of currency risk.

sc00by-d00

JoeCrystal wrote: »

Hmm... Personally, if it would me and I have no intention in living in South Africa at all, I would sell everything and bring the money back to UK into pounds. You don't know what the currency are like in ten years time, so it is quite a bit of currency risk.

but what would you do with it if you did bring it all back to the UK?

Archi_Bald

What are your pension arrangements?

sc00by-d00

Archi_Bald wrote: »

What are your pension arrangements?

Ahh, forgot about Pensions. I made a decision about 10 years ago not to take out a Personal Pension as I wasn't very confident about them. Didn't like the idea of saving money only to be told that I could only take out 25% of it in one go when I hit retirement. I therefore put the money into the BTL (hence why I have no outstanding mortgages) and ISAs. As it stands I intend to max out my S&S ISAs every year. Was hoping to use that and the BTL as my Pension when I retire. Now that I have this inheritance I can obviously invest more for retirement - however, I am still very wary of starting a Pension.

Haven't got a workplace Pension either as I work on a contract basis.

JustLikeThat

No advice, just concern for your brother who seems to have lived near enough to your deceased relative to now be considered as a future rent collector, but did not inherit...

sc00by-d00

JustLikeThat wrote: »

No advice, just concern for your brother who seems to have lived near enough to your deceased relative to now be considered as a future rent collector, but did not inherit...

He did actually inherit more than I did. I had no qualms about that as he used to help my uncle out since he lived nearby. He also runs a very successful business and we are very close. I'm not worried about him trying to nick £5000.

Archi_Bald

If I were you, I would use literally all of the inheritance to make provisions for retirement.

Your reason for not wanting a pension sound irrational - - when you retire, you won't need all of your money in one go, will you. The whole point about a pension is that you have a steady income in old age, so you can live comfortably for the rest of your life.

You can of course make other provisions (property, shares etc), but you are foregoing tax relief, probably at 40%, by not putting at least some of your money into a SIPP.

sc00by-d00

Archi_Bald wrote: »

If I were you, I would use literally all of the inheritance to make provisions for retirement.

Your reason for not wanting a pension sound irrational - - when you retire, you won't need all of your money in one go, will you. The whole point about a pension is that you have a steady income in old age, so you can live comfortably for the rest of your life.

You can of course make other provisions (property, shares etc), but you are foregoing tax relief, probably at 40%, by not putting at least some of your money into a SIPP.

the issue of 25% is only part of the reason for my not wanting to take a pension. I guess I'm just much more comfortable controlling my own money rather than being forced into buying an annuity although I understand the concept behind it. Would rather ration my income myself.

In addition, as I contract through my own limited company if I did start to contribute to a SIPP, I would not have an employer to make additional contributions. Any contributions my limited company would make would be money out of my left pocket and into my right pocket so to speak.

I just feel that investing my inheritance over a good spread of income producing assets such as BTLs, Stocks & Shares, Cash Deposit and ISAs would provide me with sustenance in old age which I have control over rather than a Pension (although I am aware that you can control what your Pension is invested in).

pat_cashmoney

if it were me, i'd retire on all that right away and have an easy life

atush

Ok, first off my thought was diversify that 1.2M in one company Way too risky. and 2.5% isn't a great yield, but not awful.

You are getting a better yield on the Uk property than the SA one.

All those assets (ie 2M) re in the SA currency, which leans you are suffering currency risk. I'd be inclined to sell some of the stock, then move it to GBP based stock.

Is there a double taxation agreement with SA/UK? Have you considered some tax advice?

you have the bulk of your money tied up in SA, which may do great in future. But if the economy tanks or there are other major problems, having so much in one country/Economy is Very risky indeed. So i'd not only diversify companies, i'd diversify countries. Doesn't have to be UK only, could be anywhere else you like (or better yet Global).

finally:

Ahh, forgot about Pensions. I made a decision about 10 years ago not to take out a Personal Pension as I wasn't very confident about them. Didn't like the idea of saving money only to be told that I could only take out 25% of it in one go when I hit retirement.

This makes NO SENSE whatsoever. You are in BTL in 2 countries- risky. you have loads of assets in another currency, risky. So you seem to have an appetite for risk, but are afraid of personal pensions? Which are ring fenced, and only as risky as the investments you put in them? And which will only cost you 60 for each 100 you put in as you pay HR tax and get relief? Amazing.'

I'd be putting some of that money in pensions.

If you decided to put some of your personal wealth in an annuity (enough to pay you 20K per year) you'd have access to all of your pension pot. But 75% would be subject to tax at your highest rate at the time.