General Advice Needed

Wilkins

Ljubica wrote: »

In answer to Wilkins - let's say in excess of £100,000 but less than £200,000. Present financial situation - no job, no benefits (bit of a non person in fact) - just a small pension that I took at 55. I own my house outright - it was originally owned jointly with my ex partner but I bought him out when we split and the mortgage I took for this was paid off when I was still working full time. I have no debts but no other savings either apart from the inheritance.

Since you are risk-averse and not experienced in handling large sums, then in the short term I think you should stick to cash while you think things through. Use the MSE main site (Banking and Saving tab) to track down the best savings deals in the following way (there's lots of good info as well):


1) set up a cash ISA using your maximum yearly allowance and get ready to do another in the next financial year;


2) park some of the money (perhaps 20%) into an instant access account at the best rate you can find;


3) park the rest into 1, 2 & 3 year term deposits (this will stop you redeploying it too quickly) at good rates;


4) ensure that you do not put more than £85,000 (and preferably much less) into any one institution (check the affiliations carefully);


Your money will erode through inflation, for sure (though not that quickly), but you will buy time to learn about finance and decide how to invest for the long term.


Please understand that property is fairly high risk and that some kind of passive equity based investment (since you can commit much smaller sums to it) is almost certainly going to be safer and much less hassle in the long run.

Archergirl

Don't forget to enjoy some of it, get somethings you have always wanted and have a nice holiday.

BobQ

You can get some general views about your options on here but you really cannot rely on them being right for your situation. If you really do not want to take any risk with any of the money then your options are largely, maximum use of ISAs and spreading the money over say savings accounts, whichever give you the best interest below the protected £85K per institution level.


Premium Bonds are not such a great deal, the value of thecapital falls with inflation but capital is at least safe in money terms. Return is not guaranteed, and unless you pay higher rate tax it is not a good deal.


Did you speak to an independent FA or just a FA tied to a bank? If the latter consider trying a real IFA. But little point if you want no risk at all.


You can put some of it into cash accounts and take a little risk. This does not mean buying shares in high risk ventures or even individual shares, it could simply mean investing in low risk investments like gilts and funds that spread investments in a range of shares. But if that bothers you, just put it in the banks.

Tuesday_Tenor

Your situation is similar to mine: bit of a non-person(!) as pay no tax (below income threshold) and claim no benefits, after giving up professional work to care for parents, now deceased. Inherited a similar amount 2 years ago. I could take a small pension next month at 55, but have chosen to work very part-time instead. Will take this, and another better pension, at 60. State pension won't kick in until I'm 66. Own house outright, but needs renovations. Single, no kids. No longer run a car.

Had no debts, but only really started saving in my 40s; had some before inheritance, but not masses. Risk averse. Pretty switched on re finances/ISAs etc in general, and had used MSE Savings Guides a lot. Tend to glaze over when it comes to other investments, though.

You say you're separated but not divorced. Does 'legally-separated' mean that all financial matters have been settled on a 'clean break' basis? If not, be aware that your ex-husband might have a claim on your new assets (as indeed you could have on any such new assets of his). The very first thing I would do is get properly divorced.

You (and I) are in an enviable position. You don't want to 'fritter' it, but you actually have the funds to do almost anything you want! As you have no children, you can regard your house as your investment for long-term care costs, if needed, so you don't have to reserve any of your inheritance for that. (Hopefully won't be needed anyway!).

The next thing I would do is think about funds you want to 'ring-fence' for particular things. E.g. Will you want a new car, both now and in 10 yars time? Do you want to move, or renovate your house, or to travel, or start a business, or re-train ... These plans will influence how much you can 'tie-up' and how much you need accessible, and when.

I'm intending to use about 15% of my inheritance on major house renovations, and 5% on major travels. (After 2 years, these haven't been started yet, so are still in the figures below). Too many friends, acquaintances and former colleagues have died in their 50s/60s for me to not want to use some of it for myelf in the near future. You can't take it with you whe you die, or enjoy some things if your health or senses let you down!

My low level of income from work (or potentially pension) allow me to live frugally, and I'm VERY slowly using my inheritance to pay for extras like holidays. I'm using up more than the interest earned, but not much more. So the capital is decreasing, but very slowly. I don't regard this as frittering. I keep detailed accounts, and know exactly what it's been spent on.

What I did with my inheritance was very much along the lines of Wilkins' advice, and each year I move more into tax-free ISAs. I don't ever expect to be in the tax-paying bracket again, but who knows, if I win the Premium Bonds, I might be!

So what I did, in approx percentages:

(a) 40% is in instant access savings accounts/cash ISAs.
I'm expecting to use half of this for major renovations and travels, but it's still there at the moment! If you don't have immediate plans, you could put more in (b) instead.

(b) 35% is in fixed-term accounts (sometimes called 'bonds'), and fixed-term cash ISAs, maturing after 1,2,3 and 5 years. You can get a better return for committing to the term. [I still have a Coventry BS 5-yr ISA paying 5% - way hay, those were the days!].

Over time (a) will get used up, and as elements of (b) mature they get transferred to (a).

(c) 20% in Premium Bonds. For the long-term. My family's experience is that PBs are worth holding long-term. Prizes negligible some years, but the odd £500 and £1000 over time. [I wouldn't use PBs if these were my ONLY savings, or for short-term!].

d) 1% is invested in a local renewable energy project. Could be a risk, but at present is paying great returns. Invested, but is something I would almost have donated to outright anyway.

e) 1% was given to a friend when her husband died as she was in financial difficulties yet really needed more time off work. She needed it more than I did. In general, don't loan to friends and family: too many stories of people unwilling/unable to repay. Only gift with no strings attached, if you can afford to.

f) 3% is invested in a Stocks and Shares ISA. I don't have the inclination or interest in getting to undertand the markets, so have done this through a bank which has particular 'ethical' funds to chose from. This was the sort of figure I was prepared to take more of a risk on, for the very long-term. I don't read or understand all the regular updates they send me, but it seems to be doing very well. I shall only really get interested when I'm considering when to cash it in (10-20 years time).
I'm not adding to this; it's the maximum I would put into something I don't have the ability/inclination to understand, but in theory should yield better returns!

That's my position. The high-risk investors will say 'how boring!'.
But this is what suits me and my needs.
Hope helpful in giving some things to think about.

atush

It sounds to me like it is enough to go to an IFA for advice, but for the short term post 12 sounds liike a plan (but I 'd go for oneyear deposits not 2/3 as that would tie the money up for too long if you want to make changes/invest. You can find a local IFA thru Unbiased.co.uk if you don't have a recommendation. Stay away from your bank when looking for advice.

Now, further clarification. You say no benefits, didn't you claim Carer's allowance when looking after your dad after giving up work? Why not if you didn't?

Will you return to work, even part time? not just for a small income but for personal reasons like stimulation? And you could invest your salary into a new pension. Plus you aren't really very old yet, are you.

Your small pension, does it cover all your current outgoings? Is it indexed or set?

Whatever you enbd up doing, I would not invest all of it in a BTL property. All your eggs in one basket etc. Also carries a large risk for a risk averse person.

I would also not leave it 100% in cash, as this too is risky in that your money will not beat inflation or even meet it after tax- which means the buying power will slowly erode over time. Extremely important if your small pension isn't indexed. So I would invest a portion of it, perhaps as little as 25% or perhaps up to 50.

But investments aren't all the same so i'd steer clear of gold, and single shares. If income is what you need, i'd look at a range of income funds and investment trusts that have paid a stable and Rising income over decades. AS it doesn't matter as much in the short term if the price of the funds rises or falls as long as the dividend paid is stable and rising each year.