Windfall

ScoobySnacks79_2

Hi.

I posted this in the banking forum, and it was suggested that I might get more help here, so here goes.

I know this isn't really the right place to ask this, and I will be seeking advice elsewhere, but I was wondering what other people would do.

I'm expecting a large cash payment at the end of next month. It's a settlement against my ex doctor for clinical negligence. I need to work out the most efficient way to distribute the money so that it actually works for me.

A large proportion of the money will probably be used to buy a property to live in. The rest will be used to help set up a business to earn some money.

Obviously, I will need to find somewhere to put the money initially. I'm loathe to put it all in one place, I don't think it will earn the best return that way, but I will need to have most of it immediately available.

How would people recommend dealing with this? I would instinctively think that I would need to spread it over a few accounts, but I don't know whether this is likely to adversely affect creditworthiness (I don't intend, at least initially, to borrow any money but with an eye to possible future requirements)

How would you guys deal with it?

Any advice/assistance is welcomed.

Cheers

Pincher

You already have your answer, given the indeterminate amount.


Put it in NS&I. This assumes the UK government will not go insolvent before you want your money back.


A business? B&B in the Lake District.

ScoobySnacks79_2

The amount is £500k, if that makes any difference?

bowlhead99

The highest paying accounts at the moment are high street bank current accounts with promotional deals to hook you in as a customer depositing a minimum £x per month (which can just be fed back and forth between accounts). However they all have limits on how much they'll pay reasonable interest on. Some of them are as low as 'the first £2500', others would pay up to £4k or even £20k as long as you meet their terms and conditions.

So if you are trying to deploy £50k you are right you would need to spread it over a few accounts to get the best deals (sometimes more than one account per bank to absolutely maximise the most they'll pay high interest on).

But if you're trying to deploy £500k you can use these for the first few tens of thousands but then they start to dry up. You would still want to spread it between banks because if one goes bust, the industry protection scheme won't guarantee more than £85k per institution. Unless you put it in National Savings which is government run so it's all guaranteed, rates are a bit worse than you'd get shopping around.

You'll find you can generally get higher rates by locking up the funds for longer so if you don't need all your property costs and business finance all up front you could look at 1-year or 2-year or long-notice-period accounts to lock into a better rate. Even 4 or 5-year fixed accounts could work, but accepting they have penalty charges if you cash in early and you probably would want to cash in early, given interest rates are bound to rise at some point and you might need the money in a hurry to support the business or the house.

But basically I would decide how much cash I needed in the short, medium, long term and spread my cash accordingly, to compromise between how long it was locked up, what the rate was, and how fiddly it was to operate (some of the high interest rate current accounts make you jump through more hoops than others).

Generally doesn't hurt your credit score to apply for a bunch of savings accounts or current accounts if they don't have overdraft facilities or borrowings, but to be honest if you are about to buy a house and wanted a mortgage you might want to take it easy on that just in case. But I assume you're not looking for a mortgage at the moment - given you don't have any income to support one until you can launch a business and you said you don't want debt.

The best return (i.e multiples of what you can get on risk free cash deposit) is on a portfolio of stockmarket investment based funds, ideally held in an ISA. However, that carries risk and for a relatively short timescale isn't suitable.

Only if you were looking at your planning of when you need the cash, and you realise there's realistically some left over after you've sorted your house and a business and an emergency pot for your business and personal life, then you could look a bit further at that sort of thing. But for now I would leave investments and pensions until I'd got myself settled with a property and ongoing income.

Pincher

£500k? Plenty to get started on a Buy To Let empire.


Make sure you have deductibles like mortgage interest to offset the rental income. The tax you pay if you own 100% is enough to make a grown man weep.

atush

Go ahead and buy a place to live in, but not so sure about the business.

Better to get a normal job and use the extra money for savings, pension and investments unless you have an entrepreneurial bent or a bankable idea as most new small companies go broke and there is your money down the drain.

Better to use some of it to retrain for another job.