What to do with inheritance?

Linton

Might you really need a £42K lump sum "as and when"? If not what you might consider is a "ladder" whereby you keep £7K for "as & when", put £7K into a 1 year fixed rate account, £7K into a 2 year account ... and £7K into a 5 year account.  Then each year you will have access to £7K + interest which you could spend or put into another 5 year account at the best rate then available. In this way you should be able to get access to the best savings rates available and yet have some of the money available on a regular basis.

Another good option would be to pay extra into your pension.

penners324

I'd definitely be increasing pension contributions significantly with £100k windfall like that. It's basically investing in stocks and shares in a tax wrapper and locked until your 55+

DiggerUK

A bitter sweet time for you, I hope your keeping well after what has happened.

Most 25 year olds would give their right arm to be mortgage free....why are you only paying the mortgage down by a small amount every year. If you can clear the mortgage do so now, it will give you a better cash flow to do other things with and a mortgage free home is the most secure asset you will ever own..._

steampowered

Sorry to hear about your loss.

As you are young, you need to have a plan for looking after this money for the long term. Over the long term stocks & shares investments are absolutely the way to go. Don't keep the money in a savings account or in premium bonds as that will simply mean losing money to inflation each year.

It's worth investing a bit of time reading about investment. I would recommend the following:
- First, keep an emergency fund sufficient to cover 3 months of expenses in a savings account. Make sure that is separate from your current account as you don't want to be tempted to dip into it for day-to-day expenditure.

- Second, now is the time to look at your pension planning. You might not have done this before - it is really important to start early. Pensions are the most effective way to save for retirement because you can get employer matched contributions and tax relief on top of what you put into the pension. Have a play around with https://www.hl.co.uk/pensions/pension-calculator. If you are setting yourself up for poverty in retirement, you should use a chunk of this money to boost your pension contributions.

- Third, invest as much as possible in a stocks & shares ISA. 

- Fourth, use a bit of the money on yourself! You could plan a nice holiday, or fund an education course.

- Fifth, anything else. One option is to overpay the mortgage. Another option is to invest the rest in a standard stocks & shares account, moving another £20k of it into your stocks & shares ISA next tax year. Remember that the average return on stocks & shares is 7-8% per year, which will likely vastly exceed the interest rate on your mortgage.

burner03

1. Pay off any non mortgage debt 
2. Max out annual pension contribution for a few years
3. £20k into S&S ISA for a few years 
4. Keep rest in savings ladder