Where to put inheritance money for 2 years

manchesterlady

Hello all and Happy Sunday,
Any advice gratefully received!

I have received £50k inheritance from my late mother's estate. I intend to put it towards a house purchase in 2 - 3 years time, putting down a large deposit using this chunk plus proceeds from the sale of my current house.

So I need to find a place to put my inheritance for the next 2-3 years, where it will be safe enough but at the same time will not actually lose value, given the rate of inflation. My current position is:

• I'm a higher rate tax payer
• Already using just over £10k of ISA allowance each year, in stocks & shares ISA
• Homeowner, already paying extra off mortgage
• Already paying substantial amounts into pension
• No debts other than mortgage

I've already consulted my IFA, who suggests using the rest of my ISA allowance via Cash ISA, and also investigating the P2P sites Zopa, Lending Works or Ratesetter as they are longest established. The best Cash ISA rate I can find right now is the Virgin 1-year fixed at 1.47%. I'm completely new to the world of P2P and really don't feel confident about using this as a vehicle, although I can understand why this is being suggested.

So my questions are:
1. Shall I just find the safest place(s) for the next 12 months and then review products/rates again? i.e. Virgin Cash ISA, Atom Bank high interest account?
2. Is it worth considering *any* investment funds that could be suitable for 2-3 years, just to try and find a decent return?
3. Is it worth me using the rest of my ISA allowance and topping up the £10k I've already put into my Old Mutual stocks & shares ISA and riding out the next couple of years?
4. I also have a little money in the Aberdeen Standard European Logistics Income fund (the sector in which the fund invests - online retail - is something I have a lot of experience in, so I chose this fund with confidence and an understanding of the long-term picture): http://www.eurologisticsincome.co.uk/eurologisticsincome/
- so I'm wondering whether it's worth putting some more into this?

Thank you in advance for your help. Hope you are all having a restful Sunday!

Linton

For a 2-3 year timeframe you should keep your money in cash. Any investments funds have a significant risk of being worth less at the end than now, at least they do if they are likely to provide a better return than cash. Though I guess adding £5K to your existing ISA portfolio may be a worthwhile punt.



Since in the overall scheme of things the interest is relatively small I would simply put it somewhere safe - (NS&I is often suggested for this) and not worry too much about the interest.

xylophone

Are you able to pay £50,000 off your current mortgage without penalty?
Is the interest rate higher than you would receive on any savings product?

manchesterlady

@xylophone - I'm already overpaying a big chunk on the mortgage each month and would rather keep the cash separate. There is a limit to how much I can pay off monthly/annually, which is another reason I'm not going down this route.

@Linton - thanks for the NS&I tip; I shall investigate!

Terry_Towelling

On the subject of inflation-proofing your cash, the only inflation you need to worry about (given what you have said) is house-price inflation. Quite how house prices will move in the next 2 - 3 years I don't know and whether that movement will be nationwide or vary by region is up for grabs.

If you want to be sure of losing nothing (except to general inflationary pressures) then getting a good return is going to require a lot of faff with high-interest current accounts (3% - 5% on relatively small balances), linked regular savers (2.25% - 5%), an easy-access saver (1.35%) with enough in it to feed the regular savers and maybe some 1, 2 or 3yr fixed rate accounts for the rest. If you don't want the faff of that, fixed rate accounts alone will give you over 2% in your timeframe - which is probably not that far away from what your mortgage rate currently is.

Sadly, Sunday isn't proving to be any more restful than any other day! - but I hope yours is.

kidmugsy

Terry_Towelling wrote: »

On the subject of inflation-proofing your cash, the only inflation you need to worry about (given what you have said) is house-price inflation. ...

A shrewd observation, sir.

Terry_Towelling wrote: »

getting a good return is going to require a lot of faff with high-interest current accounts (3% - 5% on relatively small balances), linked regular savers (2.25% - 5%), an easy-access saver (1.35%) with enough in it to feed the regular savers and maybe some 1, 2 or 3yr fixed rate accounts for the rest. If you don't want the faff of that, fixed rate accounts alone will give you over 2% in your timeframe - which is probably not that far away from what your mortgage rate currently is.

If the OP is a faffophobe and disinclined to pay more off the mortgage, a decent idea might be to buy Premium Bonds. At £50k she'll get a roughly steady stream of small monthly prizes equivalent to about 1.2% - 1.25% p.a. tax-free interest, with a tiny chance of a bigger win thrown in. It's best to buy them late in one month and cash them in early in another. For example, buy them before the end of this month and the bonds will be in the September draw.


PBs are an ns&i product and therefore about as safe as you can find.

manchesterlady

Thank you very much for all the advice. I actually checked again with my mortgage provider (Nationwide) and it looks like I actually can pay off a £20k chunk of mortgage, in addition to my current monthly overpayments, without incurring penalties. So I think I'm going to do this and then stash the rest in a safe place, as per advice.

All of the feedback was really helpful in helping me decide with a clear head - so thanks and much appreciated!