Inheritance

granddaughter1980s

Hi all,
I've recently inherited the low end of 6 figures and am not entirely sure what to do with it, having only had 4 figure savings prior to this. I'm almost 40, have a mortgaged house and a partner but no dependents. I plan to put some of it into paying off the mortgage (there's not enough to do the whole thing) but would be keen to get opinions on what to do with the rest. I have a fairly good pension with work but am unsure whether to get a second private one, or whether to just consistently drip feed it into ISAs for the next few years. I'm less keen on the portfolio approach simply because i'm quite risk averse and am not keen on the idea of it going down, rather than up.

But as I say, beyond a basic savings account I've not ever had this amount of money so am slightly ignorant about what to do with it! Any thoughts/suggestions much appreciated!

Keep_pedalling

A couple of points. Is the house solely in your name or joint with your partner? If the latter and you are not married or in a civil partnership make sure you get a deed of trust drawn up to reflect the additional money you are putting in.

Although you are risk adverse and don’t want to see the value of your inheritance fall, holding large sums of money in cash over the long term will actually achieve that because inflation will erode the real value of your savings, and certainly anything put in a pension should be invested as you won’t be able to touch it for 15 years or more.

Linton

The best way of managing your money depends on:
1) What do you want the money for?
2) When will you want to spend it?

Note that you can split the money into several tranches with different answers to (1) and (2).  You can change your mind later if your circumstances change unless you put it all into a pension, though this will probably take some years.

Without this information it is impossible to say how to manage it in the long tern to best effect with minimum risk. The different tranches will probably need to be managed in different ways.  In the short term I suggest you put the inheritance somewhere fairly accessible (eg an instant access or possibly 1 yar savings account)  with a reasonable rate of interest whilst you decide.  Make sure you dont have more than £85K with any one bank so spread it over 2 to ensure it is fully covered by the FSCS guarantee.  You will lose value to inflation so this is unlikely to be the best permanent solution.

Albermarle

 I have a fairly good pension with work but am unsure whether to get a second private one, or whether to just consistently drip feed it into ISAs for the next few years.

Can you explain what you mean by 'fairly good' ? One simple action maybe to just add more to this pension. Not the whole £100K though . In any case there are limits as to how much you can add to a pension each tax year.

There are different types of ISA. I presume from the rest of your post, you mean cash ISA's ( saving account)?

I'm less keen on the portfolio approach simply because i'm quite risk averse and am not keen on the idea of it going down, rather than up.

Of course nobody invests and hopes it goes down! Historically though the long term trend is up, even if in the short/medium term it can go up and down. Often taking no risks is risky in itself. Generally now you have more money to play with it would pay to get better informed about personal finance. Asking your question on this forum is a good start!

granddaughter1980s

These are great replies, thanks so much guys! Some generic additional information.

I'm thinking of splitting it into three lots with one being for instant access to allow me to pay for much needed home upgrades, holidays, etc. (not been anywhere for about 4 years!). One being a long term pot which I don't want to touch which could just sit in the background working for me, rather than doing nothing. And the third potentially contributing towards mortgage payments etc.

My main problem is the working for me pot. I'm hunting for fixed rate cash ISAs at the moment to just dump a bunch in for 2-5 years at least. I currently have no ISAs open so my allowance is free but everything seems to be sitting around the 2% mark, anything I find higher than that is with places like the State Bank of India, which I must confess I know nothing about...again, because I'm not enormously financially savvy my instinct is to trust high street UK banks like HSBC, santander, halifax, etc. over online ones I've not heard of.

Any more thoughts much appreciated!

bostonerimus

What type of pension do you have ie the old final salary type or the define contribution one? and how much do you currently put into it?

Do you have any debt other than the mortgage?

You are right to avoid online high interest rate offers.

jimjames

bostonerimus said:

You are right to avoid online high interest rate offers.

While it's correct to be cautious the providers listed by MSE that have full FSCS protection are not in the same league as scams even if their names are not widely known.

p00hsticks

granddaughter1980s said:

One being a long term pot which I don't want to touch which could just sit in the background working for me, rather than doing nothing.

My main problem is the working for me pot. I'm hunting for fixed rate cash ISAs at the moment to just dump a bunch in for 2-5 years at least.

I know you've said that investments frighten you as you're not comfortable with the idea of them going down rather than up, but in order to work for you, a long term pot really needs to be in some sort of funds, stocks, shares etc. A cash ISA paying 2-3% in a time when inflation is over 10% is losing you money just as surely as a dip in the stock markets would, but over a long period (say ten years +) historical data shows that mainstream investments will generally perform much better than cash savings.

granddaughter1980s

p00hsticks said:

granddaughter1980s said:

One being a long term pot which I don't want to touch which could just sit in the background working for me, rather than doing nothing.

My main problem is the working for me pot. I'm hunting for fixed rate cash ISAs at the moment to just dump a bunch in for 2-5 years at least.

I know you've said that investments frighten you as you're not comfortable with the idea of them going down rather than up, but in order to work for you, a long term pot really needs to be in some sort of funds, stocks, shares etc. A cash ISA paying 2-3% in a time when inflation is over 10% is losing you money just as surely as a dip in the stock markets would, but over a long period (say ten years +) historical data shows that mainstream investments will generally perform much better than cash savings.

Thanks p00hsticks, that does make me feel slightly less like it's going to be a more sensible move overall for at least some of it! but is there a way to go for a newbie? Would you recommend a basic stocks and shares ISA or would you go down the investment firm route and have someone 'professional' do something with it? I definitely have no headspace right now for learning how the stockmarket really works so wouldn't risk going it alone and buying random things but do I go the route of something like a vanguard index linked fund?

and no, no other major debt apart from the mortgage. credit cards all cleared and barely put anything on them and no major loans, student debt paid off etc.

pension is the USS one from a UK university so it's actually gone through a bunch of upheaval and isn't as good as it used to be but its a lump sum and regular payments at retirement and I can add to it although i don't know whether that would be as good as just getting an entirely separate one...

sammyjammy

pension is the USS one from a UK university so it's actually gone through a bunch of upheaval and isn't as good as it used to be but its a lump sum and regular payments at retirement and I can add to it although i don't know whether that would be as good as just getting an entirely separate one...

it won't be as good it will be better!

Alice_Holt

granddaughter1980s said:

p00hsticks said:

granddaughter1980s said:

One being a long term pot which I don't want to touch which could just sit in the background working for me, rather than doing nothing.

My main problem is the working for me pot. I'm hunting for fixed rate cash ISAs at the moment to just dump a bunch in for 2-5 years at least.

I know you've said that investments frighten you as you're not comfortable with the idea of them going down rather than up, but in order to work for you, a long term pot really needs to be in some sort of funds, stocks, shares etc. A cash ISA paying 2-3% in a time when inflation is over 10% is losing you money just as surely as a dip in the stock markets would, but over a long period (say ten years +) historical data shows that mainstream investments will generally perform much better than cash savings.

Thanks p00hsticks, that does make me feel slightly less like it's going to be a more sensible move overall for at least some of it! but is there a way to go for a newbie? Would you recommend a basic stocks and shares ISA or would you go down the investment firm route and have someone 'professional' do something with it... or do I go the route of something like a vanguard index linked fund?

      I'd chose a global tracker fund (such as Vanguard Life Strategy 80 using the Vanguard ISA platform) and drip feed your contributions into it monthly. That removes some risks such as:
i) Picking a more expensive active fund that under performs the market;
ii) Inflation eroding the real value of cash holdings;
iii) Seeing a lump sum investment dipping in value during short-term market movements and panicking.

Set it up, make regular contributions, and then forget it. Come back in 10 yrs, and you might be pleasantly surprised by the outcome.   

 I'd also do similar in a Self Invested Pension Plan (SIPP) which might come in useful should you wish to retire before SPA and your occupational pension start.  Or look at AVC's in your current USS scheme, if those offer better terms / reduced management costs. 
Increasing pension contributions is particularly advantageous for 40% tax payers.   

https://www.vanguardinvestor.co.uk/

https://monevator.com/category/investing/passive-investing-investing/

https://monevator.com/how-to-retirement-plan/

Others will have their own preferences / opinions / strategies, this is mine. You should decide on the approach you feel most comfortable with, and the one you can stick with regardless of inevitable market movements.