Can I Have Advice Please Re Savings. 23 February at 1:03PM in Savings & investments 13 replies 1.4K views

AdamEast

Hello girst post here but a long time lutker!

Im getting confused in what to do for the best, with some inheritance I have received recently, and rather than confuse my already confused head further I thought it would be good to guage what other people would do in a similar situation.

A little background about me and my financial situation would probably help, and I have read many posts when thats one of the first things members ask.

Im 49 Fulltime work, paying into a standard workplace pension, and another pension thats dormant from a previous job many years ago, which I believe has about £32000 in it.

I own outright no mortgage etc my House, I have no debt at all, but 2 credit cards i use for shopping and booking holidays etc, but always pay off in full at the end of the month.

The inheritance is £150,000 and I getting confused whats the best thing to do really, I have no problem about having it tied up for a year probably maximum, aftet this time all being well I will hopefully be buying a house 50/50 with my partner, using the above money, and renting my own property out.

In my limited knowledge on these things I was thinking maybe to allocate the money in this way..

20k ISA 
85k Fixed Interst 1 year saver
45k Premium Bonds (You never know I guess)

This is probably miles off the best thing to do hence asking.

Also im getting very confused re tax etc so if anyone can give me a run down on how to go about that, it would be brilliant. (Im a standard rate tax payer)

I think that covers it all, sorry for the long post, and in advance many thanks to anyone who takes the time to reply.

Adam.

AdamEast

Ps Sorry for the many spelling mistakes im dyslexic, but im hoping its all understandable.

xylophone

and another pension thats dormant from a previous job many years ago, which I believe has about £32000 in it.

It won't be dormant - it may be deferred.

Was this  defined benefit or defined contribution?

https://www.gov.uk/pension-types#:~:text=There are 2 main types,ve worked for your employer

If you are sure that you will need access to this cash within a year, your proposed course of action would be fair enough.

You could subscribe £20,000 to an ISA now and another £20,000 on 6 April.

Savings rates here

https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.html

Savings interest and tax

https://www.gov.uk/apply-tax-free-interest-on-savings

Re being a landlord

https://www.gov.uk/renting-out-a-property

https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

TiVo_Lad

Assuming you're a basic rate tax payer and only have the £1K tax-free allowance for interest, I'd do as @xylophone suggested and get £40K of that in ISAs ASAP to shelter it from the tax man. I'd then be tempted to look at putting a chunk of it into your pension. You may have unused contributions from previous years that you can utilise to make a decent contribution there. My personal approach to an inheritance is that it's a bonus, so it you put it away you won't miss it, but it's doing some good in the long term. Keep some for rainy day money and maybe some for any house renovations or repairs that need doing (it's an investment in your home).

Don't forget a bit of "fun money" too. Something for you and those you love to enjoy, put a smile on your face and to remember the loved one who's no longer with you.

grumbler

Also, this MSE article is worth reading -

What is the personal savings allowance?

Depending on your income you possibly don't need an ISA and can do better with ordinary savings accounts.

Albermarle

Im 49 Fulltime work, paying into a standard workplace pension, and another pension thats dormant from a previous job many years ago, which I believe has about £32000 in it.

The old pension will not be dormant. If it has a pot in it, this will be invested and therefore going up and down and there will be charges. Although you are wanting to use the inheritance to buy a property, some increase in current pension contributions is nearly always a good idea ( unless of course you are already contributing a lot) As you are reading these forums regularly, you will know that a big pension pot is needed to retire early/in comfort.

20k ISA 
85k Fixed Interst 1 year saver
45k Premium Bonds (You never know I guess)

Premium bonds are tax free, as are savings in a Cash ISA. 

Otherwise you will pay tax on any interest above £1000 in a tax year.

Note that you can have a fixed interest one year cash ISA

GrubbyGirl_2

You're clearly going to exceed the £1k interest limit with this amount of money so tax will be unavoidable.  You can get £20k into an ISA this financial year and another £20k after April 6th.  If you go for a max allocation of premium bonds of £50k that leaves you £60k which you could lock away in a high interest (the best 1 year fix at the moment is 4.31% which will give you £2,586 interest.

Some people will poo poo the premium bonds because there is no guarantee you will get anything but I have had the max for over 10 years and only twice have I not got more than the set interest rate at the time and it's tax free. I still live in hope I'll win the big one at some point!   Also it's easy access you can take the money out and put it back in at ant time.  If you still don't need the money in a years time then just move some more into an ISA

MEM62

AdamEast said:

I will hopefully be buying a house 50/50 with my partner, using the above money, and renting my own property out.

I am sure you will get lots of useful advice re what to do with you money.  In respect of being a landlord, think very carefully before you take this step.  It is not at all tax efficient  as an investment.  You need to be knowledgeable and have to be committed to run it properly as a business.  It is far from the holy grail of making money and come with risks.          

Albermarle

MEM62 said:

AdamEast said:

I will hopefully be buying a house 50/50 with my partner, using the above money, and renting my own property out.

I am sure you will get lots of useful advice re what to do with you money.  In respect of being a landlord, think very carefully before you take this step.  It is not at all tax efficient  as an investment.  You need to be knowledgeable and have to be committed to run it properly as a business.  It is far from the holy grail of making money and come with risks.          

Also better if your a good DIY er and/or have some good contacts in the building/plumbing/electrical/decorating trades to get mates rates.

Bridlington1

It may be worth noting that if you have Barclays blue rewards they have a rainy day saver at 5% (£5k max) which beats any 1Y fix at the moment. The interest rate is variable though.

AdamEast

Many many thanks for all the suggestions, certainly has given me of a idea what to do.