Inheritance

chelseablue

I found out recently that I am going to inherit some money from a family member, when I say 'some money' the amount is £70,000

I am 41 and a basic rate tax payer with a mortgage that has 19 years left. I did think about sending some to the mortgage but the rate on that is 3.94% and I have a savings account that is currently 5% so thought that might not be the best option for now. 
Plus when it goes to the mortgage that's it gone and I don't think in my head I want to do that yet. 

I have a S&S ISA that I could put £20k in, would it be a good idea to just keep doing that every year until its all there? 

While it's not in an ISA please throw some ideas at me on where would be good to put it

I would like to move house and that is 6 years away so would like to grow this money as much as I can 

tacpot12

While your money isn't sheltered from tax, you will lose 20% of any interest, so it's definitely worth putting the money into an ISA.

As you think that you will need this money in 6 years, it would probably be best to save in Cash ISAs rather than a Stocks and Shares ISA where you might gain more, but you might also lose money exactly at the time you need it.

Putting £20K per year into ISAs, until it is all protected is the way to go. You might look at some of the longer term ISA products for your first couple of years. You can get 2, 3, 4 and 5 year ISA Bonds from United Trust Bank. 

p00hsticks

You don't mention employment or pensions at all ?

If you are employed it might be worth looking at whether your employer would pay more if you do, and doing that, if necessary dipping into the inheritance money to make up for the resulting drop in take-home pay. 

Or you could set up a SIPP yourself. 

If you are not likely to have a need for (some of) the money in the next twenty years or so pensions are a very tax-efficient way of 'saving' and will help ensure a comfortable retirement.   

chelseablue

tacpot12 said:

While your money isn't sheltered from tax, you will lose 20% of any interest, so it's definitely worth putting the money into an ISA.

As you think that you will need this money in 6 years, it would probably be best to save in Cash ISAs rather than a Stocks and Shares ISA where you might gain more, but you might also lose money exactly at the time you need it.

Putting £20K per year into ISAs, until it is all protected is the way to go. You might look at some of the longer term ISA products for your first couple of years. You can get 2, 3, 4 and 5 year ISA Bonds from United Trust Bank. 

Thank you, if I put £20k per year in a cash ISA for 3 years does that mean I cant invest in my S&S isa for 3 years? 

chelseablue

p00hsticks said:

You don't mention employment or pensions at all ?

If you are employed it might be worth looking at whether your employer would pay more if you do, and doing that, if necessary dipping into the inheritance money to make up for the resulting drop in take-home pay. 

Or you could set up a SIPP yourself. 

If you are not likely to have a need for (some of) the money in the next twenty years or so pensions are a very tax-efficient way of 'saving' and will help ensure a comfortable retirement.   

Thank you, Im in the emergency services so have a DB pension (I joined after they got rid of final salary pensions) where contributions are already pretty high from me and employer (no chance of them paying in more unfortunately) 

badger09

chelseablue said:

tacpot12 said:

While your money isn't sheltered from tax, you will lose 20% of any interest, so it's definitely worth putting the money into an ISA.

As you think that you will need this money in 6 years, it would probably be best to save in Cash ISAs rather than a Stocks and Shares ISA where you might gain more, but you might also lose money exactly at the time you need it.

Putting £20K per year into ISAs, until it is all protected is the way to go. You might look at some of the longer term ISA products for your first couple of years. You can get 2, 3, 4 and 5 year ISA Bonds from United Trust Bank. 

Thank you, if I put £20k per year in a cash ISA for 3 years does that mean I cant invest in my S&S isa for 3 years? 

You can pay maximum of £20k into one or more ISAs each tax year. 

5 / 6 years is about the minimum length of time regular posters would suggest for S&S investments. So you could put say this year’s & next year’s £20k into S&S & the rest into non ISA savings accounts. 

Albermarle

chelseablue said:

p00hsticks said:

You don't mention employment or pensions at all ?

If you are employed it might be worth looking at whether your employer would pay more if you do, and doing that, if necessary dipping into the inheritance money to make up for the resulting drop in take-home pay. 

Or you could set up a SIPP yourself. 

If you are not likely to have a need for (some of) the money in the next twenty years or so pensions are a very tax-efficient way of 'saving' and will help ensure a comfortable retirement.   

Thank you, Im in the emergency services so have a DB pension (I joined after they got rid of final salary pensions) where contributions are already pretty high from me and employer (no chance of them paying in more unfortunately) 

There is nothing to stop you opening a separate personal pension ( DC type) .
Often the DC pot can be used to fund early retirement and/or supplement the DB pension.

chelseablue

Albermarle said:

chelseablue said:

p00hsticks said:

You don't mention employment or pensions at all ?

If you are employed it might be worth looking at whether your employer would pay more if you do, and doing that, if necessary dipping into the inheritance money to make up for the resulting drop in take-home pay. 

Or you could set up a SIPP yourself. 

If you are not likely to have a need for (some of) the money in the next twenty years or so pensions are a very tax-efficient way of 'saving' and will help ensure a comfortable retirement.   

Thank you, Im in the emergency services so have a DB pension (I joined after they got rid of final salary pensions) where contributions are already pretty high from me and employer (no chance of them paying in more unfortunately) 

There is nothing to stop you opening a separate personal pension ( DC type) .
Often the DC pot can be used to fund early retirement and/or supplement the DB pension.

Thank you, for now I'd rather not lock it into a pension until after I've moved house, just in case

EthicsGradient

If your time horizon is about 6 years, it might be reasonable to invest a bit of it in stocks and shares. As people say, it'd be nice to avoid tax if possible, and if some is going to be cash, it'd be good to avoid the tax on that now. So here's an alternative plan:

Put £20k in a cash ISA now
Put £25k in an accumulating global tracker fund now, held outside an ISA (this will get accumulated dividend income, but, at say 1.7% - the yield on HSBC FTSE All World Index - under the £500 zero tax allowance for dividends)
You have £25k in a regular savings account - you'll likely pay a little income tax on the annual interest on this (but, a tip: divide that between an account that pays monthly interest, and one that pays just once, in the next tax year. That way, you use some of this tax years £1k allowance, and may even avoid any tax next tax year).

In 25-26 tax year, put another £20k in a cash ISA. Now you only have about £6k (if you left the interest in) in a savings account outside an ISA, so won't pay interest on it (unless your existing savings take you over the £1k threshold, I suppose)

In 26-27, do a "Bed and ISA" with £20k of the tracker - sell it outside and use the proceeds to buy it inside an ISA (you could choose a platform that does this for you with the minimum of hassle, or DIY)
(if it has turned out to grow well over those 2 years, limit this to a gain of 3k - eg if it grew 25% over those 2 years, then sell 3000/(1-(1/1.25)) = 15000 - that would be 12k of your original purchase that had grown into 15k)
(if, thanks to your existing savings, you have been paying some tax on the interest, then use some of your £20k limit to put it in a cash ISA)

In 27-28, repeat what you did in 26-27 - depending on growth, this may be all of it, or you may have a bit left over, in which case you Bed and ISA that the next tax year.

So that gets it all into ISAs, cash and S&S, with a bit invested for the 6 years until you want to use it, and hopefully growing better than 100% cash. If you can tolerate risk, you could start with a bit more than £25k in the tracker, though it might mean the dividend becomes liable to income tax a little (marginal rate is less than for earnings or savings, anyway).

Beddie

Premium Bonds are a possibility too, for money outside an ISA, as they are tax free. You might not win much, but it's easy access so you're not locked in.

penners324

chelseablue said:

p00hsticks said:

You don't mention employment or pensions at all ?

If you are employed it might be worth looking at whether your employer would pay more if you do, and doing that, if necessary dipping into the inheritance money to make up for the resulting drop in take-home pay. 

Or you could set up a SIPP yourself. 

If you are not likely to have a need for (some of) the money in the next twenty years or so pensions are a very tax-efficient way of 'saving' and will help ensure a comfortable retirement.   

Thank you, Im in the emergency services so have a DB pension (I joined after they got rid of final salary pensions) where contributions are already pretty high from me and employer (no chance of them paying in more unfortunately) 

Er, DB pensions are final salary pensions.

Putting a chunk into a pension is still a got idea.