Best approach to low risk high return savings from inheritance

slhqoue

I am about to inherit around £50,000, which for me is an enormous sum - many times more than my personal savings (which have never been more than £10,000). 

I pay a mortgage at 1.78% but this is up for renewal in February with a likely fixed rate of around 4% I think?

Anyway, I'd appreciate any suggestions about the options for how to best save my inheritance - all in a savings account / investing in bonds or so on.

Stubod

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

No such thing as low risk with high returns. You need to understand your risk level. Also consider your pension options....

trickydicky14

Stubod said:

https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/

No such thing as low risk with high returns. You need to understand your risk level. Also consider your pension options....

Arr the holy grail, ‘low risk high return’ I’ve been looking for that one for most of my life.

Eyeful

Hope the following will be of help to you.

1. SAVINGS: Money is in a safe place & not at risk. You expect to at least take out what you put in.

Money need within 5 years should be kept in a FSCS protected savings account.

FSCS SAVINGS protection only covers a UK-authorized bank, building society or credit union

https://www.fscs.org.uk/check/check-your-money-is-protected/

2. INVESTING: Putting your money at risk where there is the potential loss of all your money.

You hope to take out more than you put in, but this is not guaranteed.

Many Investments are not covered by the FSCS INVESTMENT protection.

Think of investing for at least 10 years at least.

3. LOW RISK SAVINGS BONDS (also savings accounts): are regulated. You them directly from:-

(a) NS&I (which is a loan to the UK government).

b) Bank/Building Society covered by the FSCS protection (at present up to £85K).

https://moneyfactscompare.co.uk/savings-accounts/

https://www.thisismoney.co.uk/money/article-1621507/Best-savings-rates-Fixed-rate-accounts.html

4. OTHER TYPES of BOND: are INVESTMENTS PRODUCTS (these are not Low risk savings bonds).

Examples, Mini bonds, Company bonds, Government bonds, Convertible, bonds, Perpetual bonds

Basically they are IOU’s & only as good the company or government issuing the bond. As there is the potential loss of all your money, it should have a warning about risk to your money.

The FSCS protection for Savings & that for Investments is very different. Do not just assume your investments are covered by the FSCS INVESTMENT protection.

https://www.fscs.org.uk/check/investment-protection-checker/

https://monevator.com/maximising-fscs-protection-for-your-investment-portfolio/

It is safest to stick to "Bond Funds" when going in to these products as it is a complex area.

https://www.trustnet.com/news/13401827/the-18-funds-most-recommended-by-best-buy-lists-in-2024

Bond Scams occur in these “Other types of Bonds” 

eskbanker

The Flowchart - UKPersonalFinance Wiki can guide you through a structured process to help decide what to do with your money....

Bigwheels1111

One do you think you will need any of the 50k in the next 1-5 years.

If no fix it in a 5 year bond at 4.40% with Atom Bank, they are very good.

Interest paid away anually to keep tax down, that would be £2,200 a year.

- £1,000 PSA leaces £1,200 to be taxed.

Depending on your wages if under 50k you would be taxed around £240

As the interest will not be compounded a rough amount would be £59,800.

https://moneyfactscompare.co.uk/savings-accounts/5-year-fixed-rate-bonds/

Or go for a 5 year fixed isa at 4.15% interest compounded.

£2075 a year tax free.

https://moneyfactscompare.co.uk/isa/5-year-fixed-rate-isas/

For most people the isa will win out.

After 5 year compounded the isa will be £61,272.60.

£1472.60 better off with the ISA.

With the ISA you can access the money for a fee / fine.

But be careful though.

You do not know what the future holds.

I fixed my savings 2 years ago for 5 & 7 years.

All was great, A nice income for me and the wife.

Then she passed away in July, I was made homeless and I am unable to access the funds for 3 years and

4 months.

Roll on November 2027, I can buy a house outright.

Until then the interest will let me get by.

Stubod

..you could always take a "punt" on Premium Bonds. The most one person can "save" is £50k, (tax free).....and who knows, you may get the big one???

Eyeful

Stubod said:

..you could always take a "punt" on Premium Bonds. The most one person can "save" is £50k, (tax free).....and who knows, you may get the big one???

1,You mean the Low Risk Savings Bond you get from NS&I which pays no interest.
2. Where overtime your money will buy you less due to the risk of inflation.
3. Where at the end of one Labour government, inflation went up to about 25%.. 

MEM62

slhqoue said:

I am about to inherit around £50,000, which for me is an enormous sum - many times more than my personal savings (which have never been more than £10,000). 

I pay a mortgage at 1.78% but this is up for renewal in February with a likely fixed rate of around 4% I think?

Anyway, I'd appreciate any suggestions about the options for how to best save my inheritance - all in a savings account / investing in bonds or so on.

Some more background information would assist in providing informed responses.  Age?  Pension provision? Debts? Plans - marriage, travel, kid off to uni?    

eskbanker

Eyeful said:

Stubod said:

..you could always take a "punt" on Premium Bonds. The most one person can "save" is £50k, (tax free).....and who knows, you may get the big one???

1,You mean the Low Risk Savings Bond you get from NS&I which pays no interest.
2. Where overtime your money will buy you less due to the risk of inflation.
3. Where at the end of one Labour government, inflation went up to about 25%.. 

Why do you feel the need to correct Premium Bonds to "Low Risk Savings Bond"?  Premium Bonds are a unique and distinctive product - there's a superficial similarity to standard savings accounts in that capital is protected, but the returns are variable and, importantly for many, tax-free.  They're not for everyone but are a perfectly valid suggestion for consideration here....

masonic

The urge to engage in pointless party political point scoring seems to have been prioritised over understanding of the product being pilloried to push the politics.

Premium bonds do not deserve to be singled out as being more vulnerable to inflation (such as the period of double digit inflation we've just exited). All savings products (and also many lower risk investments) are worth less in real terms than they were a few years ago. Over the medium term, there is a good chance the net return from premium bonds would keep up with inflation, as would actively managed cash savings.

For someone with £50k who may not want to invest it for more than a few years, and doesn't have headroom in their ISA allowance, PB are quite competitive compared to other savings options for someone with average luck, and they tend to remain competitive without the need to move your money around.