Inheritance 100k - What would you do in my situation?

hflower74

I will be receiving about 100k inheritance later this year, any advice on what to do with it would be gratefully received.  

50yo female
Not working
Claiming contribution based ESA
Universal credit pays rent
Housing association house
Single
No pension (except state pension, I hope!
No debt
No ISAs

Obviously UC will stop so I will only have ESA coming in.

Should I put some in a private pension? Can you even do that if you don't work?

What should I invest it in to make it last as long as possible lol?

I'm used to living on a very low income.

Thanks

El_Torro

If you're not working you can put £2,880 in a pension every tax year. The pension provider tops this up to £3,600 with tax relief. 

Another way to invest would be to put £20k in a Stocks & Shares ISA each tax year.

You can also invest in an unwrapped account, though any gains will be taxable. 

If you want to save some of this money rather than invest it (probably a good idea) then regular savers and high interest easy access accounts should be suitable. You may even want to put some of the money in fixed rate savings accounts.

kimwp

Will it affect your eligibility for being in the housing association house?

Kim_13

You can pay £2,880 into a pension per tax year when not working - tax relief gets added and takes you up to £3,600.

As the Cash ISA allowance is almost certain to be lower next year, it would make sense to put £20,000 there as it’s a use it or lose it allowance. If you get a Flexible ISA, you can withdraw and replace it in the same ISA within the same tax year without affecting your allowance, so it could be a good Emergency Fund. I’d leave S&S until next year when that is likely to be encouraged via upcoming changes; they’re also not for money you’re likely to need in the short or medium term.

As you will need some of the money to live on, you’ll need something with access for a chunk of the money. Premium Bonds aren’t usually recommended here unless posters are higher rate taxpayers, but having enough to put in the full amount, it’s not a bad place to put it while exploring other options.

There are threads/guides on the best Easy Access Accounts and Regular Savers. For the latter, your own bank aren’t a bad place to start as most have something decent on offer. 

Regular Savers https://forums.moneysavingexpert.com/discussion/6576962/the-top-regular-savers-discussion-thread/p1

Easy Access https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/?_gl=1*xxt40n*_gcl_au*ODE5NTQ2NjU1LjE3MTU3NTU3MDc.*FPAU*ODE5NTQ2NjU1LjE3MTU3NTU3MDc.*_ga*MzgyNTgwNjE5LjE2ODU0NDQ3NDA.*_ga_X74CWQS9F0*MTcxODM3OTU2OS4xNTQuMS4xNzE4Mzc5NzQwLjYwLjAuNDUzMjAxNTYw

elsien

kimwp said:

Will it affect your eligibility for being in the housing association house?

Wouldn't have thought so. They are in and they have a tenancy. Assets may affect eligibility to apply, in some areas, but not to evict people once already there. 

tacpot12

You haven't said how much UC you receive, what your rent is, and whether you receive help with your council tax. As you are receiving ns-ESA, you might be receiving extra amounts in your UC if you are disabled. 

Can you report back how much UC you expect to lose (including the Housing Element) and any savings that you already have? Can you also report how mcuh help you get with your Council Tax if any? You can check this using a benefit calculator such as the one at EntitledTo.co.uk

You also have to be careful about the rules on deliberate deprivation of assets. Putting your money into a Pension might not be allowed if you need to claim UC again before you retire. (I'm looking into this for you and will come back with an update). The DWP might assume you still have the capital and refuse to pay you any UC, which means you will have to draw on your pension much sooner than expected. 

tacpot12

As far as I can see, investing in a pension might leave you open to the suggestion that you have deliberately deprived yourself of some capital. However, the fact that you will continue to receive ns-ESA means that you have some income that, theoretically, you are allowed to invest in a pension - you would tell the DWP that you used your inheritance to pay your living costs and rent, and used your ns-ESA to save into a pension, and that you spent the remaining part of your ns-ESA on other expenses (I expect your ns-ESA payment is more than £240 per month).

You would also need to tell them that your reason for paying into a pension was to ensure try to increase your standard of living once you start to draw your state pension. Under the current rules, it's not clear that it would increase your standard of living as you might be losing out Housing Benefit (HB), Council Tax Support (CTS) and Pension Credit (PC). You might take the view that such support might become less generous in future.

Emptying your personal pension before you need to claim HB/CTS/PC might also be regarded as deliberate deprivation of assets.

So it's very unclear whether you would be certain of being able to claim UC when you needed to do so, i.e. when your capital runs out, and it's very unclear whether having a personal pension income once you reach state retirement age is a good thing or not.

I suspect that you will lose so much UC due to the inheritance that you will need to spend ALL the inheritance before you reach your state retirement age, and may need to claim UC a year or two before you reach your state retirement age. However, if you  invest your inheritance and it does slightly better than expected, your capital will never go below £16,000 and you will never be able to claim UC again, but will have exhausted your inheritance and will be able to claim HB/CTS/PC as soon as you have less than £16,000 in savings. (Assuming the rules and limits are still the same).

With this in mind, I think you need to split your savings into three pots: a short-term pot, a medium-term pot and a long-term pot. You also need to consider tax. The next best savings product after a pension is an ISA, because they are tax-free.

I would suggest you put £20,000 into a Stocks and Shares ISA as the start of your long-term pot. The ISA wrapper eliminates the record keeping that would otherwise be required. The means that you will have about £80,000 that can't go into an ISA this tax year.

My guess is that you will need about £10,000 a year to replace what UC you have lost. So you need £10,000 in your short-term pot. This should be put into an interest bearing account that allows you to setup a regular payment to yourself (such accounts will usually have a low rate of interest) or at least allows you easy access to pay yourself monthly/weekly/fortnightly as you wish.

This leaves £70,000 in your medium-term pot which should be put into a savings account with the highest rate of interest you can find. You only need to make one withdrawal a year (to fund your short-term pot for the next year) but you should probably look for an account that allows for three or four withdrawals per year, just in case you need to withdraw more money. £70,000 is below the Financial Services Compensation Scheme limit, so you can put this all with one institution if you wish, but I would probably split it between two.

£80,000 at 5% interest will only result in interest income of £3,600. Whether or not you need to pay any tax will depend on the amount of ns-ESA you still receive. If you are paying any tax, it would be worth moving what as much as you can to a Cash ISA as soon as you can, bearing in might that the current limit of £20,000 per tax year might be going down. You can continue to move your medium-term pot into Cash ISA for a long as necessary to avoid paying any tax. (Your medium-term pot would then be split between a taxable account and a Cash ISA).

I'll post a seperate suggestion as to what funds you might invest in within your Stocks & Shares ISA. I haven't described how you would manage the money in that account, but my suggestion would be that about two years before you need to withdraw any money from it, you look at how the stock market is doing. If it is doing badly, do nothing - it will almost certainly recovery in two years time. If it is doing well, sell half of it and fund your short-term account rather than drawing on your medium-term account. Repeat the same in a year's time. Hopefully you will be able to sell all your investments at a time when the market is doing well and you will have benefited from the performance of the investments over 12+ years.

tacpot12

For a first time investor with no experience of investing, I would suggest that you invested £10,000 in each of the two funds, and then research them (do a bit of research each year) until you figure out what you have bought :  

HSBC Global Strategy Balanced Acc 

Vanguard LifeStrategy 60% Equity Balanced Acc

You should watch their performance every three or four months, just to get an idea of how their value changes over time. Don't worry if they go down in value immediately after you  have bought them! They have 12-15 years to perform, and historically shares and bonds have always done well over the long term. 

Linton

hflower74 said:

I will be receiving about 100k inheritance later this year, any advice on what to do with it would be gratefully received.  

50yo female
Not working
Claiming contribution based ESA
Universal credit pays rent
Housing association house
Single
No pension (except state pension, I hope!
No debt
No ISAs

Obviously UC will stop so I will only have ESA coming in.

Should I put some in a private pension? Can you even do that if you don't work?

What should I invest it in to make it last as long as possible lol?

I'm used to living on a very low income.

Thanks

I assume you will need to use your inheritance to pay for ongoing living costs at least until you start to receive your State Pension.  So 2 questions to answer…

1) How much income will you need to generate from your inheritance for how long?
2) How do you manage the money to generate that income?

Until you know what your want the inheritance for it is impossible to say what you should do with it for the best outcome.

InvesterJones

tacpot12 said:

For a first time investor with no experience of investing, I would suggest that you invested £10,000 in each of the two funds, and then research them (do a bit of research each year) until you figure out what you have bought :  

HSBC Global Strategy Balanced Acc 

Vanguard LifeStrategy Balanced Acc

You should watch their performance every three or four months, just to get an idea of how their value changes over time. Don't worry if they go down in value immediately after you  have bought them! They have 12-15 years to perform, and historically shares and bonds have always done well over the long term. 

This doesn't make any sense. I presume it's sarcastic? If not, to be clear: you shouldn't invest in something without understanding it - certainly don't invest first then research after. And the two funds you list are so highly correlated you're not gaining anything other than complexity with your strategy. Finally what's the rationale between watching their performance every three or four months to get an idea of their value changes? What would you do with the information?

Ibblackberry

tacpot12 said:

For a first time investor with no experience of investing, I would suggest that you invested £10,000 in each of the two funds, and then research them (do a bit of research each year) until you figure out what you have bought :  

HSBC Global Strategy Balanced Acc 

Vanguard LifeStrategy Balanced Acc

You should watch their performance every three or four months, just to get an idea of how their value changes over time. Don't worry if they go down in value immediately after you  have bought them! They have 12-15 years to perform, and historically shares and bonds have always done well over the long term. 

Horrific advice.  

Invest in something you don't understand, then look into it after???!???