How should I invest my Inheritance money?

RedRobin99

Last year I inherited £10k from my grandparents. I have had it sat in a savings account with an interest rate 4.72%.

I own a stocks and shares ISA with vanguard (worth around £20k currently), in which I invest a few hundred every month into either LifeStrategy® 60% Equity Fund - Accumulation or LifeStrategy® 80% Equity Fund - Accumulation.

I was wondering if it was worth me throwing the whole inheritance into this S&S ISA as well, as I have no need for the money right now, and so plan to use the money on long-term things such as to buy my first home etc, and I know the S&S ISA is best for long-term investments.

The only hesitations for me are the fact this money is slightly "sentimental" as my grandparents left it to me in their will, so I would like to avoid it dropping in value significantly, and also If I were to dump it all in my S&S ISA, it would use up half of my yearly ISA allowance in one go. Is this still the best option, and if so what are some safer funds I can use to invest in on Vanguard?

Exodi

If you're putting a few hundred every month into your S&S ISA, it would appear the annual ISA allowance doesn't matter?

If you want to put the money in less risky funds, then that is your choice. Could even put it in the SSTMMF if you prefer: https://www.vanguardinvestor.co.uk/investments/vanguard-sterling-short-term-money-market-fund-a-gbp-accumulation/overview

More generally, having it in a tax free wrapper will be better than not, if you can get the same or higher rates of return.

4.72% was that for an fixed bond that has just matured as a vanishingly thin number of EA accounts pay that now?

Newbie_John

Safest would be something like Short Term Money Market Fund but they pay very close to your 4.72% rate, maybe even just below if you consider the fees.

Maybe just keep it in existing account and use it as a top-up to ISA when you approach Apirl and haven't used the £20K? 

Voyager2002

What is your pension situation?

You might consider a SIPP, which is generally the best option for very long-term savings (the money would be tied up until you reach the age of 55). 

You could also open another S and S ISA if you want to keep this money separate from your general savings.

Bostonerimus1

If you have any high interest debt I would pay that off first.

Next make sure you have at least 6 months cash for emergencies in an easy access account.

If you are investing for the long term I would then put your money into a workplace pension. A S&S ISA generally isn't quite as tax efficient as a pension. I think you choice of VLS60 as an investment is a good one for someone who is thinking long term, want's simplicity and reasonable expenses.

Eco_Miser

SIPPs are considered more tax efficient than ISAs because they arbitrage your current and future tax rates, particularly the 0% on 25% of your pension lump sum. However they are inaccessible until at least age 55, soon rising to 57, and possibly higher.

Certainly not the right vehicle for your house deposit.

Possibly feed your inheritance into an S&S LISA over the next 3 years, if a LISA is suitable for the property price you are targeting.

DRS1

We know nothing about you so we are not likely to be much help.

Are you employed or self employed?  If not you will be limited in the amount you can put into a SIPP.

Putting the money in an ISA may make sense as it protects against tax charges (income and capital gains tax).  That is so even if you don't otherwise pay income tax on the interest because it is below £1000 (or £500).  You never know when that band will be changed or abolished.

You don't have to put it in an S&S ISA it could be a cash ISA and you could hunt around for one paying a decent rate (there's a thread on the ISA board here
 Cash ISAs: The Best Currently Available List - Page 886 — MoneySavingExpert Forum)

Why are you worried about maxing out your ISA subscription?  Are you thinking of increasing the monthly contributions?  Personally I would stick as much as you can in an ISA as soon as you can