Inheritance - £85k - help!

spending_gremlin

I am new here, and new to really caring about money..! I am going to inherit around £85k later this year and I am really struggling to decide what to do with it. 

I:
- am 41, single, no kids
- am newly self-employed
- have no debt apart from my student loan (around £22k)
- rent in London, so do not own a house
- do not own a car
- have around £6,000 in my pension pot

I would like to balance what I do with this money - I would like to allow myself a budget to "enjoy", and a portion to save/ invest/ be sensible with - but am struggling to know what the best way to split the amount is (like, what % "should" be sensible with), and what to actually do with the portion I save or invest.

Any help/ pointers would be gratefully received! 

Baldytyke88

You could be paying up to 7.3% on your student loan, so that is an option, as is a pension contribution equal to your earnings.

But perhaps you are thinking about buying a house?

You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. 
You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

https://www.gov.uk/lifetime-isa

Cairnpapple

What are your goals? Pension and/or house deposit (if you plan to buy eventually) are the first things that come to my mind, but something else may be higher priority for you. 

The ukpersonalfinance subreddit has a nice page on this scenario and something that they emphasise is putting the money somewhere safe in the first instance and not rushing any decisions. 

https://ukpersonal.finance/lump-sum/

Ch1ll1Phlakes

Baldytyke88 said:

You could be paying up to 7.3% on your student loan, so that is an option, as is a pension contribution equal to your earnings.

But perhaps you are thinking about buying a house?

You can use a Lifetime ISA (Individual Savings Account) to buy your first home or save for later life. 
You can put in up to £4,000 each year, until you’re 50. You must make your first payment into your ISA before you’re 40.
The government will add a 25% bonus to your savings, up to a maximum of £1,000 per year.

https://www.gov.uk/lifetime-isa

Just gonna mention it here. But unless OP already has an opened Lifetime ISA they unfortunately won't be able to open one. Maximum age for opening is 40 so apologies OP but not available to you sorry.

Eyeful

1. Use tax shelters wherever possible (a) Cash ISA (b) Pensions (c) Stocks & Shares ISA.

2. Money needed within 5 years should always be in a savings account protected the FSCS Savings Protection up to £85K.

This only covers UK-authorised bank, building society or credit union on their list.
https://www.fscs.org.uk/check/check-your-money-is-protected/

Best Savings Rates:      https://moneyfactscompare.co.uk/savings-accounts/

3. Contribute more to your Penson.

4. Money which you will not touch for at least 10 years could be invested.

The longer you invest for, the higher the odds of winning in the investment game.

Investing means "putting your money at risk".

There is no guarantee that you will win.

5. These may be of interest to you:

https://www.kroijer.com/

https://monevator.com/passive-fund-of-funds-the-rivals/

xylophone

 have around £6,000 in my pension pot

At 41 that is very little - time to consider increasing your contribution.......

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pensions-basics/pensions-for-self-employed-people

Albermarle

How much do you earn? Could you afford a mortgage if you used most of the £85K for a house deposit?

ThePropertyGuy

Simple, you could spend £65k to buy two Buy-To-Let properties in the North of England or South Wales, and use the rental income to build up your pension pot. All the while the property value goes up over the years to grow your money further. 

It still leaves you with £20k to have some fun and treat yourself to a nice holiday or whatever hobbies you have. 

Eco_Miser

ThePropertyGuy said:

Simple, you could spend £65k to buy two Buy-To-Let properties in the North of England or South Wales, and use the rental income to build up your pension pot. All the while the property value goes up over the years to grow your money further. 

It still leaves you with £20k to have some fun and treat yourself to a nice holiday or whatever hobbies you have. 

As the owner occupier of an inexpensive property in the North of England, we are fed up of absentee landlords who see ridiculously cheap prices and think there are gains to be made, but can't even keep the property in good repair.

enthusiasticsaver

I think I would look at the interest rate on your student loan although as you are self employed I am not sure if you are actually paying that back? 

Given you are newly self employed and presumably not  bringing in a lot of income I think I would be erring on the side of caution.  Presumably buying a property is not possible until your business has been going longer but that might be something you may be interested in a few years down the line.  Sorting out a payment into your pension would be wise given £6k is a low amount for someone in their 40s but again until your income is more stable I would be wary of committing too much of your inheritance to that.  I would definitely do a cash ISA for now and maybe look for a high interest internet saver account for now until you are in more of a position to be clear of your future objectives. I would not spend any more than £5k of that £85k given the rest of your current situation.