What to do with an inheritance?

[PersephoneParlormaid]

I’m expecting a good inheritance and not sure what to do with it. I thought about buying a house to rent out but don’t want to end up paying CGT. Also not keen on S&S type products as I don’t want to end up with less than I got originally, so low risk options.
My aim is to help my kids with a house deposit when the time comes, and have enough to keep myself in old age, so I do want to grow it.
So I’ll max out this year and next years ISA, experiment with maximum Premium Bonds for a year, but then what? Just find the highest interest rate bank accounts or is there something else?

You need to get advice from a financial advisor - just leaving what I guess is a t figure amount of money in a regular high interest account might not be risky, but it will certainly ensure your inheritance becomes worth less as time goes on.

Please listen to meaningful money podcast. It’s really good for explaining the basics and very listenable. If you don’t need the money long term then S&S are more likely to outpace inflation than cash, but if you will need it in the next few years then yes it’s probably too risky. Even if you do get a financial advisor having some knowledge will help you ask the right questions.

That’s what DH and I do. We inherited 5 years ago, have cash ISA’s, Premium Bonds and the rest in various savings bonds that mature different times of the year. We’ve helped my DS with a deposit on his first property. We live off interest and DH State Pension and 4 small pensions.

Bank account with a good interest rate is an oxymoron. Premium bonds are a fools game. It’s a bit of gambling but your money literally shrinks while sitting there.
Depending on amounts, we’re talking about here, I would get a good IFA and plan the most tax efficient way of handling this money with the view to potentially gifting some in form of a house or house deposit to your kids. How soon that’s likely to be will determine some of your approach

There's very little profit in buy-to-let these days, and increasing amounts of work.

Cash in a bank account is guaranteed to lose money over the long term, because I weren't rates always fall below inflation.

Premium bond average returns are almost always below the highest rate bank accounts, so they also lose money in real.terms.

If you want to grow the money you need to invest, not just save. And that means stocks and shares. This doesn't have to mean high risk, and you need to separate absolute risk from volatility - the latter is only a risk if you need to take money out at a specific time; if you have some.flexibipity in withdrawal timing then volatility doesn't really constitute a risk.

I had a decent inheritance.

Bought a BTL and rented to a family member to help her out, so i get a regular amount each month, with no mortgage a BTL is an excellent long term choice, so what it you pay CGT? if you do, its less than income tax and you've made money!

I put 60k in an ISA, over 3 years, 2 yr fixed term, that recently matured and will pay enough fpor a nice 3 week holiday for 2.

The remaining amount 190k went into low/medium risk investments, 20 to 50% equities, within 12months its now worth 236k, sounds good but in the first 2 years it was up and down....definitely consider it a 5 to 10 year project & as said be flexible.
i will also transfer 20k ISA each year to minimise tax, within the investment.

No such thing as "low risk" unless you place it in a bank account & no such thing as a "good" IFA, they are all salesmen, you re paying for their life style, they'll always chose a product that makes them the most commission & negotiate this amount, they'll always deal.
I didn't have the confidence to chose a platform myself, people i know who have, got mixed returns.

I'm not sure right now, given AI potential "bubble" i'd want to put it all into equities.

Bank ACC is ok short term but you'll have to register for SA to declare the interest and pay tax on it.

Also transferring money to my DD, to minimise any IHT.

You age matters a great deal too, no good having seen great investment growth if you'll be 80 in 10 years time.

The way to grow your money in real terms is to invest in shares. Cash will lose value- the nominal amount might get higher but it’s very unlikely to
keep pace with inflation).

What timeframes do you have in mind for when you might want to access it?

IFAs do not get commission on investments and investment advice. That's been illegal since 2012.

Keep in mind that unless you find an account that pays above inflation rate rates (which is pretty much impossible) you are actually losing money. It may not seem like it but 10k today buys a lot less than 10k 5 years ago. The best solution are investment ISAs. You could use a tracker and then you should make modest returns without too much risk.

I think there are two important bits of info missing: how old you are and (roughly) how much you have

"Also not keen on S&S type products as I don’t want to end up with less than I got originally" - this worries me a bit and suggests you don't understand investing. If you're young enough and there's some of the money you're happy to lock away for 10 years plus, by not investing you could be missing out on considerable gains.

Martin Lewis (obviously a very cautious man!) shared a post recently of him comparing return rates from bank savings accounts and low risk investments. Look it up. Not starting to invest earlier is my biggest financial regret.

You dont need an IFA who will charge you for the privilege of what you can learn yourself. Have a look at Rebel Finance School instead.

Whilst your deciding be mindful FSCS only protect up to £120000 so either use several accounts OR stick in NS&I saver which is unlimited protection.
I already have BTL and honestly, crunching the figures I'm going to sell as can get a better return in stocks and shares.

You've mentioned ISA but also look at SIPP to make use of that tax wrapper. You can invest last 3 years into SIPP too.

You mention 'low risk ' but your ability to cope with natural market volatility will be better the longer your money is in stocks and shares.

Edit. Re read your post. Definitely look at SIPP for your retirement plan...I'd do ISA and SIPP before anything else in your position so I've maximised tax exemption.

Whilst advice is free, they will charge a yearly management fee and a set up fee.... Commission in all but name, how do you think they make their money?

Are you below retirement age? If so, consider adding some money to your pension. You get tax relief on it, which boosts the investment amount.

The way you protect against market volatility is to diversify. Invest in a range of funds thst target different areas eg a ftse tracker, emerging markets, Asia and America. Don't put all your eggs in one basket. You can invest £20k per year, whereas the cash isa limit is reducing to £12k in April if you are under 65.

How old are kids? If early 20's then probably stick in a high interest account/bond.

If they are in primary school, S&S is the only way to go.

Just remember that investments are liable for tax. I have s&s and just paid more in tax than I 'made' over the year because of moving and CGT. There isn't a way to grow money these days IMO.

Honestly it depends.

My IFA is earning their money... and I am def making more than I would going it alone.

I managed my own money up about 150k but after that it gets tricky.

generally good advice in this thread. Some more thinks to think about:

1. How old are you and how old are your children? If retirement plus help with deposits is thirty years off the answer will look different than if those things are three years off
2. you say you don’t want risk. BtL is just as risky as stocks and shares, maybe more so. You say you don’t want to end up with less than you started with. Nobody wants that. Most sensible people buy shares anyway, because over the long run it’s just about the only way to grow your money in real terms. And unlike BtL you don’t get 2am calls because the boiler’s broken.
3. The biggest risk you face over the long run is inflation. Before doing anything, ask yourself “how can I be confident this will grow my money in real terms, ie more than inflation?” If the answer is “it won’t” then it’s a poor long term strategy.

Have a look at landlord fb groups. Everyone apart from the big dogs with loads of properties are selling up due to the changes coming giving tenants more right so could end up with non payers for months on end then have to pay for a money redciving team to evict them

IFAs will charge a fee but that means they are working for you to get the best return on your money. Back in the days of commission, they recommended the product with most commission, not the best for you. That is why it was banned.

if you have more than £500k, talk to an IFA. Less than that you could look at Martin Lewis and Rebel finance school

dont rule out stocks and shares. They are the only way to grow your money in the long term and keep ahead of inflation.

also look at bonds as a safe option- better returns than cash but safer than stocks.

If your kids are adults give them some money for a lifetime ISA. If not you can put some into junior ISA for them.

Agree with the others who suggest Martin Lewis for some basic understanding of S&S Vs cash. Also look at maximising your pension depending on your age unless it's already adequate.

Talking to a financial planner may be worth while and write or update your own Will.

Talk to a financial advisor.
Ask how best to set the children up to own a home.
Can you buy property in their name?
Can you add to your pension?

They are low to high 20’s.

I don’t want to put any in my pension as I want to be able to get at it when I want, not when I’m given it.
The thought in buying a house was to put my oldest in it as they are renting at the moment, and charge minimal rent to cover expenses. I’m up north where houses are cheaper.
I’ve not got the money yet so I’m waiting to see the final figure, but I think it will be £300k to £400k.

A private pension is accessible from 55 or 57 depending on your current age so you do get to decide when you get it.

Either way, I’m not putting in pension