What would you do with an inheritance of £60,000 to £100,000?

[Dahlia931]

I am inheriting some money (amount not known yet) and want to be prepared. What would you do with the money? Likely to be between £60-100k.

ISA

If you are working you can use it to invest in a pension but only up to a certain amount.you will need independent financial advice.

Premium bonds.

High interest savings account.

Deposit for a house of pay off mortgage.

Or you could just go on a spending spree.

I can only put £24k into ISAs per year so I would need to find something to do with the rest. I was thinking of putting the £24k into my ISAs and putting the rest into a high interest account, moving it over to the ISAs every year when the new financial year kicks in.

The ISA limit is £20k, not £24k.

Pay off a mortage or deposit for a mortage?
Depends on your circumstsnces

You cant put in £24k. You are capped at £20k

Presumably you're asking what would be best for you to do with the money, not what I would do with the money, which isn't necessarily the same thing?

Put it in the best paying instant access savings account in the short term and don't rush into anything. A few weeks delay won't make any difference.

Work your way through the financial flow chart to identify gaps that need filling.

https://ukpersonal.finance/flowchart/

If you've already covered everything, something like an electric car could be a worthwhile purchase.

What to do with it depends on your overall financial situation and long term plans.

First, pay off any debt (excluding mortgage, if you have one).

Next, ensure you have a healthy emergency fund (at last 3-6 months salary) in easy access savings.

Then think about investing the remainder if you won't need it in the next 5 years. How's your pension? Top that up to get the tax rebate. Then fill an ISA.

pay off my mortgage, have a VERY nice holiday, whack a bit into the pension pot and do some work on my property. Seriously consider dropping to 4 days a week at work (because day 5 is basically what pays the mortgage!)
It would tempting to move house but I think I'd need it to be £100k+ for that to happen.

You are right! I don’t know why I’ve put 24k - I think it’s because I put 4k into my LISA which of course forms part of the 20k cap.

No debt, 12 months emergency fund and NHS pension. I have 37 (or more like 40 years by the time comes) left in work so I haven’t paid much attention to it so not sure if I can add to it in the same way you can a private pension.

The answer would depend on what you say to the following questions?

Is your lisa being saved as a house deposit or for future pension provision?

Will you need some or all of the money in the next 5 years?

What's your appetite to risk?

Do you have an emergency fund of 6 months outgoings?

What age are you?

Do you have pension provision?

Do you work and if so are you a basic or higher rate tax payer?

I wish I could actually spend my money. I would love to go on one of those crazy holidays that cost £20k+ but I could never!

4 days at work is such an amazing balance - I don’t think work would be too pleased though.

LISA is for future pension provision. I already own my house so couldn’t use it for that.

No, I won’t need access to the money. I’m risk averse generally but I have inherited this money and know they want me to invest it (whether that’s property/ business or whatever).

Emergency fund - 2 years worth

30 years old

NHS pension and because I pay quite an bit into my pension, I am a basic rate tax payer.

oh i'm not talking a £20k holiday, £2k is my idea of extravagant 😂
Do you own your house outright or have a mortgage on it?

Who's 'they'?

I wouldn't be 'investing' in a business or property unless I actually wanted to, which I don't because both require time that I don't have and are a good way to lose money.

You sound like currently you're in a good position and at risk of building up money that you'll never spend, but you're young and things can change. Either if you have DC so you'll easily find uses for your money for the next 20 years, or you'll want to move on from your (presumably stable) NHS job or you'll want to go part time or even retire.

You should probably look at moving some of your money from cash to tracker funds - if it's properly diversified and you can leave it alone for a few years the risk of it not outperforming cash is low.

You could of course pay down your mortgage, but obviously you might have early repayment charges and even with higher interest rates, mortgages are cheap debt, so usually investments outperform them over time, so overpaying is generally overcautious.

NHS pension gives you various options and it's never too early to ensure you understand it. Your trust should run 'preparing for retiement' or 'understanding your pension' sessions. Go to one.

It may include a follow up private advice session with a financial adviser as well. If so, use it but don't sign up with them (not sure if the whole NHS uses the same adviser, but mine gave spectacularly bad advice - the 'thinking through your plans' part was great, but the actual investment stuff was not and their fees were high).

In brief though, your options are as follows.

• Leave the NHS pension as is and make your own arrangements if you want a higher retirement income. Max flexibility but more work.

• AVCs with one of the NHS partners. Works much like an ordinary private pension, your payroll sorts the payments. Flexible in when and how you take it but amount not guaranteed.

• Buy additional NHS pension. Guaranteed, inflation-linked amount for life, but can only be taken as part of the main pension - no flexibility on timing or rate of drawdown.

• ERRBO. This doesn't increase your pension, but buys down the age at which you can start taking it, so you can retire at 65 instead of 67, 68, or whatever. If you're going for this option do it as soon as possible - it only buys down the pension you accrue after starting the ERRBO payments, not the bit you've already built up. For it to apply to this year's pension you need it arranged by June. But be certain - once you're committed that's it for the rest of your time.working in the NHS, you can't stop the payments and drop back to normal pension age.

Or have I misunderstood and you're mortgage free with a 2 year emergency fund, as well as an NHS pension?

In that case, as long as you think you'll be happy to carry on working, I'd possibly look at moving to one of those dream places to live, where property is expensive, eg on the edge of a park in a desirable town so you can have a great quality of life, walking to restaurants, in the park etc.

When I was in a similar position I did pay off the mortgage. Not the best investment decision but I valued the peace of mind over the financial value.

However, I was rather older and there was very little left on the mortgage so the difference in return was marginal. General advice is that investments will outperform the savings made by paying it off.

This is very helpful - thank you. I will look into all of this in more detail.

Don’t spend a penny invest it and get an income off it every month then you still have your capital

at the moment you’ll be on 4% be able to get a monthly income of about £310 a month ( you’ll be taxed on that ) nice little top up each and every month

Yes, very small mortgage, we could pay it off but it’s negligible so happy to just keep paying it off monthly. Yes, 2 year emergency fund. I thought it was a year but actually, it’s 2 years worth.

I will definitely keep working, not sure what I’d do with all of my time for the next 40 years otherwise 😂 jokes aside, we do intend on having a family in the next few years so life will become more expensive.

We do live in a beautiful area and we may buy something a little bigger in time but I don’t want this inheritance money going towards life stuff. I want to treat it as though I don’t have it in the sense that my salary needs to pay for everything and this money just makes more money in the background. I hope that makes sense!

This is exactly what I want to achieve. I think I’ve maybe worded it badly in previous posts though!

Given that you have a good pension, home and time in your side if it was me I would start by using this years full ISA allowance in a stocks and shares ISA if you haven't already used this year's allowance. Somewhere like trading 212.

I'd speak to a proper investment company and take a good chunk of it £70k and invest it for long term growth. I have never met anyone in the NHS who wants to work to 65 as it's so physically demanding though admittedly I only know medical folk not admin.

Recent threads on MN have made me wary of investing into a joint asset if I were to come into money in case of long term marital issues. My husband would be so hurt and insulted if I suggested he would take advantage if we split and we have a good marriage so why rock the boat. More sensible [unless in extremis now] to invest it so it pays out hopefully for both of us to enjoy old age but if the worst happened it would be ring fenced as a non marital asset.

If you have children, I'd also start an ISA for them. It's tricky in that they can then access when "of age" but it's a way of saving for uni/house deposit/choices.

Not taxed if it's in an ISA.