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.

Most would be paid off the mortgage and then I would put maybe £10-£25k in an ISA.

Also no tax on the first £3,000 of capital gains and £500 of dividends - even outside an ISA.

At the lower amount I would put half on my mortgage and bank the rest. At the higher end i would pay off my entire mortgage, do about 10K in renovations and bank the rest.

You are already in a strong financial position. Never understand why anyone recommends premium bonds, the rate of return is rubbish.

If you want a safe investment look at Gilts - government securities where the capital gain is free of tax. Those with low interest rates usually offer a better return for tax payers than savings accounts. If you are willing to tolerate more risk than go for an investment ISA and a separate account on which you'll pay tax. You can bed and ISA some of the investments in the next tax year. (sell the investments and if you want buy the same ones for your ISA).

Personally at your age I'd invest on the stock market, you can afford a degree of risk.

Some brilliant advice and information has been posted on here so thank you all!

Close family have been very keen that I buy property with the money but nobody on here has mentioned it and maybe that’s the sign of the times with so much legislation and a whole tonne of grief if you get less than ideal tenants.

BTL is a massive hassle, and in most areas rather poor returns.

Dont BTL. We're in the process of seeking ourselves as, having looked at the sums over the last few years, we will get a better return in stocks and shares.

Always use tax efficient savings first so ISA and look at SIPP rather than AVC.

Then just get a general investment account sorted if it pays higher interest than your mortgage

Bonkers isn’t it!

Our friend has several BTL properties and some are airbnb. They make an absolute fortune but I don’t have the time for the hassle.

Airbnb is a whole other game to regular BTL. Yes higher short term gains but unreliable and a hassle.
If you've had BTL years great but starting now with your small investment isn't worth it.

BTl is for the experienced now. You mentioned maybe having children and it's also inflexible.

I’d ringfence 10-15% of the money as a holiday pot. Whether that’s one blow out trip of a lifetime, or a few trips. Life is too short not to enjoy yourself, particularly if you’ve had a bereavement. If the rest is invested sensibly, you’ll more than make that money back. But I think a lot of people forget to live a little because they’re so scared of wasting what they never had. But the truth is, you’ll never regret the memories made on a once in a lifetime trip.
I’d utilise your ISA allowances probably over a pension. Although there’s tax relief on the pension, you can’t access it until 57. So if you did want to retire before then, your money is tied up. You could split the balance 50:50 if you wanted the best of both worlds. Definitely worth getting an IFA though.

It very much depends on your age. If you are not a homeowner then it’s a great deposit. If you are older it might buy a car or a wonderful holiday, then provide a retirement boost. Give yourself both a treat and some security. It’s a wonderful gift.

Agree do not BTL. Far too much hassle and not great returns. I’m an accidental landlord and will probably sell when current tenants choose to vacate.

Thanks all.

Current plan is to await confirmation of the amount and once received, book an appointment with an IFA. It’s likely that I will invest/ save all of it rather than spend it. I’m also not going to be purchasing a BTL.

My advice is:

• don’t use an IFA. They rarely outperform the market and their fees massively eat into the return you make. They will also try to sell you stuff that’s not on your best long term interests.
• You already sound savvy so I’d recommend you focus on just doing it yourself. See below info re Rebel Finance.

Re your mortgage:

• what is your interest rate? If it’s low (less than, say, 5.5%), then carry on repaying it as you normally are but don’t rush to repay more.
• if you’re very lucky and managed to lock in a rate that very low (less than 3%) then that’s a absolute ‘bargain’ so don’t repay the capital at all (if possible) and instead use the money to invest. At least until the fixed rate runs out.
• if it’s high (6% or more) then possibly use some of the inheritance to repay but check if there are any repayment charges and factor those into the calcs.

I presume you don’t have any other debt? If you do, just the same 6% rule : pay off all high interest loans.

You already have an emergency fund so that’s great. Leave it as it is, or use a cash isa for it (but prioritise the stocks and shares isa below first - that will take 3 years’ worth of allowances).

Should you buy a bigger house? On a strict economic advice level, no. Bigger houses just mean bigger bills and tie you to always having to have the income to support them. Who knows what might happen in the future; don’t shackle yourself to those higher expenses.

Should you use the money to buy an expensive car if your current car is working fine? Absolutely not, cars lose so much value the second you purchase them and, again, bigger cars = higher running costs. It’s a liability not an investment.

Instead:

• put 90-100% of the inheritance (or whatever is left after repaying high interest debts) into a diversified global index fund like the Vanguard FTSE global one. Low fees, very diversified.
• use this year’s stocks and shares LISA and isa for the first 20k and a GIA (general investment account) for the rest then, over the next 2 years, transfer the remainder of the money into the Isas (4k each year for lisa, the rest for Isa)
• after it’s all in the ISAs, LEAVE IT there and essentially forget about it for the next 30 years. Pretend you never got the money and make zero changes to your overall spending/lifestyle.
• you should think about setting up a SIPP later - once you’ve had a chance to learn more about your current pension and what it already gives you. Maybe don’t do the SIPP yet though as it might lock away the money before you’re ready. Get all your ducks in a row first.
• With compounding your ISAs will be a fab nest egg for later and be worth several times your original investment.
• That’s it, no need for anything more complicated. IFAs tend to charge 10x the fees for worse outcomes than just doing it yourself.

There is a free YouTube course called Rebel Finance that I wished I had listened to 20 years ago. It’s incredibly helpful. I’d highly recommend you listen to that first.

This is the most amazing opportunity for you to build yourself a fund that gives you security, freedom and a great future!

disclaimer: I’m not a financial advisor and not in any way qualified to give advice - this is just my own personal tuppence worth of opinion based solely on my own experience ! Take or leave whatever you want. Do not make any financial decisions based just on what you read on Mumsnet!

Here’s the Rebel Finance course I mentioned:
https://rebeldonegans.com/finance/rfs/

It’s essentially the same info as in JL Collin’s book “The Simple Path to Wealth” (I’m guessing they were strongly influenced by him). The book is also good and easy to read for beginners , but I found the Rebel course to be much more accessible and far easier to implement for UK based people. I also found the couple running it to be really likeable!

It’s NOT a scary course and, afaik, there are no catches nor downsides to it! I have no financial background at all and found it very very helpful. The only thing is I wished I had found it years earlier.

Oh sorry, one last thought! ‘General’ advice is to keep 3-6 months emergency fund but, in your particular situation, I think the larger amounts of 2 years’ worth that you have is actually perfect. This is because you mentioned you’re thinking of starting a family.

If you have kids, you may find you need that money to make changes to your work life (eg if you take longer maternity leave than planned, or want to drop down work hours to balance with childcare etc), especially for the first few years.

Again, this is just my unqualified opinion speaking purely from personal experience here!

Rebel Finance is often recommended, but it's - like Simple Path to Wealth - very Vanguard focused. This was great advice a few years ago but there are now a lot more (and better and cheaper) low-cost DIY platforms available, and Vanguard UK has some very important differences from Vanguard US that the original advice was based on. I'm also told the couple running thencoirse don't actually use Vanguard themselves.

So by all means do the course as a means to understand investing in general, but do your own research on platforms and funds.

Damien Talks Money on You Tube is also pretty good at explaining things clearly, as is Chris Bourne (I think- will check his name). For reading rather than watching, and especially for things like comparison tables, Monevator is good.

don’t use an IFA. They rarely outperform the market and their fees massively eat into the return you make

You're conflating IFAs and fund managers. Two very different jobs. Although agree both unnecessary in this case.

Ah yes, you’re right - I am lumping them together in my head! I’m still learning about investing and eager to glean helpful advice wherever I can :-).

In your opinion, would you recommend an IFA at all or are they mainly unnecessary?

Also, v interesting info re Vanguard platform - - do you have any you prefer? I already use Vanguard for my ISA (too old for LISA) but mainly because it was easy to set up and had relatively low fees. However, I will soon have another small amount to invest (hence the interest in this thread!) so don’t necessary need to use the same platform.

I will definitely look into that course on YouTube. I follow quite a few finance experts on Instagram but haven’t paid as much attention as I now need to.

I’m not sure what the mortgage interest rate is at the moment as it’s a tracker (as we plan to sell) but is under 5% (not by much) but the mortgage is very low so I’m happy to continue with that. The new mortgage on a bigger home is unlikely to be more than your average mortgage for someone our age as we have a significant amount of equity to use for the bigger house.

The bigger house is absolutely a poor financial decision in isolation but it’s heart over head on that one.

It's hard to make a single platform recommendation, fees vary so much by your size of holding and what type of funds you buy (and how often). And whether you're at the paying in or taking out stage. The nearest equivalent to Vanguard is probably AJ Bell's Dodl - that has a similar set up with a limited fund choice, and I know a few people using it and happy with it. The others are all a bit more complex because they have a massive list of funds and also individual shares, so it can take longer to find the thing you want to invest in. Most do have some sort of shortlisting or assisted choice option though.

Things a pretty comprehensive table, and updated a couple of times a year usually. https://monevator.com/compare-uk-cheapest-online-brokers/ The best transfer offers are usually in the run up to the end of the tax year so unless you're massively overpaying on charges with your current one I'd suggest looking at this again in January or early February and seeing who will pay you most to move.

IFAs (or even better, one who's also a certified financial planner) can be useful if you have a complicated situation or need help weighing up several possible futures. But if you have a lump of money and just want some savings and a pension then they rarely add value.

Checked the name of that other YouTube channel, and it is Chris Bourne. The retirement planner one, if there are several of the same name.

Just one thing to check if you go down the private pension route look at options for ill health.

I receive an NHS pension due to ill health.

I have a small amount in NEST, the only ill health they allow for a pay out is terminal cancer, I think.

OP you sound like you have always been sensible, your mortgage is low you have an emergency fund and set yourself up nicely.

You can’t take money with you, and I feel like using some for a holiday or trip isn’t wasted.

No one on their deathbed wishes they had worked more, it’s all I wish I had travelled, took the experience or spent more time with friends / family.

Invest 80:90% of the money and be sensible like all the advice above. But use 10-20% into a high interest easy access account called holiday / fun account. If you have ever wanted to go to China / Japan / Bali this is the time. If these holidays aren’t your thing, work out what you have always wanted to do but stopped yourself. We only live once