Invest or save or something else?

[AnythingConsidered]

Without going into the reasons why, I will be shortly receiving 3 x lump sum amounts of money:
Sept 2020 - £115k
Sept 2021 - £115k
Sept 2022 - £70k

These values will all be subject to income tax (average 32%), so I know I need to keep money aside for the tax bill (via self assessment) in the subsequent years.

I am the sole earner, will be out of work from end of Oct & am expecting it to take 9-12 months to find an equivalent role. My payout from redundancy should cover this if we are frugal (which we can be), but if recession hits as badly as is predicted, it could be much longer (& ignoring the fact I could accept other roles at lower salary if needed)

So my question is, where do I put the money to get the best return, whilst having the ability to pay the tax when due? Or worst case scenario, draw down to live on if I can't find work in 12 months?

Also, how do I deal with the max amount protected in institutions at one time?

Looked at saving accounts & rates are low/hit the institution issue.

Considered investment through a wealth advisor but access to the cash is limited, it's designed for long term investment & returns aren't that great on our current very small portfolio. Oh, & I always feel like I'm sold too/they're only interested in making their commissions.

Even looked at NSI savings bonds as at least that would be safer than the mattress!

Once I have a new role with some stability, we will consider what we actually do with the money after the tax is paid, but for now, any advice? What would you do?

If you need the money to live off over the next few years, forget about investments. The stock market is likely to be very volatile over the next few years and you don't want to be taking money out when prices are low so you lose money.

Best thing to do is just stick it all in NSI income bonds, they pay the best rate, instant access and is 100% guaranteed by the government, so you don't have to worry about breaking £85k limits.

You could put £50k into premium bonds as the payout rate is currently 1.4% so you should get prizes more or less the same as you would in interest, and you might even win a much bigger prize.

You could also look at fixed term savings for some of the money as you might get a slightly better rate, but need to consider when you'll actually need the money.

However, if you have a mortgage and the rate is above 1.15%, you could use some of the money to overpay/payoff your mortgage, subject to any limits on overpayment. Obviously keep back what you need to live on and pay the tax bills.

I'd do exactly what Barbara said. Was going to write the same thing!

They say with investments, you need to be looking at putting money away for at least 5 years, anything less means you are more at risk of having to take a loss.

But if you do think that you probably need it in the short term then I would go to somewhere like money saving expert website and find the best savings rates. Split it between several accounts so you don't go over the protection limit for savings and leave investing until you get that new role.

NSI income bonds,

This .

This is fantastic, thank you everyone for your advice. Will check at NSI account.

@BarbaraofSeville mortgage comment has made me think. We have an offset mortgage. I wonder if we should put it into the linked savings account and use it to reduce the term? I need to go away and investigate that option too

Do you need to pay off any of your mortgage soon? And if so, when does your fixed term end? If soon, I would pay some of your mortgage off as I reckon interest rates will massively rocket and this could be an issue if you haven't found an equivalent role. Not your typical way to "invest" but it kinda is if interest rates rocket - get the mortgage down now!

Sorry just read someone else has mentioned the mortgage too. We are about to take out a 5 year one and will be paying off the maximum in those 5 years, as we will be stung massively once the 5 years is up.

We don't want to take out a 10 year one as we will be saving less in that time (and would rather build up as much equity as poss, and use it to pay off the maximum each of the 5 years)