Wealth Check: 'How should I best invest my inheritance?'
Saturday 10 October 2009
James Brewerton, 23, from Leeds is set to receive a £6,000 inheritance after his grandparents died last December and wants to know what to do with it. He works for a firm of insolvency practitioners in Leeds and lives with his partner, Emma, in a two-bedroomed apartment that the couple bought in May 2009.
"I want to make the most of the inheritance as well as being able to arrange my finances so that we can afford to move into a house within the next five years," says James. "I'm close to completing an accountancy qualification and will then get a £2,000 pay rise. My main aim is to become a chartered accountant within the next three to four years so that I can earn a guaranteed amount for the rest of my career."
Salary: £21,000 plus 10 per cent bonus each year. Also earns £100 a month from running a night club
Mortgage: £100,000, monthly repayment £515
Other monthly outgoings (jointly with his partner, Emma): £200 (food), £550 (bills, such as utilities), £859 (entertainment, clothes), £40 (savings)
Debts: £12,000 Student loan and £500 interest-free overdraft
Savings: £800 in a cash ISA
Giving advice this week are Alex Pegley of Calculis, Dennis Hall of Yellowtail Financial Planning and Gordon Bowden from Quainton Hills Financial Planning...
"James should accumulate a contingency fund in readily realisable cash deposits," advises Gordon Bowden. "He should keep at least his £6,000 inheritance on instant access deposits to cover any emergencies. A telephone or internet account at ING Direct would be ideal. The current interest rate is 3.2 per cent with instant access."
Alex Pegley suggests James should put an amount equivalent to three months' net salary in a savings account as an emergency fund. "A good proportion of this can be held in a cash ISA, avoiding tax on the interest."
"As he's not planning to use the money for five or so years, the balance of James's inheritance after putting away an emergency fund should be invested in a portfolio of collective investment funds (OEICs and unit trusts)," says Alex Pegley. He picks Jupiter's Merlin range of funds as consistently good performers.
"A shares ISA would be a sensible option, retaining tax advantages whilst investing in growth assets," agrees Dennis Hall. "Any medium-term investment should be considered as seven to 10 years, particularly for someone who describes themselves as slightly risk averse."
"It is good that James and Emma have no credit card debt or borrowings other than their mortgage, student loans and overdraft," says Gordon Bowden.
But Dennis Hall is critical of the overdraft. "Running overdrafts is not a sensible habit to get into," he says. "The banks could alter their terms at any time, and once the interest-free period is over there is no guarantee that the overdraft will be extended or have a low interest rate. James should plan to have the money available to keep accounts in the black."
James has life cover, critical illness cover and income protection in the case of redundancy. They cover his mortgage or provide a lump sum payment upon death or diagnosis of a terminal illness. Emma also has the same cover. "It sounds like James and Emma are well protected against death or ill-health, but is worth checking to whom the benefits would be payable in the event of a claim," suggests Alex Pegley. "With life and critical illness policies, we recommend using a split benefit trust. This enables the insured to receive the benefit in the event of a critical illness claim and the survivor in the event of a death claim, thereby speeding the settlement of the claim at a traumatic time."
James currently pays £28 a month into a final salary pension scheme with my current employer, with the company contributing £70. He's doing well, says Gordon Bowden. "James is in the fortunate position of being in a final salary pension scheme. This means that his long-term retirement planning is relatively secure for as long as he works at his current firm."
"But James should check exactly what type of pension he's got," suggests Alex Pegley. "If it is indeed a final salary arrangement, then he's well set at present and, as he's not looking to retire early, he can for the moment enjoy the perks of a great scheme."
James and Emma need to make wills, the experts agree "Without a will, James's assets will not go to Emma on his death, passing instead to his parents under the law of intestacy," points out Dennis Hall. "He should also make a nomination to the pension scheme trustees about where he would like his pension benefits to go in the event of his death. While not binding on the trustees, it does provide some direction."
For a free financial check-up, write to Wealth Check, The Independent, 2 Derry Street, London W8 5HF; or email firstname.lastname@example.org
Independent Partners; request a free guide on NISAs from Hargreaves Lansdown
Five Questions: Changes to car tax discs
A student's guide to financial survival: You don't have to drown in debt at university
How to save money: UK is crashing down the European league table for putting money away
Two million first-time buyers are locked out
Mark Dampier: When even safety first is a risk, go for income and capital growth
- 3 Oil tanker with $100 million cargo goes missing off Texas coast
- 5 Medina: Saudis take a bulldozer to Islam's history
Robin Williams Emmys tribute led by Billy Crystal criticised for including 'racist' joke about Muslim woman
The Rotherham child abuse scandal is a tale of apologists, misogyny and double standards
Scottish independence TV debate: Pumped-up Alex Salmond bounces back in bruising second round against Alistair Darling
Do you realise just how foolish the UK looks?
Ukip Douglas Carswell defection: Tory MP jumps ship to join Nigel Farage
When elitism grips the top of British society to this extent, there is only one answer: abolish private schools
- < Previous
- Next >
iJobs Money & Business
£50000 - £80000 per annum + benefits+bonus+package: Harrington Starr: Data Sci...
£450 - £500 per day: Orgtel: SAS Business Analyst, London, Banking, Credit Ris...
£32000 - £38000 Per Annum Bonus, Life Insurance + Other Benefits: Clearwater P...
£200 - £250 per day + competitive: Orgtel: KYC Analyst, Key Banking Client, Bi...
Day In a Page
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony