Your Money: Windfall Special - How not to blow it

Speak to the experts and you will find there is no single answer to your financial questions. Simon Read asked three independent financial advisers what to do with pounds 5,000 in windfall shares and the deposit no longer needed to be left with the demutualising society once the windfall has been assigned

Pay off the overdraft, credit cards and loans

Robert Guy, technical director at the independent financial advisers John Charcol, favours first paying off debts.

Getting a windfall is is similar to someone getting an inheritance and I would suggest a client should follow the same procedure as they would if they had inherited a lump sum. The first thing to look at is short- term debt reduction, such as paying off an overdraft, or credit cards, personal loans or any HP agreements you may have.

That's a good use of the money as it will reduce your outstanding debts in the long term. Financially I think it make the most sense and means you'll be doing some some real good with your windfall.

If there is cash left over I would take a close look at a client's circumstances. I tend to take opportunities in tax relief order and would therefore look at pensions first. I would consider the scope of making a one-off payment into a pension to get the full tax relief, which would give a real long-term benefit from this windfall. Then I would look at Tessas and PEPs, for those people who are prepared to tie up the cash for any length of time.

Go for one of the remaining societies and hope

Simon Holt, managing director of Skipton Financial Services, independent financial advisers owned by the Skipton Building Society, also advises looking out for potential future windfall bonuses.

As a short-term investment I would recommend choosing one of the mutual building societies. A recent Which? survey highlighted the typically higher rates paid by the mutuals, and this would also give the opportunity for further windfall bonuses if the society subsequently demutualises.

For the longer term I would suggest considering the AIG Bonus Bond, which is a six-year investment with minimum guaranteed growth on maturity of more than 5 per cent each. The bond offers a maximum potential return of 16.25 per cent for each year that the FT-SE 100 index and the American S&P 500 index do no fall. There is a small initial charge of 2 per cent payable on the bond, but the combination of guaranteed returns plus potential of stock market linked extra growth makes the product suitable for a cautious investor. I would also recommend a look at PEP investments.

Despite some predictions to the contrary, the UK stock market has reacted favourably to the change of government. Although most PEPs are linked to the stock market, some providers, such as Legal & General, offer capital returns on their PEPs at the end of five years, with potential for real profit if the markets rise.

For those not requiring capital guarantees I would suggest a balanced- risk PEP such as the GT Income, which has an excellent long term performance record under the fund management of Nick Train.

Try an income bond for a long-term investment

Stephen Dight, an independent financial adviser with Grosvenor Financial Services of Henley-on-Thames, says any strategy he proposed would depend on the individual client.

If anyone had sold their shares then it would suggest they are a conservative investor. So I would suggest a strategy which broke down between long- and short-term savings. If they want fairly immediate access to their money then the building society is still a logical home.

It might be interesting to put the windfall cash in a few different building societies to have another go, as it were, at benefiting if any of them decide to go public. For that reason it does not make any sense to leave the cash in those building societies which have already issued their shares.

If a client was more interested in tying things up for a longer period I would suggest a guaranteed bond or income bonds or even National Savings. The bonds issued by insurance companies look good at the moment. Scottish Mutual, for instance, has just launched a 10-year bond which looks quite attractive.

If a client were to go the equity route I would suggest a PEP such as the Skandia Multipep because it divides the function between PEP provider and fund manager and therefore gives much more choice and spread over the investment funds available.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Editor-in-chief - Financial Services - City, London

    £60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

    £25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

    Guru Careers: Management Accountant

    £27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

    Guru Careers: Project Manager / Business Analyst

    £40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

    Day In a Page

    General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

    'We will not sit down with Nicola Sturgeon'

    In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
    VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

    How ordinary Britons celebrated VE Day

    Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
    They came in with William Caxton's printing press, but typefaces still matter in the digital age

    Typefaces still matter in the digital age

    A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
    Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

    'Missing link' between Earth's two life-forms found

    New microbial species tells us something about our dark past, say scientists
    The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

    Pan Am Experience: A 'flight' back to the 70s

    Tim Walker checks in and checks out a four-hour journey with a difference
    Humans aren't alone in indulging in politics - it's everywhere in the animal world

    Humans aren't alone in indulging in politics

    Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
    Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

    Crisp sales are in decline

    As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
    Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

    Ronald McDonald the muse

    A new wave of artists is taking inspiration from the fast food chain
    13 best picnic blankets

    13 best picnic blankets

    Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
    Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

    Barcelona vs Bayern Munich player ratings

    Lionel Messi scores twice - but does he score highest in our ratings?
    Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

    Explosive batsman who sets the range for Kiwis' big guns

    Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
    General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

    Miliband's unlikely journey from hapless geek to heart-throb

    He was meant to be Labour's biggest handicap - but has become almost an asset
    General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

    On the margins

    From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
    Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

    'This is the battle of young Egypt for the future of our country'

    Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
    Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

    Why patients must rely less on doctors

    Improving our own health is the 'blockbuster drug of the century'