How to spend pounds 17m

Personal Finance Editor Steve Lodge warns the Princess she will need to be canny to stay rich

It's At least as big as any unshared lottery jackpot. It's nearly 10 times what the Duchess of York got and double that awarded recently to Katina Dart who, on divorcing US burger-box tycoon Robert Dart, famously claimed her lifestyle needed an "absolute minimum of many, many tens of millions".

While any of these amounts would almost certainly see a stratospheric soaring in the standard of living of you and me, Diana's divorce pay-off - a lump sum thought to be between pounds 15m and pounds 17m, making her one of the country's richest women - may well not do a lot for hers.

In fact Diana is thought to be seriously rich in her own right already, with an estimated personal fortune of up to pounds 5m, thanks to legacies from her late father Earl Spencer, other relatives, and a series of trusts.

The pay-off, which equates to around pounds 1m for each year of marriage, could also produce pounds 1m in interest annually from a building society at current rates.

But, if anything, the settlement could force her to cut back or think of ways of earning more money (although perhaps not to the degree of poor Mrs Dart, whose solicitor said of her pounds 8.8m: "This will mean a major cut in her lifestyle. The private jet will have to go.")

The trouble for Diana, say investment experts, is the money is likely to have to last a long time. Diana is 35 and could live another 50 years or more. Spend now, and there will be less to produce ongoing income. Leave it in a building society (or upper-crust bank) and live off the interest, and inflation will take its toll. pounds 1m now could have the buying power of just pounds 150,000 by the time Diana is as old as the Queen Mother.

Diana's father, the late Earl Spencer, reportedly once said of her: "Diana doesn't understand about money." Fergie famously had John Bryan as her financial adviser some time ago.

Whoever has Diana's ear, say investment experts, should be recommending stocks and shares for a big chunk of the pay-off.

The stockmarket would give a lower income for now - starting at a mere pounds 680,000, or pounds 34,000 a month after tax on the full pounds 17m. But this option should ensure both income and value if the shares keep pace with inflation, protecting the spending power of her money.

Spending, of course, may prove Diana's problem. She is reported to have spent pounds 166,000 on "grooming" in a year, not including clothes. This covered pounds 12,000 on sports and health clubs, pounds 10,000 having her hair done, pounds 8,000 on alternative medicine, pounds 22,000 on beauty treatments and pounds 25,000- plus on holidays.

However, as well as the lump sum, her divorce settlement includes pounds 400,000 of office costs a year, a rent-free home in Kensington Palace, free police protection, use of the Royal Squadron and Royal Train, and the use of jewellery given to her as Princess of Wales. She won't own a house - which could easily set her back a few million - while a decent yacht could be out of her league (the proposed new royal yacht will cost a whopping pounds 80m, for example).

It is not clear to what extent her wardrobe and other elements of her lifestyle are freebies - nor whether they will continue. But as she put it in her Panorama appearance: "You see yourself as a good product that sits on a shelf and sells well, and people make a lot of money out of you."

Majesty magazine calculated that she generated pounds 14.5m of free publicity in a year for products and businesses she patronised, based on column- inches of mentions in the tabloids.

But without proper earnings, Diana will not be able to take out a pension plan - though she will be able to take advantage of other tax breaks to help minimise a tax bill that could top pounds 250,000 a year. She will likely yawn (don't we all) at the virtues of Tessas, Peps and National Savings, given that the limits on how much she can squirrel away from the inland revenue - a few tens of thousands - are no more than for the rest of us. Stashing her dosh offshore won't help so long as she stays in the country - she will still be liable for tax on her worldwide income. And the settlement may effectively bar anything so unpatriotic. But forestry and venture capital-style investments could offer tax shelters for hundreds of thousands of pounds a year.

Any money-making ideas are unlikely to include films about a gauche young girl who meets her prince. But she could yet make more out of Charles. Bookies William Hill is offering odds of 5 to 1 for Charles remarrying before the end of the century (Diana is 2 to 1 for getting hitched again). Diana couldn't back herself, but there is nothing to stop her backing Charles - although William Hill says in that case it would probably "close the book".

And if the whole thing becomes too much Diana could always buy an island. Abba fans will remember Agnetha - the blonde one - who became a recluse on an island after the pop group split up, having seemingly aired their romantic troubles through their songs as publicly as Charles and Diana through the media. The reclusive businessmen the Barclay twins are reported to have paid more than pounds 2m for Brechou, a Channel Island close to Sark. But an island could start at as little as a few hundred thousand pounds.

Royal manners, Real Life

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