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Investing an inheritance

Louis Coke


If you are lucky enough to have received an inheritance this may raise some questions as to how best it should be looked after. Charles Stanley & Co. Limited is expert in managing wealth and I will outline below some of the considerations:

·         Repaying debt

You should consider repaying any short term debt or credit card balances.

·         Investing for future generations

If you have funds to spare, you may wish to invest some of the inheritance for your children. If they are minors (aged less than 18) and UK resident they may be eligible for cash or stocks and shares Junior ISAs. If they are aged 18 or over there are a range of tax-efficient ISA wrappers available. You could even consider contributing to a pension for them.

·         Inflation erosion

Inflation erodes the real value of money over the long term. We are all aware that inflation levels are currently higher than the levels of interest available on bank deposit accounts. This means that £1 in a few years’ time will not be able to purchase as much as £1 today. If you wish to combat this you may wish to consider another type of investment.

Risk Appetite

To potentially achieve a greater return than a cash deposit, all or some of your capital is at risk and is exposed to potential losses. Generally, if the level of investment risk is low, your return is also expected to be low, whereas if the level of investment risk is high, there is greater potential for a better return and a bigger loss.

·         Investment time horizon

You should think about the length of time before which you will need to withdraw from your investments. The longer the timescale, the longer you have for market fluctuations to even out and, potentially, the more risk you can afford to take. This is why many people turn to assets other than cash to help grow their capital and meet longer term objectives such as retirement. If your investments fall, you may need the courage to stay invested to give yourself the chance to recover rather than realise losses.

·         Tax efficiency

You should think about using tax-efficient investments such as an ISA. The 2017/18 ISA allowance means that every adult in the UK can invest up to £20,000 in a Stocks and Shares ISA.  ISAs are free from income tax and capital gains tax.

·         Flexibility

You may wish to consider the accessibility of your funds. This is important should you wish to withdraw a portion or invest more. This may be important if your long term plans are uncertain and you may wish to have access to some or all of the funds quickly in the future.

·         Investment Types

You may wish to consider the following types of investments amongst others:

o   Cash. This is the safest and most liquid form of investment provided you remain within the Financial Services Compensation Fund’s deposit compensation limits of £85,000 per person per firm. See the FSCS website for details.  Cash returns are currently mediocre and will be eroded by inflation.

o   Pension top-up. If permitted, you may wish to consider adding to your pension or starting a new one. This can offer income tax relief and any capital gains or income generated within your pension are tax-free.

      The tax treatment of pensions depends on individual circumstances and may be subject to change in future.

o   Equity Investments. These are potentially the most flexible because portfolios can be constructed at a suitable risk level and over a range of time horizons. In addition, the majority of equity based investments are relatively liquid so you can have access to some or all of your funds, as required. Investments can also be organised to make full use of any tax allowances and wrappers such as ISAs and pensions. However, returns are likely to be more volatile.

      The value of investments and the income derived from them may fall as well as rise and you may not receive back the amount you originally invested.

·         Seek regulated financial advice

Charles Stanley is experienced in managing wealth for individuals and families. If you have £200,000 or more to invest and would like some further advice please do not hesitate to contact us.

Happy investing!


The information contained within this article is based on our understanding of current UK tax provisions, which is subject to change, and the benefits of which would depend on your personal circumstances.


Louis Coke

[email protected]

01483 230824


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