I am about to receive between £20,000 and £35,000 from an investment, which is being released from the official receiver 22 years after being discharged from bankruptcy. I’m disabled and receive the DLA (Disability Living Allowance) at the highest rate and mobility at the middle rate, but both are under review at present. My wife receives the state pension. We own our home mortgage-free. I want to split the money into four lump sums and invest it in different accounts covering short notice, medium- and long-term fixed-rate savings, but I don’t want to lock any part of it away for more than five years. I don’t want to risk the money and don’t need to worry about using Isas as I earn less than the personal allowance. Can you offer advice as to where I should invest my money?
I would use your Isas as much as possible, as they are tax-efficient allowances. You don’t know what the future may hold and while you aren’t earning enough to pay income tax at the moment, that could change in the future. Once your money is in an Isa, all future returns are tax-free regardless of how your circumstances change. Also, if you died before your wife she would have an additional Isa allowance equivalent to the amount in your account, so the money continues to enjoy tax-free returns. See the table on the opposite page for current best cash Isas.
If you do not want to subject the new money to any investment risk, your only option is to hold it in cash rather than investment funds that could fluctuate in value. Therefore, I would keep it all very simple. I would put the first £20,000 into an instant-access Cash Isa. The rest – if any – I would put into a 12-month fixed-interest deposit, so that this time next year when it matures you could put the proceeds into an Isa – either your existing one, or a separate one for a fixed 12 months.
Francis Klonowski is principal of Klonowski & Co in Leeds