How can my inheritance support the Covid recovery?
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I’ve received an inheritance of £50,000 which I may use to refurbish my house when I retire. In the meantime, I would like to invest it and support the government to help the country recover from Covid-19. Are there government schemes where I can put my money that will give me interest?
Phil Beck from Smith & Pinching responds:
There are two primary routes for investing that will support the government: products from National Savings and Investments – known as NS&I – and Government Gilts. The suitability of each route will depend on your circumstances and financial goals, so I strongly recommend that you get independent financial advice before making a decision.
NS&I is a state-owned bank currently offering five different ways to save (plus a Junior ISA) – see www.nsandi.com. To choose which is most suitable for you, you’ll need to understand what interest rate is payable, how the interest is paid, if the rate is fixed or variable, if there’s a fixed term involved, any tax payable on the interest and any restrictions on how much you can pay in or take out. They also vary according to how the account is managed and accessed: some provide online access only, for example.
Savings products include Cash ISAs, Income Bonds, Direct Saver Accounts and Investment Accounts. Interest rates are currently low: you should expect returns of no more than 0.15%, although this may vary.
There are plans for NS&I to issue “green savings bonds” later this year with the aim to raise funds for government-sponsored green projects. They will have a three-year fixed term. Details about the interest rates on offer are yet to be published but are expected to be attractive.
You might also like to consider Premium Bonds which, while not offering interest on your savings, do have the potential to deliver a more significant return via the prize fund, although this isn’t guaranteed.
Gilts are fixed-interest securities issued by the government to raise funds. They pay a fixed rate of interest over a fixed period of time. Typically, the longer the period you agree the government should have your money, the higher the rate of interest that will be offered.
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Importantly, there is a secondary market for gilts so you may pay more or less than the nominal value of the gilt and its maturity date will be sooner. They normally offer a higher rate of interest than most savings accounts. Gilts are complex so I recommend you take advice before going down that route.
Any opinions expressed in this article do not constitute advice. The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.
For more information, please visit www.smith-pinching.co.uk