Financial Advice with Lucy McKinley: Investing a Cash lump sum
The thought of investing money can be daunting, especially if you’ve never had any experience of investing. Lucy McKinley explains how The IFA Company recently helped a couple with advice on investing a cash lump sum.
Chris and Mary came to The IFA Company for advice on what to do with a large cash lump sum. Mary had recently retired and received the lump sums from her pensions and they felt unsure of the best way to use the cash for their future.
First, we assessed Chris and Mary’s financial situation and discussed their objectives for their money. They had paid off their mortgage when Chris retired a couple of years earlier and had built substantial cash savings while they were both working. They were keen to have money available to enjoy their retirement and treat their family, but they were also concerned about passing on some of their wealth to their children.
We advised Chris and Mary to invest a lump sum rather than keep it as cash in a savings account. The capital growth achieved by investments means that they provide the potential for much higher returns than cash over the long-term. Capital growth also allows for investors to take withdrawals from their investments without eroding the capital value. Chris and Mary didn’t need to take income from their investment, but they thought they might draw out lump sums to pay for large expenses such as family holidays.
We recommended that Chris and Mary use tax wrappers to make sure the value of their investments wasn’t eroded by unnecessary tax liabilities. We advised that they invested in an investment ISA each and a joint investment bond. This meant that their investments were immediately sheltered from income and capital gains tax.
Finally, we assessed Chris and Mary’s attitude to investments risk and investment preferences. This helped us to recommended investments funds that are suitable for their circumstances and objectives, at a level of risk that they felt comfortable with. Chris and Mary chose an ongoing service, so we arranged the purchase of their investments and provide ongoing advice and written annual reviews.
It’s important to remember that the advice we gave to Chris and Mary will not be suitable for everyone.
If you’re considering investing a substantial part of your wealth, you should seek professional advice.
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