What’s The Safest Way to Maximise Returns On a Cash Lump Sum?
Say you’ve just won a decent amount of cash at an online casino, you inherited a lump sum, or your work gave you an excellent severance package and you want to get the biggest return on that money, how would you do that most safely? In this blog, we’re going to explore the safest ways to maximise returns on a cash lump sum. Disclaimer: This blog is for entertainment purposes only. For accurate financial advice, consult an Independent Financial Advisor (IFA) who will recommend the best financial product for your needs.
OK, so what is our advice then?
Consult a Financial Advisor (IFA)
IFA’s are professionals who offer advice on financial matters. They will be able to tailor their advice to your particular circumstances and the outcome you want to achieve. To work as an IFA in the UK, you have to register with the Financial Conduct Authority (FCA), and it’s a heavily regulated industry. That means that the advice you get is likely to be good. If it isn’t, you can take them to court and recover losses, but only if you can prove that you lost money due to poor financial advice.
Through the grapevine, I know an IFA who allowed another person to use work under their licence. That person then gave someone bad financial advice to a client and the client sued the IFA for £400k. However, I wouldn’t say that getting bad advice on financial products is a safe way to maximise returns on a cash lump sum. Only visit an IFA if you already have a cash lump sum.
Remember, you’ll have to pay for an IFA, and they can be quite expensive. But it’s definitely worth it when you’re looking to maximise returns on more than £15K.
Put it in a savings account
Savings accounts are offering terrible interest rates right now – barely any banks offer more than 2%, and even then, those are regular savings accounts, which mean you have to pay in every month and you can’t withdraw money until after a fixed term, usually 12-months.
The best option for a lump sum savings account right now is probably a fixed-rate cash ISA. You can get a return of as much as 1.15%, which sounds rubbish, but is actually good for the current climate. Another bonus to ISAs is that any interest you make is usually tax-free.
The biggest advantage in putting your cash in a savings account is that it is relatively risk-free. Even if the bank goes bust, as long as you’re using a UK bank account, the government guarantees £85k of your money (and this doubles for joint accounts).
Premium Bonds are sort of like a lottery, but you don’t ever lose money. This is because the winnings come from the collective interest of everyone’s bonds. For example, say everyone in the UK bought 1 premium bond. The government would have £66m and they make interest off that. That interest is where the winnings come from. Everyone is entered into a draw and then an RNG selects winners. Prizes range from £20 to £1m and there’s one draw per month.
Premium Bonds do not guarantee a win, so you might not make any money from your Bonds. But even so, your money is always safe, and the odds of winning are pretty good. The more Bonds you have, the better your chances. You have an average chance of winning back a return of 1%. If you’re an unlucky type of person, you might not win anything, but if you’re the lucky type, you might win as much as £1m per month for 12-months (extremely unlikely, but you never know!).
Summing it up
In sum, the safest way to maximise returns on a cash lump sum is not going to make your rich anytime soon. The way to riches is to take risks, but risks are also the way to ruin – ask any problem gambler.