Martin Lewis has warned people managing large sums of inheritance of a key deadline before they lose protection on their savings.
The money saving expert, 51, addressed viewer queries on This Morning, including one person seeking guidance on managing an inheritance from the sale of their late parents’ house.
Speaking to presenters Alison Hammond and Dermot O’Leary, Martin explained that there is a special rule for those with inheritance that protects up to £1 million for six months.
However, if you have been sitting on the funds for over six months, you will need to transfer it into multiple savings accounts in order to protect all of the cash.
He also said that while you are deciding what to do with the money, it is important to make sure it’s earning maximum interest, which should be around 5 per cent.
Speaking to a caller named Rachel, the personal finance guru acknowledged her personal situation after she revealed she is battling mental health issues.
‘Not having money and having money can be stressful too when you don’t know what to do with it,’ he sympathised.
The money expert explained that savings are usually protected up to £85k, but an exception made for those storing inheritance.
‘Normally, any money in savings is protected up to £85k per person, per financial institution, under the FSCS [Financial Services Compensation Scheme].
‘But there is a special rule called the Life Events Rule, which if you sell a house or have an inheritance, it means you’re protected up to £1m in one financial institution for six months.’
Although those with over £1m will need to spread their money around – and it will still be protected for six months.
Martin said that while deciding what to do with the funds, it is important to make sure it’s earning maximum interest.
‘The top paying easy access account at the moment is the Coventry Building Society – 5.1 per cent interest – you can put up to £25k in there.
‘Because you have life event protection, in the unlikely event that something were to happen to the Coventry Building Society, all money would be backed up by government under the FSCS.’
The money saving expert was discussing managing an inheritance
Martin Lewis was answering viewers’ questions on Tuesday’s This Morning
Additionally, the 51-year-old stressed the importance of transferring the funds into an account with maximum interest, which should be around 5%.
However, if you have been sitting on the money for over six months, you will need to transfer it into multiple savings accounts.
‘If you’re past six months, you’ll need to put it in chunks of about £85k in different top savings accounts – there are guides online.
Martin strongly advised that those with limited experience should seek guidance from an independent financial advisor.
‘I would usually recommend Debt Crisis Help which is free, but if you’re young and have a large amount of money but no idea what to do with it, paying for a regulator financial advisor is a good thing.’
He also suggested asking friends for recommendations or using an unbiased website to find a local independent financial advisor in your location.
‘I would write them [the advisor] a letter telling them that you are vulnerable because it’s important that that is noted.
‘If you do have a trusted friend, even one who’s not particularly good with money but that’s just quite sensible and could hold your hand when you went, then you might want to take them with and get them to help you through this.’
Martin encouraged the caller to remain positive, saying: ‘What you’ve been through is a bad situation but the fact that you have some finance behind you is a good situation.’
He added: ‘Of course you will want to clear any expensive debts you’ve got as well.’
