How to invest a £184m Euromillions win



We’ve all day dreamed about winning the lottery and what we would do with the jackpot. That dream has come true for a lucky couple from Gloucester.

Joe and Jess Thwaite scooped a record-breaking £184,262,899 with a Lucky Dip ticket on the draw on May 10.

The winners of Britain’s biggest Euromillions lottery jackpot revealed that the first thing they bought was a wardrobe. Beyond the first impulse purchases, most people would not know where to start when it comes to investing £184m.

where to start

Most lottery winners want to share their newly found fortunes with family and friends. So before investing their money or creating a financial plan, you should first figure out how much you want to give away.

One priority should be to pay off any outstanding debts where possible, particularly as the cost of borrowing has risen sharply. Buying property has been top of the list for many winners, and Mr Thwait was no exception. The Euromillions winner said he had been searching for homes of all prices online.

It’s only natural to want to go on a spending spree when winning a life changing sum of money. But winners should first work out what they want to spend now, including money for family, paying off debts and buying property.

Only then can you figure out how much you want to invest for the longer term and how much you want to take as an income and live off each year.

It may be easier to split the money into various pots according to your goals, such as one for the children, one for yourself to live off and one for business investments.

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What to invest in?

Like all investors, before choosing specific investments, it’s important to decide how much risk you want to take, why you are investing and which areas have the best prospects for long-term growth, Laura Suter of AJ Bell, the stockbroker said.

Invested in the right way, someone with £185m could generate an income of £9.25m every year without ever touching the initial winnings, assuming 5pc returns, she said.

“If you wanted to target £1m of income a year to live off you’d only need to generate a yield of just over 0.5pc, which you could get in a cash account,” she added.

However, investing is crucial because any money left in a cash account is at risk of being quickly eroded by inflation. The average easy-access cash Isa rate now stands at 0.45pc, compared to 0.22pc last May, according to Moneyfacts, an analyst. However, inflation hit 9pc in the year to April. This means that every £1m saved in the average cash Isa would effectively lose £6,500 of its purchasing power each month.

Cash accounts are unlikely to be a viable option for those with hundreds of millions of pounds. Just £85,000 with each bank is protected by the Financial Services Compensation Scheme. Splitting £185m into 170,000 chunks is a near impossible task, Ms Suter said. “The compensation scheme does have protection for temporarily high balances, to cover situations exactly like this, but it still only goes as far as £1m per organization for up to six months,” she said.

When it comes to investing, it’s important to identify the goals of each investment pot. Those wanting to generate an income to live off should focus on income-generating funds and stocks.

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Construction firm Persimmon and mining company Rio Tinto are expected to be the highest paying stocks in the FTSE 100, an index of Britain’s largest companies, producing estimated dividend yields of 11.2pc and 10.1pc in 2022, according to AJ Bell.

Navigate taxes

Lottery prizes are all tax free initially but that money will soon become taxable once you start to use it. Taxes will soon become a big factor for all winners, Ms Suter said.

Anything generated in interest or investment income will be taxable, as will capital gains and the wealth will eventually be subject to inheritance tax.

Savers can invest up to £20,000 into an Isa each year and while this may seem a high allowance to the average investor, lottery winners will soon hit that ceiling. It would take 4,625 tax years for a couple to stash £185m in their Isas, Ms Suter said.

“What’s more, high earners have a lower pension allowance, so each individual can only put £4,000 into their pension when they earn £312,000 a year or more, so that won’t help much,” she said.

More tax-efficient investment, such as enterprise investment schemes or venture capital schemes may serve winners better, she added.


www.telegraph.co.uk

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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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