What should you do with your injuries compensation money?
Of course, the money has been awarded to you to cover the costs directly resulting from your injury. These would include, for example, private medical treatment you have sought in addition to or instead of NHS treatment, say rehabilitation therapies that the NHS would not normally provide. It would also cover your loss of earnings and care and support services you need whilst incapacitated. The point is you may not need to spend it all at once and your “award pot” needs to be earning interest, if possible, until you draw it down.
Savers have been kicked into the long grass over the last five years, clobbered by the double whammy of dismal interest rates and a biting inflation rate. Inflation is a real concern, because the injuries compensation award you have just been paid will progressively drop in value and you will notice it. However, there are some options which soften the blow to some extent.
Some current bank accounts and ISAs are paying as much as 3% and the average is 2%, so shop around. The advantage is you still earn interest while your cash is available to you.
Savings accounts are paying between 2% and 3% but you have to lock your money away. If you are certain that you are not going to need some of that injuries compensation award for 12 months, you could do this.
NSI Government-backed Premium Bonds hold out the promise of a win, but you earn no interest at all. However, any win is tax free. The return for the average PB holder is between 1% and 2%, and of course, you might hit a big one. You can cash in your bonds at any time.
Peer-to-Peer lending is a new financial instrument set up as an alternative source of lending to the banks. Investors looking for higher returns can achieve as much as 8% p.a. interest on a loan. The downside is that the capital is not secured, so the loan carries a risk. Some lenders do offer certain protective strategies, but it is wise to check out exactly what the deal is and not to risk more than you can afford. The bottom line is to remember what your injuries compensation money is for and to invest it accordingly.
Date Published: March 12, 2013
Author: David Brown