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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

Splicing up the pot to get on the housing ladder and to earn big from the stock market
Thursday 18 Mar 2021 Author: Martin Gamble

This is the latest part in a regular series in which we will provide an investment clinic based on hypothetical scenarios. By doing so we aim to provide some insights which can help different types of investor from beginners all the way up to experienced market participants.

Mary has just inherited £50,000 after her grandmother died, and the 38-year-old is thinking about two ways to spend the money. She would like to invest some in the stock market and double it in value in the next 10 years. She is also keen to get on the housing ladder.

She regularly puts money aside into cash and investment ISAs, already has £6,000 saved for emergencies and hasn’t got any credit card or personal loans to pay off.

She is happy to put the money in the stock market in the hope it will grow but doesn’t want to take excessive risks.


Mary could consider taking advantage of the Government’s new mortgage guarantee scheme where lenders are being encouraged to give mortgages that only need a 5% deposit on  a property.

The maximum value for a house purchase under the Lifetime ISA is currently £450,000. Mary has her eye on a £200,000 two-bedroom house in Yeovil so she would need £10,000 for a deposit.

She can benefit from the current stamp duty holiday because the purchase is less than the £500,000 threshold which remains until 30 June 2021. From 1 July the threshold drops to £250,000 until the end of September. Stamp duty then returns to the usual level of £125,000.

Even though Mary already has enough cash for a £10,000 mortgage, she could get £1,000 of that amount for free simply by putting £4,000 into a Lifetime ISA.

A Lifetime ISA account can be opened by anyone aged 18 to 39. Up to £4,000 can be paid in each year and the Government will add 25% to the value of any contributions annually until the account holder reaches age 50.

The scheme is primarily intended to help first-time buyers accumulate a deposit for a house purchase, but it can also be used for long-term savings. If you’re not buying a first home and are not terminally ill then taking out the money before age 60 will incur a 20% charge, rising to 25% from 6 April 2021.


Mary could take the £5,000 in the Lifetime ISA (her £4,000 plus the £1,000 Government bonus) and put it towards the £10,000 deposit. The remaining £5,000 could come from her inheritance and she might also want to consider allocating a further £5,000 to cover any extra costs from moving home such as legal and survey fees, and any urgent bits that need fixing in the new property.

In total she would have used up £14,000 of the £50,000 inheritance by this point. That would leave £36,000 to invest in the stock market.

Mary hasn’t used any of her 2020/21 allowance prior to depositing £4,000 in her Lifetime ISA, which means she has £16,000 allowance left to use across other types of ISAs in the 2020/21 tax year. She only needs to wait a few weeks before the new tax year starts on 6 April 2021, upon which she can invest the remaining £20,000 in a Stocks and Shares ISA.

It would take about 10 years for her to double the £36,000 from the inheritance put in an ISA, assuming a 7% annualised return.

She could hit the goal sooner by transferring £4,000 each year from her Stocks and Shares ISA to her Lifetime ISA to keep collecting the £1,000 Government bonus each year until she reaches age 50.

The downside is that the Lifetime ISA money is locked away until she is aged 60, so Mary would need to consider whether she would want to access the money before this age. If so, she would be better suited to keeping it in a Stocks and Shares ISA where there are no withdrawal restrictions.


Of all the available liquid assets in which to invest, shares have provided the best compound annual growth rate over the long run.

According to research by Credit Suisse, since 1900 the annualised return of US shares has been 9.6% a year compared with 4.9% for US bonds. Global shares delivered slightly lower return of 8.3% a year.

While history is supportive of Mary’s ambition to double her money over 10 years, there have been rare occasions when 10-year returns have been negative, notably in the 1930s and the    late noughties.

One option for Mary is consider the £2.2 billion Fidelity Index World Fund (GB00BJS8SJ34) which tracks the MSCI World index, giving broad geographical spread at a competitive cost of just 0.12% a year.

This tracker fund provides diversified exposure to thousands of companies around the globe, effectively spreading risk as well as benefiting from faster growing regions than the UK.

DISCLAIMER. This article is based on a fictional situation to provide an example of how someone might approach investing. It is not a personal recommendation. It is important to do your research and understand the risks before investing.

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