Why you should invest an inheritance in a pension

A friend of mine expects to receive a modest windfall from an inheritance. Their now-deceased relative was sufficiently twice-removed to make the money both unexpected and also unencumbered with emotional baggage. (Notwithstanding my envious side-eye…) “Well, I’d put it in a pension,” I said. Just because the money had effectively fallen out of the sky, that doesn’t mean they should flush it down the toilet. “Of course,” I continued, “I am not your financial advisor. Everyone’s situation is different so seek professional advice if you need it.” Now it was my turn to get the side-eye. “Also,” I whispered, leaning in, “Your capital is at risk, and you may get back less money than you started with.” My friend did not get the joke. But they did buy me a coffee to hear more. Why invest an inheritance in a pension? My friend expects to receive about £30,000. That’s a significant amount of money for most people, but not a life-changing one. Certainly not if they blow it on a car and a luxury…