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How to Invest £100k – Best Investment Options for £100,000

Careful consideration is required when deciding how to invest £100,000. £100k is a significant amount, and with careful planning, this could provide you with a supplementary income, or you could grow this sum to provide for a comfortable future.

How to Invest £100000

Of course, investing is a highly personal journey and no two circumstances are the same. You may be considering the safety of cash savings accounts where your money can earn interest and grow, free from any of the risks associated with investing. However, this is not always the most suitable option, and the current financial climate has given rise to interest rates that have fallen as low as 0.1%, well below the current rate of inflation, which means that your money will actually lose value over time, tucked away in a savings account. This leaves all savers struggling to find inflation-beating returns, which is much more likely if you were to invest your cash.

How much interest does £100k earn?

Interest rates are currently at an all-time low, however, if you are wondering how much interest £100k could earn in savings rates in a bank account then here is an example. It would still be advisable to use a cash ISA in order to avoid capital gains tax and the best interest rate for a cash ISA is currently 0.75% on a two-year fixed term. At the end of the two years, your money would have grown to £101,505.63. Conversely, the same sum in an investment account with a return of 5% would be worth £110,250.

As you can see, investing your money under these circumstances will give you greater returns. So what’s the best investment option for your money and where should you start?

Remember that before you even consider investing your money in the stock market, you will need to be happy to leave it for a minimum of five years. If you require access sooner than this, then investing isn’t the right course of action for you.

Identify your attitude to risk

All investing comes with a degree of risk, however, this can vary significantly depending on the investment portfolio. Generally speaking, the younger you are, the more risk you can assume as you have time to ride out any volatility in the market. Remember, the rule of thumb is that the less risk you assume, the less your returns are likely to be so you need to take your investment goals into consideration. If you are having issues identifying the risk tolerance that might be suitable for your circumstances, then this is an area a financial adviser will be able to help you with.

How to invest £100,000 for the best return

Getting the best possible return for your money, without assuming too much risk, is the aim for most investors. Careful use of tax wrappers and government bonus schemes is likely to throw up the best immediate returns before you even start investing the cash.

An investor aged between 18 and 40?

If you are an investor between the ages of 18 and 40, then one of the best starting point to get an immediate return from a sum of cash is to deposit it into a Lifetime ISA.

The good news about Lifetime ISAs is that they attract an immediate 25% government bonus, which means that although the maximum amount you can deposit is only £4,000 in any given financial year, this amount will give you an immediate return of £1,000. Investors will struggle to obtain this kind of return from any other means and this is before you have even invested the cash. The government will continue to pay this bonus each year until you reach the age of 50, which means that if investors continue to pay the full £4,000 into your account each financial year, you will receive a total of £32,000 in “bonus” money.

The bad news about Lifetime ISAs is firstly the aforementioned limit of £4,000 per financial year for deposits which means that the vast remainder of your cash will need another option. The other downside is that the money in your Lifetime ISA can only be used to purchase your first home or accessed for your retirement when you reach the age of 60. Any early withdrawals will incur a 25% penalty so this option definitely isn’t appropriate for investors who might need their money sooner than this.

Our best in class for Lifetime ISA providers is AJ Bell who supply a great range of ready-made investment funds as well as competitive prices. You can manage your Lifetime ISA on the go with their innovative mobile app and they are able to cater to all levels of experience when it comes to investing.

Stocks and Shares ISA

In an ideal world, you would put your first £4,000 into the Lifetime ISA and a further £16,000 into a stocks and shares ISA which would bring you up to your £20,000 ISA allowance for the year. A stocks and shares ISA allows you to invest your money free from any capital gains tax which is ultimately good news for your bottom line.

People over the age of 18 can open a Stocks and Shares ISA, however which one you open will depend on how much help you need with your investments, whether you would like to do your own trading, and what you are looking to invest in.

Nutmeg’s Stocks and Shares ISA has 0% management fees for the first 6 months


One of our top picks for a stocks and shares ISA is with Nutmeg, a market leader with a full eight-year track record on their investment portfolios published on their website showing a +5.7% annual return. Nutmeg are also offering 0% portfolio management fees for the first six months on all new accounts, and have a full suite of expertly designed portfolios as well as a great range of investment options to match all risk levels. They offer both a mobile app and desktop platform and if you really want to keep things simple they also offer a Lifetime ISA so you can move money easily and quickly between your accounts.

Self Invested Personal Pension (SIPP)

Investing in a pension has two major benefits. Firstly, you are investing in your future and it’s important that you can feel confident about your financial security in retirement. Secondly, there are generous tax benefits associated with investing in a pension as you can claim back tax relief to the value of your income tax band. This means that a basic rate taxpayer who pays £8,000 into their pension will receive £2,000 in tax money, bringing the total to £10,000.

It’s important to note that you can only pay up to £40,000 into your pension each year or the equivalent of your annual salary, whichever is lower. Therefore if you were to deposit the full allowance, you would have invested a total of £60,000 out of the possible £100,000, making full use of tax benefits using these various products.

There are of course many providers offering pension products, however, if you are looking for a really low-cost option, Vanguard are well below the industry standard and don’t charge when it comes time to take out your pension at retirement. At Vanguard there are also 75 investment funds to choose from providing access to shares and bonds.

How to invest the remaining lump sum of money

Once you have utilised the above tax wrappers and government bonus schemes, you should have £40,000 remaining. This can also be utilised to grow your wealth, however, you will have to pay capital gains tax on your returns from this point. However, each year you are able to pay the maximum allowance into your ISA and pension accounts so you can continue to move this money into a tax free wrapper.

General Investment Account (GIA)

The final £40,000 would be best served in a General Investment Account where you could either choose to pick your own investments or invest in a ready-made fund managed by experts. Our top pick for a trading platform is IG investments. They also have an ISA and a SIPP product so you could use them to keep everything in one place, and one of the things we loved about this provider was their free demo account which allows novice investors to trade with virtual money before risking any of their own funds.

IG Investments
IG has a great demo account available for investors

How to invest £100k for a novice investor

If you are a complete novice looking for the best way to invest £100k, then you might be feeling daunted by the stock market and all the options available. The good news is that it is entirely possible for you to successfully invest your cash whilst assuming an appropriate level of risk. To this endeavour, we would recommend you invest £100k using the Moneyfarm app as they provide fully managed portfolios as well as investment advice, an investor profile based on your investment knowledge, attitude to risk and amount you are investing. Moneyfarm can help you ensure you make all the right choices and the great news is that their level six investment portfolio achieved a 16.6% return in 2019 which is one of the best performing portfolios we have come across.

Best way to invest £100k in Real Estate

Historically property has been a popular investment, however we would caution against this in the current climate. The reason for this is that property investment is often aimed at commercial premises and lockdown has led to the death of the high street, driving down rents for landlords and pushing down the value of high street properties.

Is it safe to invest £100k online?

Yes, online investment platforms are still authorised and regulated by the Financial Conduct Authority so this is a perfectly safe space from which to manage your investments.

Have you got any debt?

Remember that before you embark on any of the above, experts will always recommend that you rid yourself of any expensive debt that could be costing you money in interest, and to get your finances in order before making the decision to start investing.

Remember to make full use of your ISA and SIPP allowances each year by moving money from your GIA when the new financial year begins.

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