Five top tips for future national lottery winners (provided you are prepared to pay two quid a ticket)

3rd October 2013

The National Lottery is increasing both ticket prices and the potential jackpot from today. Tickets will increase from £1 to £2 and the average jackpot from £2.5 million to an estimated £5 million.

Hargreaves Lansdown’s Danny Cox says that playing the lottery is a bit of fun and not a serious investment, however if it is you, and you do win the top prize, learn from other millionaires and how they manage their money.

1. Bank you cash and take your time. Avoid the temptation to rush into moving house, buying a Ferrari or making large gifts. There is plenty of time to consider your options. Think about how your win can change your life and lifestyle, and make good decisions at your leisure. Remember the maximum statutory protection on cash is £85,000 per person per institution. Spread your cash across financially secure banks and consider safety before interest rate.

2. Wealthy people manage their money with the same principles as most investors: Clear your debts and take this opportunity to never have to borrow again. Ensure there is sufficient cash in the bank to cover short term spending and provide an emergency fund. However inflation will eat away at the value of your winnings over time, so consider investing some of your cash to ensure your jackpot wealth keeps its spending power.

3. Investing – if it looks too good to be true it probably is. Wealthy investors are bombarded with the next “big idea” which has the potential to make lots of money, save lots of tax or potentially both. It is more prudent to stick to blue chip investments such as shares and funds.

4. Minimise taxes. Use all of the tax breaks and allowances available to you, such as ISA, pension and Venture Capital Trusts (VCTs). This will help to reduce the amount of tax you pay and improve your investment returns. Even if the contribution allowances seem modest, you can use these each year and their affect is cumulative. For many jackpot winners this will be the first time tax will be a significant issue and certainly one to take seriously. Avoid the schemes which bend the rules – bear in mind it is often difficult to retrieve your money from high risk tax planning schemes and these are also likely to be the ones under most scrutiny from HMRC.

5. If in doubt take professional independent advice. Most of the straight forward decisions can be made without taking advice, however, a significant change of circumstances is often a good time to take stock. Wealthy investors often use financial planners, accountants and solicitors to help manage their affairs.

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