23 July 2019
The sun may be setting on the fifth series of ITV2’s Love Island, but for the triumphant couple looking to make it ‘on the outside’ there are some important financial decisions ahead.
This season’s winners will take home a combined £50,000. Although they have the opportunity to ‘steal’ the total pot as individuals, in every season so far the couple have decided to stay together and split the jackpot in half.
With both winners under the age of 30, Jo Douglas, a financial planner at Brewin Dolphin, said the duo – and anyone receiving an unexpected lump sum – should carefully consider a range of options when choosing what to do with their prize money, but pick a route that ticks all of their boxes.
Financial objectives: what’s your type on paper?
Setting both personal and combined financial goals is an important first step when considering how best to use a substantial pot of cash. The couple will need to look at existing income, personality type (risk aversion vs risk taker), and their propensity to spend on luxury items.
Jo Douglas said: “It’s natural to put some money aside for short-term spending on holidays, clothes and partying – but it’s wise to keep the bulk as financial security. Once the initial fun has been had, the winners should take stock of their existing wealth, what they want to achieve with their money, and how best to move toward their individual and joint objectives.”
Pay off debt before your head is turned
Paying off existing debt should be one of the first considerations for anyone who comes into a large sum of money. While debt will differ for each individual, analysing the levels owed and interest rates attached – and committing to repaying all or most of it quickly – can be a crucial first move.
Jo Douglas said: “Paying off debt early can ensure the couple avoid hefty penalties like late payment fees. Being debt-free also means they can invest their remaining money with a clean slate and will find it easier to secure a mortgage and other forms of credit in the future.”
An instant connection between your win and existing income
Unexpected income can do more than just clear debt. It can transform the working life of the recipient, especially when used in tandem with existing income from other jobs or investments.
Jo Douglas said: “Using a combination of existing income and part of the winnings could be a great way for the winning couple to save in the short-term. That would perhaps allow them to take a career break, re-train in their dream profession or consider further education.
“Typically, the 18-30 age group who take part in Love Island will want to continue working – and, while £25,000 isn’t enough to retire on, it is a useful cushion for taking time off to travel or make other life changes, especially when topped up with a salary.”
Make your money graft with stocks and shares
For those willing to take some risk with their money, investing in stocks and shares could be an option. A stocks and shares ISA is one of the easiest ways to get into the stock market, while a pension too can be invested in line with the FTSE 100.
The FTSE 100 itself has returned 6.1% on average per year over the last five years. While this might be an enticing prospect, there are greater risks associated with stocks and shares: savers could get back less than they put in.
Jo Douglas said: “If early retirement is the goal, then investing more aggressively is likely necessary to try and build a big enough pension pot in good time. Depending on how much the winners want to save, this could mean having to invest in riskier areas that offer a potential for higher returns. However, committing to the wrong company or fund could result in losses, so this tactic must be approached carefully with a long-time horizon in mind.”
Pull your partner for a chat before deciding on couple goals
A young couple are likely to decide that getting a foot on the property ladder is a priority, making a joint financial step in what represents a significant milestone in anyone’s life. However, Jo Douglas cautioned that new relationships don’t always last long and therefore steps should be taken before buying assets together to protect each individual. Jack and Dani, last year’s winners, moved in together in August 2018 before splitting in April of 2019, highlighting the often short-term nature of winning relationships.
She said: “Cohabitation agreements like pre- and post- nuptials are no longer the taboo they once were. It’s wise to be completely transparent and outline who is entitled to what in case of a re-coupling – something the Love Island contestants should be familiar with.”
Take action – don’t live by the ‘it is what it is’ mantra
All options should be explored when a surprise jackpot comes around to ensure the opportunity it presents is not wasted. Paying off debt, investing with care and getting on the property ladder are all accessible ways of making the most from that money.
Jo Douglas said: “When it comes to maximising your income, casting a wide net can pay dividends in the long run, whether it’s £1,000 or £100,000. After some initial indulgence, a longer-term strategy with clear goals attached can ensure that the winning couple don’t get mugged off when it comes to their money.”
Getting to know the options: example scenario
At odds of 4/11, the bookmakers see social influencer Molly-Mae Hague and boxer Tommy Fury as the most likely couple to make it work on the outside.
According to analysis from Brewin Dolphin, if they were each to invest £10,000 in a stocks and shares ISA over 30 years, this could grow to £40,817 based on an average annual return of 4.8%. It would also leave them each with, for example, £2,000 to splash out on trips and luxuries, and £13,000 to contribute to the deposit on a property.
If the same net amount is added into a pension, this would be grossed up by the government to £12,500. In the case that it offered the same average annual return of 4.8%, this would return £51,021 after 30 years. Half would then still be available for each of them for other expenditures.
Jo Douglas said: “These options are incredibly tax efficient and make the most of the allowances available for those starting their savings journey. Both an ISA and pension can be invested in a diversified range of underlying assets, depending on how much risk an individual is willing to take.
“Regardless of what option Tommy and Molly-Mae decide to take, they must ensure they know what they want to achieve and by what age. Only then can they take steps to make sure the winnings tick as many of their boxes as possible.”
PRESS INFORMATION
For further information, please contact:
Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel. +44 (0) 141 559 5840
Libby Keiller libby.keiller@framecreates.co.uk / Tel. +44 (0) 141 559 5840
Cameron Hill cameron.hill@framecreates.co.uk / Tel. +44 (0) 141 559 5840
Richard Janes richard.janes@brewin.co.uk / Tel. +44 (0) 20 3201 3343
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: (0) 20 3201 3026
Anita Turland: anita.turland@brewin.co.uk / Tel: (0) 20 3201 4263
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
NOTES TO EDITORS
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £42.4* billion in total funds, it offers award-winning personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.
We give clients security and wellbeing by helping them to protect and grow their wealth, in order to enrich their lives by achieving their goals and aspirations. Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £37.5* billion on a discretionary basis.
Our intermediary business manages over £12* billion of assets for over 1,500 advice firms either on a discretionary basis or via our Managed Portfolio Service.
In line with the premium we place on personal relationships, we’ve built a network of 31 offices across the UK, Jersey and Dublin, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
*as at 31st March 2019
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