In our weekly series, readers can email any questions about their finances to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot and has worked in financial services for 25 years. If you have a question for her, email us at money@inews.co.uk.
Question: My five-year-old son has recently been awarded a sum of £30,000 from a medical negligence claim. What investment options do you think my husband and I should consider. He will not be able to access the fund until he turns 18. So the investment will be long term with no need for access. What are the pros and cons of investment ISAs? Could the money start a pension pot? Are other options available?
Answer: First of all, I’m sorry your family has had to go through this. A settlement like this can never undo what has happened, but it does give you an opportunity to support your son in a very meaningful way.
At just five-years-old, time is firmly on your side. With more than a decade before he can access the money, careful planning now can turn a sizeable but not life‑changing sum into something that could genuinely shape his options in early adulthood.
The good news is that medical negligence compensation is generally tax‑free. The lump sum itself is not treated as income, but as a payment designed to put your son back, as far as possible, in the position he would have been in. That means there is no income tax or capital gains tax to pay on the award itself.
