Furthermore the pounds 46,000 lump sum should not affect her daughter’s full grant entitlement as liability for parental contribution is based only on income. If Gillian’s annual income stays below pounds 16,450, her daughter will still be entitled to a full grant.Even though Gillian is looking to pay off her mortgage with the legacy, she should probably continue with her Sun Alliance endowment policy. It has been running 13 years and will mature in her chosen year of retirement, giving a good boost to other pension provision.In theory she could cash it in or sell the endowment on to another investor and look for an investment likely to yield a higher return over the next 12 years. But with-profits policies of this kind are relatively low-risk investments and give poor value if cashed in early. And with the inheritance, Gillian will have other money to invest.Gillian says she may also want to move house or buy a better car when she gets the pounds 46,000.

It is important then not to commit too much money to long-term savings plans. Initially she should keep the money on deposit, perhaps in a notice account that offers slightly more interest but gives her the access she wants. Once the debts are paid and spending decisions have been made, Gillian can look to longer-term saving.Probably the biggest attraction in pension plans is the tax relief. Gillian could use unused allowances from this and previous years to get tax relief on a lump sum paid into her pension, subject to certain limits.A PEP is one way of saving for the long term, combining tax-free investment in the stock market with the flexibility to get money back at any time without loss of tax breaks. There are a range of ethical PEPs to choose from; one of the best-known companies is Friends Provident.Gillian would like to retain some access to her savings in case her earnings remain low, so a PEP might be preferable to a Tessa where, for the interest to be tax-free, you can’t touch your savings for five years.Even if she does start working again full-time, Gillian knows she will never be rich. But careful management of her savings should allow her to be modestly comfortable when she retires.Gillian Thurlow was talking to Byron Longstaff, an independent financial adviser in Tyne & Wear and a member of DBS Financial Management, a network of advisers. If you would like to be considered for a financial makeover for publication write to Steve Lodge, personal finance editor, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL.

Please include details of your current financial situation, a daytime telephone number, and state why you think you need a makeover.. My wife and I are due free shares in the insurer Colonial which, is demutualising. We have been given a deadline of 2 May to decide whether to keep or sell the shares. The issue seems more complicated than with other windfall shares because the company is Australian What should we do?

AM, Devon
First, the deadline. You have to get paperwork back to Colonial by this date if you want it to sell the shares (for which there will be a charge of up to 2 per cent) or if you want to buy more for pounds 1.30 apiece. If you simply want to keep the shares you have already been allocated, you need do nothing. You can always sell them at a later date.But that is the first possible problem.

You will have to sell through a broker willing to deal in Australian shares. The price for this is likely to be higher than for dealing in UK shares. You could pay between pounds 40 and pounds 70 and this can be a big proportion of the value of the shares, especially if you are due the minimum handout of 225 shares.The shares are denominated in Australian dollars. When you sell eventually, you will have the cost of converting pounds as well as higher dealing costs.

The dividends are also initially payable in Australian dollars, although Colonial has arranged for them to be converted for payment into sterling.This means you won’t have big currency exchange costs when receiving dividends. But you still carry the risk that goes with investing in any foreign shares. Even if the investment does well, currency fluctuations could go against you.Only you can decide whether these complications make the shares worth holding. But ask yourself if you would normally choose to invest some of your money directly in the shares of a foreign company. For many, the answer is almost certainly “no”.Colonial plans to set up a helpline in the UK to give shareholders information – on points such as the current share price and with details of brokers willing to deal in the shares – but it cannot advise on whether to sell or hold the shares.I recently received an unexpected cheque for pounds 402 from Gartmore.