Follow this topic Q&A » Savings

I have no oustanding debts, no major purchases planned. I already have £22000 pa in pensions, and am looking for a safe home for >£400k cash - help !

by dikkyfit 04 February 2010 |

6 comments | Love

Love 0 loves

I am looking for "safe" savings accounts, to provide an income via interest to supplement my pensions - I am thinking of depositing some savings in an easy access account, and the balance in fixed term bonds or accounts - but I dont want to put all my eggs in one basket ! - so any advice would be much appreciated - thanx !

Report

Enjoyed this? Show it some love

Retweet

Comments (6)

Facebook

Twitter

General

Comments (6)

804

MikeGG1 posted
The first rule to take account of is to restrict deposits to £50,000 per person per institution to remain within the Financial Services Compensation Scheme. It also answers your eggs/basket aspect.
The longer the term, the more your interest would be. The problem is that interest rates are expected to go up later this year and we don't know how much they are likely to go up or how fast they will rise. Rises have been factored into rates already. The question is whether they have included enough or too much?
I would suggest investing in a variety of accounts with different terms so that the maturity dates are reasonably spread.
3 months net income in an instant access account is sufficient (such as Coventry BS 1st Class Postal @ 3.30%) and another 3-9 months in a 90-day account (such as Investec Hi-5). 3-9 was suggested depending on whether you want to be bothered with a 6 month term account.
After that, divide up your cash between 1, 2, 3, 4 & 5 year term accounts and the different institutions.
Bear in mind that if there are 2 of you, the FSCS limit would be £100,000 per couple.
Mike
Posted on 04 February 2010 | Love 3 loves Report
134

liesarenocomfort posted
Suspect a bit more info will be helpful for others to advise eg:
Are you married/have partner ?
How old are you (about) ?
Do you own your property?
Is inheritance tax an issue for you?
Do you have any dependants?
Would you consider stock market investments?
Posted on 04 February 2010 | Love 2 loves Report
410

manzanilla posted
You don't need to restrict investments to 50k / 100k if they are government guaranteed - that includes NS&I and Northern Rock accounts.
Inflation is your big enemy - maximising your guaranteed interest now will leave your returns dwindling in future as inflation bits into them. So my advice is to mentally divide the money into 4 parts:
i) 100k you wnat to be invested in NS&I indexed linked bonds. You can only buy 15k of each issue, so if you are single, you can get 15k of the current 3 year and 15k of the 5 year. Then when the next one comes out, get another 30k. Buy buying in chunks, you will stagger the maturities, so you have a bond expiring every year or so.
ii) 100k into easy access funds, moving 5k a year of this money into cash ISAs, so you gradually shelter it from tax
iii) 100k into longer term bonds
iv) 100k into blue chip shares paying a good dividend - shares like BP, Scottish and Southern, Vodaphone, Glaxo, Tate. Have a look at this board http://boards.fool.co.uk/Messages.asp?bid=51676&mid=11804384 to get an idea as to how to pick 15-20 shares that will give you a good diversified portfolio.
You may think shares are too risky. But with shares there is a good chance that the dividends you get will rise with inflation - with bank deposit accounts, you know you are onto a loser.
manzanilla
Posted on 04 February 2010 | Love 4 loves Report
1

dikkyfit posted
thanx for your recommendations so far guys - very interesting and very helpful - certainly food for thought ! In answer to liesarenocomfort :
- I am 61, recently widowed, 4 children, all grown up, married, with families, so no dependents
- I own my house, current value ~ £300k
- so inheritance tax is a big concern - but that may be the subject of another question later, when I've sorted out my finances !
Posted on 09 February 2010 | Love 0 loves Report
1

dikkyfit posted
... and forgot to mention, I am currently working part time, planning on retiring within 12 months, and pay into a money purchase pension scheme with my employer, current value of pension pot ~£100k
Posted on 09 February 2010 | Love 0 loves Report
134

liesarenocomfort posted
Hi dikkyfit,
The rules on inheritance tax are that you have at least £325,000 "tax free". However, if your late husband left all his estate to you, you can also add on his "unused" nil rate band which will effectively double your nil rate band to £650,000 "tax free".
So even assuming you have a double allowance you are already a smidgin over the threshold.
If you're not a huge amount over the limit I suggest you do not worry too much (ie don't feel you have to take steps to reduce tax eg by making gifts to children). I say this because:
1) The bands go up (slowly admittedly) so in 5 years you may be under again
2) You may spend the money (it's your money which you have worked hard for and you should make the most of it yourself)
3) Your own interests should take priority over those of your children (who are probably financially reasonably well off - yes?)
Don't forget you can also simply buy an annuity for cash (ie it doesn't have to come from a pension fund). This would boost your income but doesn't get passed on to your estate. Other posters may have some thoughts on this - there are tax issues to consider.

Posted on 09 February 2010 | Love 1 love Report

Post an answer

Something you're dying to ask... or answer?

Get started now

Sign in for a better Q&A

Registered already? Great! You can just sign in to ask and answer questions.

W3C Thank you for using The Four Horsemen of the Apocalypse