Best place for lump sum

keith_parke

having reached 60 years of age, I have now opted to reduce to part time employment and have applied for a lump sum (£55k) with reduced residual pension from a previous employer.
My wife`s only income is from her state pension (£87.85 per wk.)
Question :- Can I put my lump sum into investments in my wifes name as I understand that income above her tax threshold derived solely from savings interest is still taxed at 10%. I know, in effect I will be giving this money to my wife but hey, she has put up with me for 41yrs.

EdInvestor

Sure you can. And it's a very sensible idea, everyone should equalise assets and pension income to take advantage of all tax breaks.

Gatser

Good Point !

There is alot of discussion about saving 0.5% on charges (SIPP's vs PP's) yet this offers far greater efficiencies...by careful tax planning of assets between spouses.

Thanks for raising it, Keith.

Gatser

keith_parke wrote: »

I understand that income above her tax threshold derived solely from savings interest is still taxed at 10%.

Can we clarify this please...
If a spouse was to earn (say) £30k from savings interest....surely this is going to be subjected to more than 10% tax?

EdInvestor

Apologies I didn't read the original question properly. She should be able to obtain half the interest tax free as her state pension will leave around 1.5k of the new 6k personal allowance unused.

I believe that there is also a band above that which would be taxed at 10% but it is quite small.

Suggest you ask the question on the "Cutting tax" forum.

CLAPTON

assuming your wife is under 65 (after that she gets a larger tax free allownace)

then her income is 4568 per annum form the state pension
assuming no other income

her personal allowance is 5435

so the first 5435-4568 i.e. 866 of interest is tax free
then the next 2320 is taxed at 10%
she will need to claim this back from the HMRC

but use up the ISA allowance for both of you too


allowances change after september

keith_parke

Thanks for that Clapton. Both of our ISA`s will be maxed prior to investing the remainder. Do you know how the allowances will change after Sept.

jamesd

keith parke, you might also consider whether you're comfortable putting some money into these funds:

BlackRock UK Absolute Alpha
Cru Investment Portfolio

Those two don't pay a regular income, instead they grow the capital and you sell some from time to time to take an income. Since everyone gets 9600 capital gains tax allowance this year that effectively makes the income tax free.

There are also funds like this one that are best held inside a stocks and shares ISA that produce a regular income:

Invesco Perpetual Monthly Income Plus

No guarantees that there will not be a decrease in value in one of these but if you look at the first two you can see that they have been doing a good job of delivering steady upwards performance with minimal drops.

averageguy11

maybe drip money in over a period of time

dunstonh

I wouldnt mention funds like James does. It would be inappropriate for me to say funds like Baille Gifford High yield bond, JPM Global High Yield bond or Aegon high yield bond as a few you could also look at as options to consider in your research.

jamesd

Yes, those three funds are also well worth considering.

averageguy11, that's what I'm doing myself. Though I use the BlackRock fund as the holding account for money that's being fed slowly into others. There's some risk to that since there is no guarantee that it won't drop in value by more than a little.