How to invest/save £150,000? Plus Q on Tax.

blue_monkey_2

HI everyone,

I wonder if I could pick a few brains.

My mother is due to get a large sum of money. Already the 'vultures' are circling and I wanted to give her some advice on how best to invest it. She is 58 and is still working part time so this covers daily bills.

I have suggested she 'locks' some of it away so she cannot get to it, which is perfect if people start tapping her for moeny as she is not the kind of person to say no without feeling bad so would 'lend it' but the people who want it are not the people who are able to pay it back. If you know what I mean.

I have said I would see what information I can get to help her.

I have said that it is not wise to keep it all together so to break it into £30,000 increments and save it this way. I went around the banks and without me speaking to someone they were not very forthcoming with their advice.

I have suggested if she puts it into 5 different accounts and then at the end of each year she takes the interest out and uses this for extras she may want. Am I right in thinking that this would give her about £7,500 a year at 5%. This would be enough for her to have a holday, etc...

What is a bond? Some of the banks mentioned a bond.

She does not have a pension other than state pension hence me saying she should lock it away until she retires and needs an income.

She does not earn enough to pay Tax and NI, nor does she get any benefits. Will she pay tax on these savings and then have to claim it back?

She will leave a sum in her bank account and have one savings account that she has access to if she needs it (£30,000) I was wondering what the best option would be for the other £120,000 over the 4 accounts.

I do not have a clue on savings and the banks I asked did not offer much help at all, anything you could advise her to do to ensure this money is safe for when she needs it (when she retires she can then release one account at a time).

My sister has arranged a financial advisor that she 'knows' to visit her but am I right in thinking they will only be interested in selling her products for their advantage, the people she bought her life insurance from (the same person?) kind of screwed her really with really high payments for rubbish cover and I'd like to ensure this does not happen again.

Does she need to continue with Life Insurance if she has no mortgage to pay?

Thank you.

opinions4u

This is a big sum at a key time in her life.

I would suggest she sees at least 2 reputable INDEPENDENT (not bank) fnancial advisers (IFAs) with you joining her.

Together you can then decide if you like what you've heard or disagree - IFAs will advise, but you don't have to accept their advice.

There are all sorts of issues to address:

Income or capital growth?

Taxation?

Life assurance?

Possible Inheritance Tax?

Long Term Care?

Short term pension contributions?

Gifts to relatives?

She will almost certainly end up a taxpayer with this amount of capital. IFAs can find the best ways of mitigating this.

A bond could be a fixed rate savings account or it could be a more complex product with tax advantages. Banks have pinched the name from what it really is.

Get genuine expert and independent advice and she will make this money go a lot further and ensure the tax man gets a lot less.

dunstonh

My sister has arranged a financial advisor that she 'knows' to visit her but am I right in thinking they will only be interested in selling her products for their advantage

If it is a sales rep then they still have to get best advice from their product range but they do work in a sales environment. If their product range doesnt offer the best product then they will look for the best one they have. If its an IFA then you dont have that problem.

Reaper

blue_monkey wrote: »

I have said that it is not wise to keep it all together so to break it into £30,000 increments and save it this way... I have suggested if she puts it into 5 different accounts...

If you were to decide to put it all in saver accounts (and I'm not saying that is best) then why so many? Is it for the FSCS guarantees? If so £50,000 is protected so 3 accounts will do and be easier to manage.

If you are unsure I would suggest seeing a good IFA (not tied salesmen) though I know some on the forums argue against it in all circumstances.

She does not earn enough to pay Tax and NI, nor does she get any benefits. Will she pay tax on these savings and then have to claim it back?

No. Fill in form R85 and hand it to the bank and the interest will then be paid without deducting tax. However remember to include the interest payments when calculating whether she is under the threshold.

What is a bond? Some of the banks mentioned a bond.

A meaningless term as the banks apply it to a variety of products. Probably just a term account but could be almost anything - you need to get the details of what they are suggesting.

blue_monkey_2

Thank you for those suggestions. I will tell her tomorrow to get the help of another IFA, it is a lot of money for her and I realise that she could need this for the long term rather than just to splash around. She does not drive - nor can she drive due to an eyesight problem so no splashing out on a new car or the like, she does not travel further than scarborough either!! I know this has to be for her future and want to make sure she is safe guarded so no-one else can tap her. She has pretty much lived hand to mouth from birth so this will be life changing for her but I wanted to ensure that she put it in the right place so it lasted for the life she had left and so she did not have to scrimp and save when she needed it most.

Thank you again, I'll print these off and take them with me and tell her to ask.

I am not wanting to poke my nose in too far, there are four of us siblings so I do not want to be seen as the interfering one.

dunstonh

I will tell her tomorrow to get the help of another IFA

There was no indication in your post that she had seen an IFA. Just FAs/sales reps. You need to be clear on the difference.

Mikeyorks

blue_monkey wrote: »

I am not wanting to poke my nose in too far, there are four of us siblings so I do not want to be seen as the interfering one.

Four siblings makes a Committee. And Committees don't work for something as VIP as this. Unless one of you is particularly knowledgeable about financial matters (and in the current climate) then stick your nose in as far as it will go ..... but only to make sure she sees an independent IFA. And one who is experienced with Savings / Investments - after all it's not a Mortgage she's looking for, so you need the right specialist.

The advice you've been given by Reaper is fine with the exception of the R85. If your Mum currently works but "does not earn enough to pay Tax and NI" then she will have used up at least part of her Personal Allowance (PA) of £6035. It's not going to take a lot of interest to push her into the 10% band that exists, for Savings income only, for the next £2320 above her PA. And you can't file an R85 as soon as the PA is exceeded. Which is almost inevitable ..... if any substantial portion of the money finishes in standard savings or term deposit accounts.