Inheritance Money - What to do with it?

joeyp101

cos69 wrote: »

The costs of putting the money into a trust could be greater than the tax savings - even in a trust tax will have to be paid.

If you each put £33k into a fixed rate bond, the best you will get is 7.05% (Anglo Irish - but you might want to stick with UK companies), then interest is £2327 so if you pay tax at 20%, the tax will be £465

Depending on your income tax might even be at 10% savings rate - so you need to check the costs of the trust and how safe will the money be. So at the end of the year, after tax will the trust give you significantly more than £33k plus £1861 ?

I am currently not earning above the higher tax rate so my saving rate will be 10%. Do you happen to know how much tax is paid on trust? It looks to me like its completely pointless if its also 10%. Is that correct?

Baldur

joeyp101 wrote: »

I am currently not earning above the higher tax rate so my saving rate will be 10%. Do you happen to know how much tax is paid on trust? It looks to me like its completely pointless if its also 10%. Is that correct?

If you are a standard rate taxpayer, the tax is likely to be 20% not the lower savings only band of 10% - see http://www.hmrc.gov.uk/rates/it.htm

joeyp101

Oh yes, I see, thanks

Do you know anything about Trust charges? Do you think im better off just putting it into a bond like you said earlier?

Thanks for your advice.

cos69

The problem is there are a great many different types of trust with different tax implications. There are usually also set up costs to pay, these can be a management fee, so tend not to be suitable for short term use ie a year.

First thing you should do is make use of your cash ISA this year £3600 and also leave enough money handy for next April, so another £3,600 making £7,200 in the ISA. Its a simple way to avoid tax on your interest whilst having your money available - although there are also ISA fixed rate bonds worth considering.

You need a lot more info from your financial advisor about the setup costs, management fees, exit charges and tax charges for the trust. There might not be any in which case we would all love to hear about the scheme for our own use

joeyp101

I should find out more today

https://www.icicibank.co.uk/ ICICIBank are offering a 7.10% rate on a fixed bond for a year.

What do you think of that? Safe?

Thanks in Advance

Baldur

joeyp101 wrote: »

ICICIBank are offering a 7.10% rate on a fixed bond for a year.

What do you think of that? Safe?

I have a number of fixed rate accounts with them and have found them to be OK - they are covered by the FSCS for deposits of up to £50,000 per depositor, just like any UK bank.

Whether any bank is absolutely safe in the current climate remains to be seen.

<Edit> See Martin's views on ICICI Bank - http://blog.moneysavingexpert.com/2008/10/17/icici-is-it-safe/

joeyp101

Great! Thanks for the speedy response. It is extremely tempting, Ive applied for Anglo Irish which has a 100,000 Euro Garuntee, thats at 7.05%. I have an Egg savings account where they are offering a 6% Bond for a year. Would that be any safer? or should I go with Anglo Irish or ICICI?

Baldur

Your choice.

Of the three, both Egg & ICICI Bank are fully covered up to £50,000 by the FSCS, whereas Anglo Irish is covered by the Irish deposit protection scheme.

cos69

Only you can decide on what is safe for you, there is good information at the link below - go down to foreign banks for Anglo Irish and ICICI

For ICICI, they say "It has been removed from This is Money's savings tables due to its low credit rating. "

joeyp101

lol that really does throw a spanner in the works!

Egg has a 'negative' outlook, where as ICICI and Anglo-Irish have 'stable' outlooks. Wow I could not be more confused about what to do now!

Reading the report on ICICI, it looks like a bad idea to be saving with them at the moment. Their CDS rating is over 800, where Egg is 153, Anglo Irish 331.

Just looked at Saga, pretty solid I think, AA rating, only CDS of 90. They have a savings rate of 6.85%, (net 5.48%). Maybe I should play it safe and go with them?