In-laws £30k savings - can anyone help please?

nicknameless

Dear All,

I'm a little bit clueless about these things so would appreciate any advice around possible avenues to investigate (very willing to do the research but don't know where to start).

In short both my mother and father in-law are now retired (both 65). They do not have a massive income - 2 state pensions plus a couple of very small private pensions. They do have £30k savings as well.

Speaking to my mother in-law this is currently in an instant access savings account paying 2.5% per annum tax free. I was pretty sure that they could do better with this money, but have no idea where to start looking for them.

Criteria would be - level of risk very low, ideally with quick access to a portion of this (they have no immediate intention to spend this, or need to do so, but want some access if an emergency pops up). So maybe a portion of this (5-10k) with quick access.

Are there any options that fit those criteria which would help them make the most of this money? Anything with the words stocks and shares in it would make them run a mile by the way.

Many thanks in advance for any pointers or suggestions.

Cheers,

N.

qpop

Why is the 2.5% tax free? Is it wrapped in an ISA? Or are they below the tax-paying threshold?

I'm guessing the latter, in which case, if they are planning to utilise the income per month, they could place it in a Santander easy-access account at 3.1% AER, with the interest paid monthly and unlimited withdrawals.

I seem to remember you can nominate an external account for the interest to be paid to as well, but I may have been imagining that.

The main thing is setting a diary note in 12 months to find a new account, as most of the interest is a "bonus"

nicknameless

yes they're below the tax-paying threshold

psychic_teabag

Are they happy to bank online, or do they want a branch or postal account ? Are they going to want to move the money each year to chase the best rates, or settle for a slightly lower rate that won't plummet after a year ?

Sounds a bit like they just want some money in an instant-access savings account, and perhaps fix some for one or two years at a time. If they want the interest to supplement their income, they can still fix - see the end of Martin's fixed-savings guide at
http://www.moneysavingexpert.com/savings/fixed-rate-savings
(and all the other savings articles if you haven't already).

One observation (but which no-one else in the forum has yet confirmed or refuted) is that fixed-term ISAs seem to allow early access, though with penalties, whereas non-ISA fixed-terms tend to forbid early access. So if they are worried about access in an emergency, that might be something to consider.

ISA rates tend to pick up near the turn of the financial year : even though they don't pay tax, there may still be a benefit in using ISAs in case their situation, or the tax regime, changes. As long as the ISA and non-ISA rates are comparable, there's little harm in having an ISA. (Unless they prefer to have all savings in joint accounts, for example.)

nicknameless

psychic_teabag wrote: »

Are they happy to bank online, or do they want a branch or postal account ? Are they going to want to move the money each year to chase the best rates, or settle for a slightly lower rate that won't plummet after a year ?

Sounds a bit like they just want some money in an instant-access savings account, and perhaps fix some for one or two years at a time. If they want the interest to supplement their income, they can still fix - see the end of Martin's fixed-savings guide at
http://www.moneysavingexpert.com/savings/fixed-rate-savings
(and all the other savings articles if you haven't already).

One observation (but which no-one else in the forum has yet confirmed or refuted) is that fixed-term ISAs seem to allow early access, though with penalties, whereas non-ISA fixed-terms tend to forbid early access. So if they are worried about access in an emergency, that might be something to consider.

ISA rates tend to pick up near the turn of the financial year : even though they don't pay tax, there may still be a benefit in using ISAs in case their situation, or the tax regime, changes. As long as the ISA and non-ISA rates are comparable, there's little harm in having an ISA. (Unless they prefer to have all savings in joint accounts, for example.)

I believe they would be happy to manage accounts online and move around yearly / twice yearly to find the best rates.

margaretclare

Anything with the words stocks and shares in it would make them run a mile by the way.

Sorry about that! They might be better with (a) a cash ISA which is also easy-access and (b) a stocks-and-shares ISA for growth. They might say they're not too bothered about growth, but that argument can be countered with 'in that case, are you happy to lose the value of your savings over time because of inflation?'

I would not keep £30K in any sort of cash account!!! OK, you need some to be accessible - who knows what anyone needs unexpectedly - but not as much as that. That money should be working for its living.

nicknameless

margaretclare wrote: »

Sorry about that! They might be better with (a) a cash ISA which is also easy-access and (b) a stocks-and-shares ISA for growth. They might say they're not too bothered about growth, but that argument can be countered with 'in that case, are you happy to lose the value of your savings over time because of inflation?'

I would not keep £30K in any sort of cash account!!! OK, you need some to be accessible - who knows what anyone needs unexpectedly - but not as much as that. That money should be working for its living.

Thanks. It's not that they aren't concerned with growth, but rather totally risk averse and see the stocks and shares label as "i might lose all my money if recent experience is anything to go by".

qpop

nicknameless wrote: »

Thanks. It's not that they aren't concerned with growth, but rather totally risk averse and see the stocks and shares label as "i might lose all my money if recent experience is anything to go by".

Out of interest, which recent experience would that be?

Whilst, if you watch the ITV news or read the Daily Mail you may presume that stocks and shares have been on a downward trajectory since "the good old days" (or at least, July 2011), the FTSE100 has in the last month or two recovered to nearly pre-Euro-crisis levels. It just doesn't sell as many newspapers pointing this out, so they tend to avoid putting it anywhere noticeable.

Either way, if they're risk adverse there's little point trying to convince them to risk their cash, particularly if it's valuable to them (and they don't have much else).

Santander savings would pay them ~£78 a month in income, which may be welcome.

nicknameless

qpop wrote: »

Out of interest, which recent experience would that be?

Whilst, if you watch the ITV news or read the Daily Mail you may presume that stocks and shares have been on a downward trajectory since "the good old days" (or at least, July 2011), the FTSE100 has in the last month or two recovered to nearly pre-Euro-crisis levels. It just doesn't sell as many newspapers pointing this out, so they tend to avoid putting it anywhere noticeable.

Either way, if they're risk adverse there's little point trying to convince them to risk their cash, particularly if it's valuable to them (and they don't have much else).

Santander savings would pay them ~£78 a month in income, which may be welcome.

Exactly, it's a perception, rather than reality. But it's their perception and so difficult to navigate around.

nicknameless

Out of interest - how much, in recent times have low risk stocks and shares ISAs paid in comparison to savings account / cash ISAs. Apologies if that's too generic a question!

qpop

nicknameless wrote: »

Out of interest - how much, in recent times have low risk stocks and shares ISAs paid in comparison to savings account / cash ISAs. Apologies if that's too generic a question!

3-6% in dividend/bond income typically, with some potential for capital gain/loss.