Advice on lump sum management

vigman

Hi

I should be getting 20K as a pension lump sum soon. I want to feed 5K per annum in monthly payments to my bank current account over the next four years (no interest).

I'm trying to work out how to do this and get the best overall interest.

Would I be right to put 5K in an instant access account with interest and unlimited withdrawals for the first year (is there such a thing?) and put 5K in a one year ISA account to move out to the instant access interest account 12 months later; 5K in a 2 year non-ISA saving acc/bond to move out at the end of this period and the last 5K in a three year saving acc/bond with movement out for the fourth year??

Any advice welcomed, please

TIA

Vigman

psychic_teabag

Sounds like a reasonable plan, though my inclination would have been to use the ISA for the 3-year fix - saving tax on the bit at the highest interest.

When the ISA fix matures, you would probably want to transfer it to an instant-access ISA to keep the tax-free status, rather than moving it to "the" instant-access account. And you'd want new instant-access accounts each time since the current vogue on instant-access accounts is to have a bonus interest rate for the first year.

Could also put half of first year's money into a 6-month fix, and similarly look for any 18-month fixes.

I'm not sure if it's worth hanging onto 5k until April so that you can start a 2-year fixed ISA with the new ISA allowance. Have to settle for instant-access rates for a bit longer, but ISA rates might be higher around then.

atush

The problem is you can only have one ISA per year. If you get it before april than you can do a 2 year fix with 5K, and a one year fix in 2 months. But the third 5K would need to go into easy access until april 2013.

psychic_teabag

I think OP was suggesting ISA only for the 1-year fix.

vigman

Thanks for all the replies and suggestions.

Can anyone suggest a good instant access interest-paying feeder account (where I can set up a regular monthly transfer.....Lloyds Vantage used to be discussed here?).

Also I (or my wife) haven't paid anything into a cash ISA this year (knowing that I would stop earning full pay soon).

Do the better ISA deals happen in the run up to April 5th, please?
TIA

Vigman

cos69

vigman wrote: »

..... Can anyone suggest a good instant access interest-paying feeder account (where I can set up a regular monthly transfer.....Lloyds Vantage used to be discussed here?).

Also I (or my wife) haven't paid anything into a cash ISA this year (knowing that I would stop earning full pay soon).

Do the better ISA deals happen in the run up to April 5th, please?
TIA

Vigman

Lloyds Vantage is a current account that pays 3.00% on balances of £3,000 to £5,000 so sounds like a good option for you.

If you have the money available, then put £5,340 into an instant access cash ISA now and you can then move it later into a fixed rate ISA when you decide how to go forward with your finances.

For your ISA you could consider Birmingham Midshires or Nationwide do "Online ISA Issue 3" paying 3.1%. As I say, get some money in to use this years allowance and move it later as required.

psychic_teabag

Yeah, Lloyds vantage is good if you can keep the balance between £3k-£5k (for 3% interest). Or 6-10k in two accounts. I think you are allowed up to 3 accounts (each).

If you effectively have two ISA allowances per year, then you could get all 4 parcels of money into ISAs by the start of April.

Does your wife pay tax ? If not, you could just put the money in her name in taxable accounts, but with the paperwork to get the interest paid gross. At the moment, non-ISA accounts are paying slightly more than ISAs (except for 3-year fix ?)