Can government check savings?

MikeR71

Don't forget, the government has no money. People have money, you and I have money. That's because we work. We don't hand money to the government willingly. It's taken from us by coersion, force, and the threat of prison.

Benefits aren't too generous. This is an unnecessary rod the government has made for its own back.

I am all in favour of receiving no benefits provided the government does the decent and moral thing and not take most of my income in various forms of taxation.

But so long as they do and so long as they want to continue with their welfare state, they should pay the benefits too. End of.

innovate

MikeR71 wrote: »

innovate:

3- when you say until recently, when exactly? 2009? Which instant access ISA do you know that pays more than 2.4%?

For instance, the one I (and lots of other MSEers, from what I gather) took out this April at Nationwide which pays 4.25%.

You can get 2.5 - 2.75% today if you shop about.

You can even still get 3.1% today, though admittedly that isn't entirely instant access, since it has a 60 days notice period.

MikeR71 wrote: »

2- I am not expecting the government to balance my debts and savings. I simply asked whether paying off debts are taken into account.

I simply suggested that it's down to you to balance your own finances so you don't disadvantage yourself.

MikeR71 wrote: »

1- When my wife took on the bank loan, the sum payable had the interest added on. By paying it back sooner we don't reduce the interest. In fact we get penalised.

It's not unusual that interest gets added to a loan - in fact, the only reason loans are on offer is because the lender can make money from the interest.

You haven't told us how much debt you have but I still don't understand why you / your wife would take out a loan when you have £6K in instant access savings.

Regarding early redemption penalties - clearly without knowing the numbers, nobody can comment in detail. But unless you (she) got the loan from some loan shark (did you/she?), an early redemption usually costs no more than one or two month’s interest. Possibly something to make back in absolutely no time if you maximise the interest on your remaining savings. And it keeps your savings below that benefits treshhold for a bit longer.

MikeR71

We got the loan from a bank at a rate of 9.9% and it was for private medical reasons which I do not wish to discuss. The interest was added on to the amount payable at the time and paying it off in a lump doesn't lower the amount payable and in fact it incurs a small penalty. We started saving after that time.

We are clearing the debt and there is only another year to go. It doesn't make any sense to pay it off with the savings because we are gathering interest on it, albeit small amount.

I hope this makes sense.

le_loup

MikeR71 wrote: »

It doesn't make any sense to pay it off with the savings because we are gathering interest on it, albeit small amount.

Another economic illiterate!

zagfles

MikeR71 wrote: »

Yes, my wife and I trying to save for our own house and the only benefit we get is child benefit and a little help with nursery fees as part of the child element.

£1 for every £250 seems grossly over the top. No saving gives you such a return so what does the government base this on I never know. It's nearly 20% if I am not mistaken?

I just want to make sure I don't break any laws or be labelled a benefit cheat. If I go by the government's own rules then I should be fine.

You're making all this up aren't you? You don't need to declare capital at all for tax credits or child benefit, so what are these forms you claim to have to fill in asking for your savings? Child ben don't ask. Tax credits don't ask.

You can have £100,000 in the bank and still get the benefits you mention above, which you say is all you're claiming. So go for it. Save as much as you want

bowlhead99

le_loup wrote: »

MikeR71 wrote: »

It doesn't make any sense to pay it off with the savings because we are gathering interest on it, albeit small amount.

Another economic illiterate!

Le Loup that's harsh to take that out of context, because it makes perfect economic sense to not pay off a loan if you have been told you will not save any interest by doing so, and you would indeed be better off to keep cash in savings and earn interest income on that instead.

Where it's flawed I think is what innovate has picked up on which is that with loans from a high street bank you usually will be able to save interest if you pay them off in a lump.

What has probably caught MikeR out is that if he wants to pay it off now he has to pay the whole balance currently on his statement PLUS a penalty for early settlement. So he thinks there is no saving to be made and concludes he would be dumb to pay it off.

However, how it usually works is your balance is, say, 1000 right now, and the future interest has not all in the balance already. Over the next 12 months if you keep to the schedule there might be 200 of total new interest charged and your 12x 100 monthly payments will pay off the loan. But if you pay if off right now, you have to pay the 1000 you currently owe plus a 30 early settlement fee. The purpose of the fee is that the bank was hoping to make 200 interest off you over the next year and wants to get some of it.

But it is still cheaper to pay it off early and pay the penalty, as 1030 now is better than 1200 later. Your interest income on the 1030 is not going to be as high as the 170 interest avoided. These are made up figures but 9.9% payable on your debts is way higher than 2% net income being earned on savings. I suspect this wasn't explained to Mike particularly well before. It would be worth getting a current settlement figure and then comparing it to how many months you have left multiplied by the monthly payment. The settlement figure should be a smaller number.

I am going to stay right out of any political debate about whether the government should be able to tax us to pay for public services and provide a safety net to the needy. I'm just here for the maths.
:cool:

Hominu

MikeR71 wrote: »

You missed the point. Why are we paying such high rate of tax?

Simply because there are too many people claiming benefits to which they are not entitled. The more benefits that are claimed, the higher tax becomes to pay for it. To me, the amount of savings allowed is already too high. It should be that if you have in excess of £2,000 then you get ZERO benefits until the amounts of savings you have drop below that figure. This would mean less money going out from the benefit pot, so less money needed putting back in the pot, so less tax needed.

MikeR71

le_loup wrote: »

Another economic illiterate!

Actually, you are the illiterate, or at least have comprehension problems

I said the interest was added on to the total payable when we borrowed the money. Let me be more clear: we borrowed around £13000, and the interest was calculated for the 4 years that we asked for, so total payable came to roughly £15500. That is the amount charged to us at the time. It does NOT gather interest with time because we STILL have to pay the the £15500. Say we won the lottery the day after we signed the loan agreement. We'd STILL have to pay £15500. In addition, the agreement clearly stated that there is an early repayment fee if we want to clear the debt earlier than the 4 years we agreed to.

So given this, it would make sense to start saving in an ISA in order to gather interest. Paying off the loan early would NOT make any financial sense.

Now does this make sense to the few of you who didn't bother to read and think and still had an opinion?

Also, please don't go calculating 9.9% on the amounts I quoted because I don't have the exact numbers in front of me. These are rough sums I gave you to make the point.

MikeR71

zagfles wrote: »

You're making all this up aren't you? You don't need to declare capital at all for tax credits or child benefit, so what are these forms you claim to have to fill in asking for your savings? Child ben don't ask. Tax credits don't ask.

You can have £100,000 in the bank and still get the benefits you mention above, which you say is all you're claiming. So go for it. Save as much as you want

Not making anything up. I wasn't talking about child benefit which we still get. I was referring to the working tax credit, the childcare element which is based on income and childcare costs etc. You do have to fill a form for this and declare income, savings etc. I though this was clear in the original post. Sorry.

antrobus

MikeR71 wrote: »

. Say we won the lottery the day after we signed the loan agreement. We'd STILL have to pay £15500.....

No, you'd have had to pay £13,000 plus the early repayment charge. Roughly speaking.