My Mum and her savings

dfarry

Hi all... I'd appreciate some general advice please.

My mum is aged 67 and has savings of £10000... I'm trying to find a good savings account that pays a reasonable interest rate on this whole amount.

The money is currently sitting in a Woolwich savings account and they have started deducting tax - they said they would need to send her a tax exemption form before they would stop deducting the tax.

My mum currently get's a pension of around £3200 per annum... so by my calculations she is not eligible for tax until she reaches her annual allowance of £7090 - http://www.hmrc.gov.uk/rates/it.htm I don't believe that she has any restrictions placed on this allowance by the IR.

First question though is does this sound correct?

Is there a standard form that must be completed to ensure the tax exemption is taken into account - also would the Woolwich pay back the tax they have deducted or would this need to come from the Inland Revenue now direct?

My mum just wants a general savings account although she doesn't plan to with draw from it regularly.

At the moment I have short listed the Halifax Regular Saver (7.07% gross - no withdrawals allowed) and the Alliance and Leicester Online Saver (5.35% flexible) accounts... are these with considering or are there any better ones?

Many thanks

margaretclare

Hi Dan

Yes, your Mum needs to complete the certificate of exemption from tax on interest on her savings. Have a look at: http://www.hmrc.gov.uk/individuals/tmabank-and-building-society-interest.shtml

Have a look at the savings and investments thread. I hope someone a bit more knowledgeable will come along.

You say your Mum receives a pension of £3200 a year - is that ALL she has to live on???

Aunty Margaret

dfarry

Thanks for the link Margaret.

Luckily no.... my mum and dad do have a little bit more money than that in income....

My Dad is also retired and does pay tax on his own pension but my mum's income is I believe all held separately. They are also mortgage free now.... so they have a little bit of cash to play around with, the £10000 is basically the only savings they have though.

kazd

Its a very simple process and I would be surprised if you can't print the form off the internet site, I know you can with Halifax Online. What about putting £3k each in min isa's.

margaretclare

Hi Dan

How old is your Dad - was he by any chance born before April 1935? If so he'll be getting married people's tax allowance as well as his personal allowances.

We just squeezed into this when we got married (B was born in December 1934) and we split it between us to set against our annuities. One of them has to have been born before April 1935. If it applies, your mum could set some of this against her pension income.

Yes, mini-cash ISAs are a very good idea.

Margaret

dfarry

I'm not completely sure but I think they do get the married persons allowance.... my Dad was born in Nov 1933 - I will check though... cheers.

Problem with mini-cash ISA's is the limit?... typically a £3000 investment max?... though can you setup multiple ISA's?

margaretclare

Hi Dan

Your Mum could always invest the rest of the ISA allowance into an equity ISA. They can have £7,000 a year total ISA allowance EACH.

I guess your Dad does get the married people's tax allowance. In that case it might be advantageous to split it with your Mum. Again, back to the Inland Revenue's site. We did this when we got married 3 years ago and the IR were 'cool' about it.

Of course, if they don't need the £10K now but want it to grow in case they need it later - how about considering a stakeholder? Again, the IR site gives advice.

Best wishes

Aunty Margaret

newfoundglory

Halifax Reguar Saver would be a good choice... you can close it before anniversary although you get the websaver rate (which is still okay, but its not 7% obviously).

You should also consider Halifax monthly saver, which requires a monthly deposit of £5 to £500 (you can change it). You can open the account in the first month with up to £1,000. I think this account pays 5.35% at the moment, and its been a good payer for quite a while. Clearly opening the Regular Saver account first would be the thing to do before using this one.

Northern Rock offer a "Silver Savings" account for those age 50 and over. Pays 5.10% gross on a minimum of £10,000 which can actually be accessed via branch + post. There is information on their website about this. However, NR are not known for keeping their rates competitive over a number of years; so if this account is chosen keep an eye on the rate - but it does have a guarantee to at least match the Bank of England base rate until start of 2010.

Of course, you should first think about if she is likely to be a tax-payer in the future; in which case using the £3,000 mini cash ISA allowance now might be a better idea to think about before a normal savings account.

To register for interest to be paid tax-free, all she needs to do is request an R85 form from her bank/BS (if you can't get one online from the bank, just get one from the Inland Revenue website), complete and return it to the bank. If you need to cancel interest paid gross (because she becomes a taxpayer), then you request form C85.

dfarry

Hmm does the Halifax account not allow for a one off investment (in this case the £10000) plus monthly deposits.... if £3000 is the maximum balance then that is not very good

I'm not sure about ISA... thoey wouldn't cover the whole amount and my Mum would prefer something that is simple to understand and can be used like a regular savings....

I'll look into stackholders... I have no idea what these are at the moment...

Cheers

margaretclare

Hi Dan

Northern Rock, as explained above, looks good.

Yorkshire Building Society have an online cash ISA which pays 5.20% per year. Mum could put £3,000 into an ISA and the rest into Northern Rock.

Best wishes

Aunty Margaret

NB: Don't Northern Rock also have a cash ISA?

dfarry

Hi again..

Sorry I think I am missing something here or just being stupid?

But both the Halifax and Alliance and Leicester products offer better interest rates Gross... anyway... than the cash ISA's - what other benefits are there to an ISA?

Though I can appreciate how a Cash ISA would be good for a tax payer. I doubt that my mum would ever become a taxpayer again... the chances of her working again are pretty remote I think... Obviously Halifax is more restrictive (and there seems to be a question mark other the size of the initial investment), when I explain this to my mum I think she will prefer the A&L one.