My Mum and her savings

newfoundglory

dfarry wrote:

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.

The benefits of the cash ISA mean that any interest earned doesn't actually count towards the tax allowance (so about £7,000 in this case).

Yes, the Halifax and A&L products do pay more than NR... but I was also considering the methods of accessing the account (a lot of older people prefer branch/post access to using the web). So there is a choice to be made here!

Remember, although the initial investment can be high with a regular savings account, it doesn't have to be; that was just the maximum. And the accounts mentioned in this thread are not stock-market invesments so there is no chance of losing capital. But she should consider how often she will want to take out money before deciding to open one.

A lot of people say that regular monthly savings accounts aren't generally good for large lump-sums of money. This is why you would probably want to find a high-paying instant access account and gradually filter the money from this account into the monthly savings accounts which usually pay more interest.

Older people generally have much less tolerance to risk with investments (because they have less time to invest over and often can't afford big losses), so i'd be very wary of any bank or advisor who tries to sell any high-risk stock market linked product to someone of that age. This is why you should also be careful when considering Equity ISAs or any equity-based product. Someone who is retired and who has a pension would also be investing more for income, and not growth. You would need to seek professional advice on all these aspects of equity invesments if thats the route you want to go down; but for investments where capital is not guaranteed you should never invest more than you can afford to lose - because its rather like gambling. Remember share dividends are taxable even if you are a non-taxpayer - and you can't claim it back!

I also don't see what stakeholder pensions has to do with this, so ignore that!

isasmurf

margaretclare wrote:

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?

I'll assume you're talking about Stakeholder Pensions and not any of the other Stakeholder products.

newfoundglory wrote:

I also don't see what stakeholder pensions has to do with this, so ignore that!

What is very popular amongst retirees is immediate vesting. This is where you make a deposit into a Stakeholder pension and immediately cash it in. You can stick £2,808 into a Stakeholder pension and the Governmnet will top it up so the total is £3,600. The advantages for non-taxpayers is that you get basic rate tax relief on your money, the disadvantage is that you can only take 25% of it as (tax free) cash, the rest must be used to buy an annunity.

margaretclare

isasmurf wrote:

I'll assume you're talking about Stakeholder Pensions and not any of the other Stakeholder products.

What is very popular amongst retirees is immediate vesting. This is where you make a deposit into a Stakeholder pension and immediately cash it in. You can stick £2,808 into a Stakeholder pension and the Governmnet will top it up so the total is £3,600. The advantages for non-taxpayers is that you get basic rate tax relief on your money, the disadvantage is that you can only take 25% of it as (tax free) cash, the rest must be used to buy an annunity.

Yes, this is the kind of thing I meant.

I haven't found anywhere else that you can get an immediate gain of 22% on whatever you put in. And it sounds from what Dan has written that his Mum is not in immediate need of the £10K which is why she's looking to stick it somewhere that it can grow.

Of course, you can always start another stakeholder with the annuity money, and watch that grow, and repeat the process....

Aunty Margaret

EdInvestor

This probably won't be relevant to the OP if his mum only has 10k, it's unlikely she will want to give the money away no matter how high the income.

But since we're on the subject of annuities, anyone thinking of buying one for cash (not from a pension fund) should investigate Purchased Life Annuities, which get much better tax treatment than ordinary annuities (eg those bought from a stakeholder.) This particular applies to older pensioners.

There is also another type, Immediate Needs Annuities, which are used to pay for care home costs, again they also get more favourable tax treatment than pension annuities.

HTH