Personal Injury Trust - Below Inflation!

Ibomol

Hi There,


Last year I received a personal injury pay out for a knee injury sustained when I was 15 (I'm 21 now).


I put the money into a personal injury trust (at the cost of £675) as I am a university student (living with a partner) who also receives (a small amount) of housing benefit.


Money is very tight in our household, but I am determined to save the £11,000 which remains in trust to get onto the property ladder (either our first home or a buy to let opportunity, when my employment status - following university - allows this.


The concern is that I have £11,350 (at the moment a reasonable sum of cash) which sits in trust with 0.0% Interest!


My concern is that each day that goes by I'm losing money, but taking this out of trust would me losing benefits - due to my student loan payments nearly always making my bank balance hit the £6,000 savings threshold every couple of months.


I was wondering, what others may recommend if they were in my situation, I have considered perhaps keeping a high interest current account slightly below the savings threshold? or maybe drip feeding the trust into one of the new help to buy ISAs that are coming soon?


Any advice/help/suggestions appreciated.

DesG

So you are fraudulently claiming benefits and you expect people to help you?

jimjames

Why can't the trust invest the money?

Ibomol

DesG wrote: »

So you are fraudulently claiming benefits and you expect people to help you?

There is nothing fraudulent about this situation, My local council and HMRC are fully informed of the trust and both me and my partners work status and income.

Personal injury trusts are entirely legitimate acts of law which protect the receipient of personal injury payments from losing means tested benefits - which of course would defeat the point of an injury settlement.

jimjames

Ibomol wrote: »

Personal injury trusts are entirely legitimate acts of law which protect the receipient of personal injury payments from losing means tested benefits - which of course would defeat the point of an injury settlement.

But can the trust invest the money to get a decent return if that is important?

Ibomol

jimjames wrote: »

Why can't the trust invest the money?

The requirements for a trust account are very particular, meaning that very few banks understand how the account needs to be set up. I dare say other options are avaliable but only one bank in my home town had staff with the knowhow.

xylophone

http://www.markthompsonlaw.com/need-a-personal-injury-trust/personal-injury-trust-to-protect-personal-injury-compensation/


You can open an account in the name of A and B, Trustees of XYZ PI Trust.

Some building societies will accept trust accounts as will NS and I - you need to enquire about the particular account in which you are interested.

Eco_Miser

Ibomol wrote: »

My concern is that each day that goes by I'm losing money, but taking this out of trust would me losing benefits - due to my student loan payments nearly always making my bank balance hit the £6,000 savings threshold every couple of months.

But current income is not savings. I would suggest that you check on the current definitions of what is and is not classified as savings.

bowlhead99

Eco_Miser wrote: »

Ibomol wrote: »

My concern is that each day that goes by I'm losing money, but taking this out of trust would me losing benefits - due to my student loan payments nearly always making my bank balance hit the £6,000 savings threshold every couple of months.

But current income is not savings. I would suggest that you check on the current definitions of what is and is not classified as savings.

Eco Miser, not sure if I'm missing something.

But isn't he/she saying that they will occasionally have (say) £5999 across their current accounts and savings accounts at the times when student loan payments have recently been received, and they do not wish to have another (say) £10000 of cash sitting in their general current accounts and savings accounts and investment accounts because the government would assess them as having £15999 of capital at those times, which will result in a significant reduction of benefits because of the notional income that such as sum of capital would be expected to generate (with some benefits reducing by £x for every £y of capital held).

Not sure how 'but current income is not capital' helps in such a situation? The student loan amounts are presumably not income either, but they conspire to give him/her a big chunk of cash before they are spent. If there's a definition that would help, care to share it?

To the OP: the problem you have is that interest rates are at all time lows. Bank of England base rate is only half a percent. Banks offer some high interest rate products such as 3%, 4%, 5% on limited amounts of money within certain current accounts, as a marketing tool to attract certain types of customers who they hope will take out loans and credit cards etc and make them money in the long run. They don't offer those sort of accounts to trusts. Typically if you go into a high street branch and say you are a trust, you will get a very basic deposit account and get the going rate which might be 0 or 0.1%.

As xylophone says, various places allow accounts to be opened for a trust by the trustees. NS&I is one, and their income bonds pay over a percent which is better than what you are currently getting.

Also, a number of investment firms (brokers / investment platforms / fund supermarkets) offer accounts to trusts. So that is what jimjames was getting at - presuming your trust deed does not say that the trust assets must be held in interest bearing bank accounts and cannot be invested, you could invest the money in investment funds for the longer term. However, this exposes you to investment risk and while the long term returns would likely be higher than cash, it would not be suitable if you planned to use the money to, say, buy a home or a car or a bunch of equipment to support a disability in a few years' time.

I was wondering, what others may recommend if they were in my situation, I have considered perhaps keeping a high interest current account slightly below the savings threshold? or maybe drip feeding the trust into one of the new help to buy ISAs that are coming soon?

If you are really running up against the savings threshold every couple of months, I would have thought that dripping cash from the trust into a personal account (whether a good current account or an ISA) is still going to, temporarily, give you more capital above the savings threshold. And presumably if the help-to-buy ISA got up to £6000+ as a long term holding, then you would be facing benefit reduction even if you had £0 in your other accounts.

Still, the total return on a help to buy ISA, if you do end up buying a property and qualify for the government incentive, is 25% on top of whatever actual interest it earns. If you spend a couple of years building up the amount in the ISA before cashing out the incentive, that's more than 10% a year free from the government, on top of the interest rate from the bank or building society (which may or may not be a rate worth having, in itself, depending how competitive the products are once launched). If you're getting a return of 10%+ on the ISA (or an even higher notional rate: over 25% a year if you hold the account for less than a year...) then it will go a long way to offset any benefit reduction and may leave you quids in.

You mentioned high interest current accounts. If you qualify for them, all of your current accounts holding your day-to-day £0-6000 cash should be high interest versions, or you're losing out. That plan for your 'normal' cash isn't affected by or anything to do with your trust money. However, if you can take money out of trust and deposit it in similar accounts to earn more money (maybe £2,3,4 a year after tax per £100 deposited) without losing that same amount of benefits, it is worth doing that ; if not, it isn't.

Eco_Miser

bowlhead99 wrote: »

Eco Miser, not sure if I'm missing something.

But isn't he/she saying that they will occasionally have (say) £5999 across their current accounts and savings accounts at the times when student loan payments have recently been received, and they do not wish to have another (say) £10000 of cash sitting in their general current accounts and savings accounts and investment accounts because the government would assess them as having £15999 of capital at those times, which will result in a significant reduction of benefits because of the notional income that such as sum of capital would be expected to generate (with some benefits reducing by £x for every £y of capital held).

Yes, something like that.

bowlhead99 wrote: »

Not sure how 'but current income is not capital' helps in such a situation? The student loan amounts are presumably not income either,

Well they're certainly neither savings nor capital and therefore possibly do not generate a notional income or corresponding reduction in benefit.

bowlhead99 wrote: »

but they conspire to give him/her a big chunk of cash before they are spent. If there's a definition that would help, care to share it?

It's a long time since I had any interest in what would or would not count as capital for benefit reductions, hence my vagueness, but when I was, certain amounts in your bank (or your mattress) did not count, so exceeding £6000 in the account would not necessarily result in a benefit reduction.

From memory, amounts earmarked to pay your next bills, and recently received money, such as the student loan, would not be counted. However, this was long ago, and rules have changed, which is why I merely pointed out not everything in a bank account is savings, and suggested the OP check on the current rules.