how to save 130k - lump sum help!

sherrybee

My father recently passed away at the age of 58, he died while still in work full time.

My mum has received a widows monthly pension and a lump sum. She is also due to receive a substantial amount from dads life insurance.

This will total approximately 130k (after expenses/debt/funeral has been paid)

We have never had this type of money therefore are looking for advice on how to save it/store it without being hammered with tax.

What is the simplest way to save this? It is in my mums current account at the moment and its making her anxious!

We have opened a credit union account and moved 10k into it. This is all thats been done at the moment.

Mum is potentially going to buy a small flat in the near future and will be buying my brother a car.

Any advice would be much appreciated. :eek:

eskbanker

Sorry for your loss.

As you and she suspect, keeping it in her current account isn't a good idea for two reasons - it won't be earning much interest and it's well above the FSCS protection limit of £85K.

If some or all of it is likely to be needed in the foreseeable future then it's best to keep it in accounts with easy access - the simplest solution would be to put it all into NS&I income bonds (where the £85K protection limit doesn't apply but the money earns 1%), or more interest could be earned by splitting the amount into two and putting it into top-paying easy-access accounts.

Premium Bonds are another option for £50K - the expected return on that (circa 1.2-1.26%) is less than those best-paying savings accounts (although tax may eradicate that variance, depending on her total annual earnings) but does also involve the small possibility of a sizable win.

sherrybee

Thank you, would you recommend we do this all in her name or move the money under family members? She is on a low income annually however I don't know how this will look now she has an additional income via widows pension.

How about a cash ISA?

eskbanker

sherrybee wrote: »

Thank you, would you recommend we do this all in her name or move the money under family members? She is on a low income annually however I don't know how this will look now she has an additional income via widows pension.

How about a cash ISA?

Although you've repeatedly referred to 'we', I'm reading your OP as saying that it's her money, so it should be kept in her name, unless she wishes to permanently gift it to others.

There's no harm in putting up to £20K (the annual allowance) into a cash ISA but personally I wouldn't obsess about trying to avoid tax and would concentrate on overall net return (or maybe simplicity) - she has a personal savings allowance of £1,000 anyway.

PRAISETHESUN

sherrybee wrote: »

Thank you, would you recommend we do this all in her name or move the money under family members?

Sorry to hear about your loss. Please don't take this the wrong way, but only do this if you never want to see the money again... I may be cynical, but in my experience money has a bad habit of breaking families apart....

You are right to be wanting to put the money into multiple places to get the £85k FSCS protection. You could get really complicated if you wanted to with multiple current accounts and regular savers to maximise every penny of interest... or for simplicity have all the money in 1 or 2 accounts. If it needed in the short term, keep it in easy access account, otherwise if it can be locked away for a while I'd consider some 1-5 year term deposits/bonds

xylophone

Thank you, would you recommend we do this all in her name or move the money under family members?

Why should your mother's money be held in the accounts of other family members?

Is she on any form of means tested benefits?

The whole sum can be held safely in NS&I until your mother needs to use it.

Your mother is receiving a salary and also the widow's pension?

Is her tax position correct?

kidmugsy

sherrybee wrote: »

Mum is potentially going to buy a small flat in the near future

Why? Is it for her to live in? Would a bigger flat with room for a lodger be a better bet?

sherrybee wrote: »

and will be buying my brother a car.

Why? Shouldn't sorting out her pension take priority? Has she paid off any debts e.g. mortgage?

Put another way: how long will it take your brother to pay her back?

What you probably both need to understand is that £130k isn't a lot of money for someone who may live for 30 or 40 years. So it should not be spent lightly on consumer goods.

Voyager2002

Tax is really not a consideration: she will not be taxed on her legacy, and will only pay tax if she invests it in something that produces a fairly hefty income, and even then the tax on that income is rather modest.


Cash ISAs are generally not worthwhile for most people: the banks pay such low interest on them that even though the interest is tax free, one would usually be better off receiving a higher rate of interest and paying tax on it.


Has your mother looked at a SIPP (pension arrangement)? That is a scheme where her money could grow free of tax.

tel_

Voyager2002 wrote: »

Cash ISAs are generally not worthwhile for most people: the banks pay such low interest on them that even though the interest is tax free, one would usually be better off receiving a higher rate of interest and paying tax on it.

Just out of interest Voyager, what saving/investment would you choose instead of a Cash ISA?

ROLY9

I'm thinling of a 1yr Bond with Secure Trust Bank 2.02%

System

Don't let the tax tail wag the investment dog. Paying tax on an investment isn't a bad thing once you've used up all tax free options.