NS&I Guaranteed Income Bond maturing after 2 yrs - where to put 75k balance?

aphty

My 85 year old mother in law's NS&I Guaranteed Income Bond matures in a few days - it has been a fixed 1.15% gross rate for the last 2 years. Capital sum 75k is unchanged, no withdrawals allowed and the interest is paid monthly to her to supplement her pension. The NS&I options available are either to cash in at maturity or to renew the bond with rates offered of 1.80% for 1 year term / 2.20% for 2 years / 2.50% for both 3 or 5 year terms.
What should she do? - I believe the monthly income, though quite small, may be important to her.
For example, she could get 2.5% paid monthly from the Marcus online easy access account and I presume arrange a monthly withdrawal of the interest to her current account. But I feel there should be better options than this available.
She is 'online banking literate' but will be wary of the idea of managing investments.
Any recommendations?

wmb194

aphty said:

My 85 year old mother in law's NS&I Guaranteed Income Bond matures in a few days - it has been a fixed 1.15% gross rate for the last 2 years. Capital sum 75k is unchanged, no withdrawals allowed and the interest is paid monthly to her to supplement her pension. The NS&I options available are either to cash in at maturity or to renew the bond with rates offered of 1.80% for 1 year term / 2.20% for 2 years / 2.50% for both 3 or 5 year terms.
What should she do? - I believe the monthly income, though quite small, may be important to her.
For example, she could get 2.5% paid monthly from the Marcus online easy access account and I presume arrange a monthly withdrawal of the interest to her current account. But I feel there should be better options than this available.
She is 'online banking literate' but will be wary of the idea of managing investments.
Any recommendations?

Just open a fixed rate savings bond(s) somewhere and which offers to pay away monthly interest. Up to about 5% at the moment.

https://moneyfacts.co.uk/savings-accounts/2-year-fixed-rate-bonds/

aphty

Thanks - hadn't realised some fixed rate bonds had the option of paying away monthly interest to another account. That's very helpful.

RobM99

aphty said:

Thanks - hadn't realised some fixed rate bonds had the option of paying away monthly interest to another account. That's very helpful.

£75000 @ 5%  = £312.50 per month as a guide but is there a tax liability?

Or how about - £5000 in an easy access and take the £312.50 a month from that, a cash (20,000 max)   ISA and £50,000 in a fix one year? You'd have to juggle the figures but you see the idea.

aphty

Great idea - many thanks - the regular withdrawal from a small easy access pot and the rest in fixed hadn't occurred to me. I'll work through figures. 
Am assuming that as a pensioner, the ceiling to earn up to £1,000 of interest on savings each tax year without a tax implication should be ok.
Cheers

RobM99

aphty said:

Great idea - many thanks - the regular withdrawal from a small easy access pot and the rest in fixed hadn't occurred to me. I'll work through figures. 
Am assuming that as a pensioner, the ceiling to earn up to £1,000 of interest on savings each tax year without a tax implication should be ok.
Cheers

Happy to help!

Band7

aphty said:

Great idea - many thanks - the regular withdrawal from a small easy access pot and the rest in fixed hadn't occurred to me. I'll work through figures. 
Am assuming that as a pensioner, the ceiling to earn up to £1,000 of interest on savings each tax year without a tax implication should be ok.
Cheers

Whethet she has to pay tax on her savings interest depends on her total income. How much is that?

Even if she has to pay tax, it is not going to be 100% 😀. 

RobM99

Band7 

Whether she has to pay tax on her savings interest depends on her total income. How much is that?

Does it? The first £1,000 of interest is tax free, no?

Band7

RobM99 said:

Band7 

Whether she has to pay tax on her savings interest depends on her total income. How much is that?

Does it? The first £1,000 of interest is tax free, no?

It is, provided she is a basic rate tax payer.

But she might also be entitled to the £5,000 savings start rate, in addition to the 1,000, depending on their total income. Conversely, she might only be entitled to £500 tax free interest, if she is a higher rate tax payer. Which is why I asked what the total income is.

RobM99

Ah right, you've explained it better than I could.

soulsaver

 Gatehouse Bank.4.98% Gross p.a. 2 year fix IIRC, interest paid away option.

PS If income is the main focus, do consider investment yields.