Advice please. Not sure what to do 7 December 2022 at 9:28AM in Savings & investments 16 replies 1.7K views

SimpleMind85

Hi. I`m retired,60 years old, basic rate tax payer with £27k annual income from an annuity, and have £60k in a savings account (2.1% AER). I have no other income. I would like an easy access account, but confused what I should do. ISA or a "normal" savings account(s). From a tax perspective, what are my options. Thanks!

Qyburn

Your existing £60K at 2.1% will just take you into paying tax on the interest.

For instant access you could do worse than putting £20K into the Virgin cash ISA paying 3% (tax free of course).  Then in April put in another £20K. Although it says for current account holders, I opened my current account solely to get this ISA and it was all done online pretty quickly.

https://uk.virginmoney.com/savings/products/easy_access_cash_isa_exclusive_issue_2/

RobM99

Do you need £60,000 in easy access? Much better rates for a one year fix, for example.

Albermarle

RobM99 said:

Do you need £60,000 in easy access? Much better rates for a one year fix, for example.

For example here is a comparison of lots of different fixed rates- as ISA's and as not.

Compare The Best UK Savings Accounts | moneyfacts.co.uk

Also here is a full explanation about tax on savings interest
Tax-free savings: check if you're eligible - Money Saving Expert

SimpleMind85

Thanks everyone. Yeh, I don`t really need instant access but just like the thought of being able to get at my money whenever. I`ll look at the options now.

Exodi

SimpleMind85 said:

Thanks everyone. Yeh, I don`t really need instant access but just like the thought of being able to get at my money whenever. I`ll look at the options now.

Let's say you keep the money as is £60,000 @ 2.1% = £1,260 interest a year.

Let's say you kept £10,000 @ 2.1% and put the other £50,000 into a one year fix @ 4.3% (about the going rate at the moment) = £2,360... so over £1,000 a year more.

Is it worth £1,000+ for the "thought of being able to get at (all) my money whenever". Do you possibly see any eventuality that will require immediate access to £60,000? That's a lot of boilers breaking down, sudden car repairs and roofs leaking.

steveksullivan

Exodi said:

SimpleMind85 said:

Thanks everyone. Yeh, I don`t really need instant access but just like the thought of being able to get at my money whenever. I`ll look at the options now.

Let's say you keep the money as is £60,000 @ 2.1% = £1,260 interest a year.

Let's say you kept £10,000 @ 2.1% and put the other £50,000 into a one year fix @ 4.3% (about the going rate at the moment) = £2,360... so over £1,000 a year more.

Is it worth £1,000+ for the "thought of being able to get at (all) my money whenever". Do you possibly see any eventuality that will require immediate access to £60,000? That's a lot of boilers breaking down, sudden car repairs and roofs leaking.

Also , what I have recently had to remind myself is that if you were to choose an ISA fix for some of it, in the event that you really DID have a serious and expensive emergency, that is also 'Easy Access'  - albeit with an interest penalty charge .....

Ciprico

Albermarle said:

RobM99 said:

Do you need £60,000 in easy access? Much better rates for a one year fix, for example.

For example here is a comparison of lots of different fixed rates- as ISA's and as not.

Compare The Best UK Savings Accounts | moneyfacts.co.uk

Also here is a full explanation about tax on savings interest
Tax-free savings: check if you're eligible - Money Saving Expert

Abermarle, 

I read the article above. When they refer to income including interest do they include isa account interest. 

.. Or is isa interest excluded from all these calculations. I realise it's tax free but does it count towards total income in regards to savings tax band's...? 

wmb194

Ciprico said:

Albermarle said:

RobM99 said:

Do you need £60,000 in easy access? Much better rates for a one year fix, for example.

For example here is a comparison of lots of different fixed rates- as ISA's and as not.

Compare The Best UK Savings Accounts | moneyfacts.co.uk

Also here is a full explanation about tax on savings interest
Tax-free savings: check if you're eligible - Money Saving Expert

Abermarle, 

I read the article above. When they refer to income including interest do they include isa account interest. 

.. Or is isa interest excluded from all these calculations. I realise it's tax free but does it count towards total income in regards to savings tax band's...? 

No, Isas are ignored completely. That's the whole point of them. With one exception*, HMRC isn't interested in them one jot, which is part of what makes them so great.

*They still form a part of your estate for inheritance tax.

SimpleMind85

Exodi said:

SimpleMind85 said:

Thanks everyone. Yeh, I don`t really need instant access but just like the thought of being able to get at my money whenever. I`ll look at the options now.

Let's say you keep the money as is £60,000 @ 2.1% = £1,260 interest a year.

Let's say you kept £10,000 @ 2.1% and put the other £50,000 into a one year fix @ 4.3% (about the going rate at the moment) = £2,360... so over £1,000 a year more.

Is it worth £1,000+ for the "thought of being able to get at (all) my money whenever". Do you possibly see any eventuality that will require immediate access to £60,000? That's a lot of boilers breaking down, sudden car repairs and roofs leaking.

Good point. I guess with points you make, I'll not need access to the full £60000.I'll go on what you say, and put 50k in a fix for the sake of that extra 1k a year. It makes sense, and keeps HMRC away...until the time comes 🙂

BooJewels

Some of the fixes pay monthly interest out to another account. I am also nervous about locking money away - not sure what I think I might need it for, but I can't quite shake the feeling - I've lived a long time hand to mouth without any money, so it's hard to let go of what I now have - it's come at a very high price. 

So what I've done is split the difference and taken different term fixes, but which pay interest monthly.  You take a slight hit on the interest on what perhaps aren't the highest rate payers in the first place, but by paying the interest monthly into another easy access account, which then compounds a little, the original principle stays locked away, but I get some back in a form that I can get at, should the need arise.  On my own savings, the difference worked out at less than £100 per year and that's worth it for me for this particular arrangement.  Maybe in time when I get used to this lark, I'll be bolder in my choices, but being a bit of a wuss, this suits me personally.