Where to stash 300k

MrsSc00ge

Hi. I've  never had any money to invest so I know absolutely nothing about investing other than earning interest in a normal savings account. I've got around £325,000 from the sale of mum's former home. She's now in a care home and I have to pay appropriately £850 a WEEK top up fees. I will be billed monthly for this
I want to know the best way to invest this money for the above purpose. Maybe I should keep 6 months or a year's care home fees in a basic savings account and invest the rest in something  like a 90 day notice account. I really have no idea what I'm  doing. Help! Thanks

TheMilkmansDad

To Clarify - is this your money to invest/save or it it money you are investing/saving on your mother behalf (POA)? You mention you are being billed - are you paying for the fees or is your mother?

Linton

Is the £850/week after Mum contributes most of her State Pension, any other pensions, and any benefits to which she is entitled?  In paying for care homes it is usually expected that this will happen.

I will assume it is...

£850/week= approx £44K/year.  So assuming zero return £325K would last about 7 years allowing for some inflation.   This suggests but does not guarantee that the money shuld last her lifetime.

What would be reasonable to do may depend on whether the money is your's or Mum's.  If Mum's I suggest you set up a series of fixed term £45K-£50K tranches in
each of:

1) 1 year fixed term savings account
...
5) 5 year fixed term savings account.
6) the rest in an instant access account.


In this way she will have sufficient coming in each year for at least 6 years to pay the care home costs plus extra cash in hand should fees rise faster than expected.

Another option you could investigate is a care annuity (or "immediate needs" annuity).  This will on average cost more than paying for each year until she dies but it will give full cover should she live for longer than the £325K would otherwise support.

Gary1984

I think your plan of 6 months of fees in an instant access account and the rest in a notice account which can be periodically used to top up the instant access account, say every 3 months, is sound.

Gary1984

Linton said:

Is the £850/week after Mum contributes most of her State Pension, any other pensions, and any benefits to which she is entitled?  In paying for care homes it is usually expected that this will happen.

I will assume it is...

£850/week= approx £44K/year.  So assuming zero return £325K would last about 7 years allowing for some inflation.   This suggests but does not guarantee that the money shuld last her lifetime.

What would be reasonable to do may depend on whether the money is your's or Mum's.  If Mum's I suggest you set up a series of fixed term £45K-£50K tranches in
each of:

1) 1 year fixed term savings account
...
5) 5 year fixed term savings account.
6) the rest in an instant access account.


In this way she will have sufficient coming in each year for at least 6 years to pay the care home costs plus extra cash in hand should fees rise faster than expected.

Another option you could investigate is a care annuity (or "immediate needs" annuity).  This will on average cost more than paying for each year until she dies but it will give full cover should she live for longer than the £325K would otherwise support.

I'd be wary of tying up too much money in long term fixes. If fees increase significantly you may be left with a shortfall in a given year. Make sure you leave yourself plenty of cash that's either instant access or can be accessed with a not excessively long notice period.

Linton

Gary1984 said:

Linton said:

Is the £850/week after Mum contributes most of her State Pension, any other pensions, and any benefits to which she is entitled?  In paying for care homes it is usually expected that this will happen.

I will assume it is...

£850/week= approx £44K/year.  So assuming zero return £325K would last about 7 years allowing for some inflation.   This suggests but does not guarantee that the money shuld last her lifetime.

What would be reasonable to do may depend on whether the money is your's or Mum's.  If Mum's I suggest you set up a series of fixed term £45K-£50K tranches in
each of:

1) 1 year fixed term savings account
...
5) 5 year fixed term savings account.
6) the rest in an instant access account.


In this way she will have sufficient coming in each year for at least 6 years to pay the care home costs plus extra cash in hand should fees rise faster than expected.

Another option you could investigate is a care annuity (or "immediate needs" annuity).  This will on average cost more than paying for each year until she dies but it will give full cover should she live for longer than the £325K would otherwise support.

I'd be wary of tying up too much money in long term fixes. If fees increase significantly you may be left with a shortfall in a given year. Make sure you leave yourself plenty of cash that's either instant access or can be accessed with a not excessively long notice period.

I agree that it would be far too risky to tie up too much in fixes.  With my suggestion the OP (or rather Mum) would start with at least £75K in immediate access funds and there is reasonable expectation that the amount coming in each year would be higher than the fees, certainly in the early years.  

There is plenty of room for a reasonable compromise between 100% short term savings and 100%  fixed term accounts. 

PeskyBlunder

Whatever you end up doing, don't forget about the £85K FSCS compensation limit.

MrsSc00ge

Thanks everyone! 
To confirm the house was legally mine but the money from the sale of the house is morally mum's. This is being used as a top up for a much better quality home than if mum was somewhere purely LA funded. I'm  savy with regards to her getting all the funding she's entitled to as I used to work in a benefits department. So mum makes a client contribution from her pensions and the LA adds funding to a total of what they "believe" is sufficient payment for a home to meet her needs. I have her in a much more expensive home and therefore have to pay a top up out of the house sale.
I sincerely hope mum isn't alive in 6 odd years because she has alzheimers. However, my husband will have inherited a very large sum of money by then so we can continue to pay the top up.
So taking into account the money is  mine and doesn't have to last longer than 6 years is my original idea the best plan? As an aside, I have no assets in my name and don't work so I don't  know if a tax allowance would have anything to do with how I invest.
Sorry for being gormless
And what's a FSCS compensation?

Albermarle

Hi. I've  never had any money to invest so I know absolutely nothing about investing other than earning interest in a normal savings account

Just so you are aware to avoid any future confusion.

Investing is normally understood to mean investing in stocks and shares etc, which is really a much more long term exercise than you are wanting.

All the suggestions above are for ways of saving the money, not investing it.

So you only have to look at standard savings accounts that you say you are familiar with, and avoid investing altogether ( for this particular situation).

jaceyboy

MrsSc00ge said:

Thanks everyone! 
To confirm the house was legally mine but the money from the sale of the house is morally mum's. This is being used as a top up for a much better quality home than if mum was somewhere purely LA funded. I'm  savy with regards to her getting all the funding she's entitled to as I used to work in a benefits department. So mum makes a client contribution from her pensions and the LA adds funding to a total of what they "believe" is sufficient payment for a home to meet her needs. I have her in a much more expensive home and therefore have to pay a top up out of the house sale.
I sincerely hope mum isn't alive in 6 odd years because she has alzheimers. However, my husband will have inherited a very large sum of money by then so we can continue to pay the top up.
So taking into account the money is  mine and doesn't have to last longer than 6 years is my original idea the best plan? As an aside, I have no assets in my name and don't work so I don't  know if a tax allowance would have anything to do with how I invest.
Sorry for being gormless
And what's a FSCS compensation?

What we cover | Check your money is protected | FSCS

greensalad

Here's how I would approach it, from a fairly "laymens" attitude.

As others have said, spread the money across several different fixed term and no fixed term accounts. 5 years seems a bit too long, but 3 years sounds reasonable for a good return especially if you are not thinking she will be here in 7 years. 

For example, with the instant access at 4.55%, at that full amount of £85k you would earn £320 per month which is a nice chunk off the monthly bill (almost 10%). Naturally it will decline as you spend, but you'll be building on the other investments. 

Instant access: DF Capital at 4.55% https://www.dfcapital.bank/savings/easy-access/

1-year: Vanquis 6.15% https://www.vanquissavings.co.uk/1-year-fixed-rate-bonds/

2-year: Vanquis 6.2% https://www.vanquissavings.co.uk/2-year-fixed-rate-bonds/

3-year: Vanquis 6.05%: https://www.moneysavingexpert.com/savings/savings-accounts-best-interest/#threeyearfixed

Withdraw the interest funds each month from the Vanquis accounts and place in Premium Bonds, another risk free savings option with fairly quick withdrawals. 

After one year, you will have only spent about half the instant access account on care, presuming prices stay similar and interest rates stay good. But you'll have topped up an additional £15k in the premium bonds, before you even count any winnings. 

Edit: I realised when I calculated the £15k interest this would be compound, dependent on the extra amount staying in the account for the full year. So if withdrawing (which would be needed due to going over the £85k FSCS protection) it'd be slightly less. Still, not that much less.