Fix now or wait

colingcp

My wife is 61 and a non tax payer. She has £15000 in an old cash isa earning nothing. The money will not be required for the forseable and is really to go towards my wifes retirement has she has no real private pension. We can get 5.8% on a five year fixed ( United Trust Bank)  Does this sound sensible  or should she wait for more rate increases? Thank you

Bigwheels1111

Like last November, The boe raised rates but interest rates for savers keep falling.

Do you want anual payout.

ie £870 a year or £4884.72 in year 5 if compounded.

I fixed at 5%, 4.85%, 4.5%,4.40% last year and 5.55% this year.

You have to take the plung at some point.

Yes i would have got better rates this year, but who knows.

Are you happy with that return, If Yes then fix.

Brie

Hard to know if rates are going to go up or down.  If she puts it in at 5.8% she knows she's going get that rate.  If she waits with the ££ in a .5% account at what point will she break even moving it to, say 6.5%, assuming she may want to have the ££ when she's 66 rather than 67 or 68. 

Linton

If your wife expects to be a non tax payer for the foreseeable future it would be more efficient for her to use her non-tax status to pay £3600 gross (£2880 net) into a pension each year so getting the tax relief on the non-existant tax when paying in and then taking the full amount tax free when withdrawing  - a 25% return per year with a small amount of admin effort.

Waiting for a rate increase could well leave your wife losing more from the time when she is not earning a reasonable return than she gains from some future increase in rates. If she is worried about missing out on future increases, if any, I suggest she puts a resonable amount of the money into a fixed rate account now.  The rest  could be placed in a good instant access account and used for further fixed rate accounts spread over the next year say.  There is of course no point in keeping the money in an ISA,

colingcp

Thank you very much for your replies and sound advice. My wife works part time and has a government Nest pension. I am assuming that this is still a good idea to make the 2880 net pension contribution each year. I did not realise that my wife would get the tax relief as a non tax payer.Thank you

colingcp

Sorry there was a second point. I was going to opt for 5 year bond and interest paid annually. My Wife will continue to be a non tax payer until retirement , so is that wise or would you suggest monthly/annually or end of term?

Really appreciate your help and Sorry if I am asking obvious questions.

subjecttocontract

A 6 month fix pays over 5.5%.

Albermarle

colingcp said:

Thank you very much for your replies and sound advice. My wife works part time and has a government Nest pension. I am assuming that this is still a good idea to make the 2880 net pension contribution each year. I did not realise that my wife would get the tax relief as a non tax payer.Thank you

The £2880 net maximum pension contribution only applies to non earners.
As she is working she can contribute up to her salary . So for example if she earns £5K pa, she can add £4Kpa and she will get £1K tax relief. The fact she is not actually earning enough to pay any tax is not an issue.
Surprising to many is that the amount of tax you pay ( or not), and the amount of tax relief you can get are not connected.
Presume she is paying already into the NEST pension at work , or not ?
By the way although NEST was set up by the government, in reality it is no different from a pension with other providers.

ColdIron

Albermarle said:

colingcp said:

Thank you very much for your replies and sound advice. My wife works part time and has a government Nest pension. I am assuming that this is still a good idea to make the 2880 net pension contribution each year. I did not realise that my wife would get the tax relief as a non tax payer.Thank you

The £2880 net maximum pension contribution only applies to non earners.

Not quite, it applies to people with relevant earnings below £3,600 as well

Albermarle

ColdIron said:

Albermarle said:

colingcp said:

Thank you very much for your replies and sound advice. My wife works part time and has a government Nest pension. I am assuming that this is still a good idea to make the 2880 net pension contribution each year. I did not realise that my wife would get the tax relief as a non tax payer.Thank you

The £2880 net maximum pension contribution only applies to non earners.

Not quite, it applies to people with relevant earnings below £3,600 as well

Very true, good that you pointed that out.