Bit Confused-Please help with advice

LindsayT

Don't know if a bit of background is needed but just in case it is. I'm 73, been widowed for many years, get state pension and small pension from my late husband's company.
I've got 50k in Premium Bonds and now circa 50k in a Current Account earning nothing and never had an ISA.
I want to keep the Current Account open but it's a large part of it that I want to do something with and don't want to tie up for more than a year at a time.
I was thinking about 20k in an ISA. Then for the rest, don't know whether to go for the year fix from NS&I or the easy access Santander, so I can withdraw and go for another ISA in April.
Any and all advice gratefully received.

ColdIron

Do you need an ISA? It may not help if you won't be paying income tax on your savings

What is the total of your two pensions?

Bigwheels1111

Add up both pensions and get a total.

Do they total £12570.00, more ? or less ?.

The basics are you can get up to £18570.00 tax free a year.

This can be earnings and interest or all interest.

The first £12,570 can be pensions & interest in your case

The next £5,000 it tax free interest

Then your Personal savings allowance £1,000.

A total of £18,570.

If your pensions added together are more than £12,570, Lets say £14,000.

You can still get £4,570 of interest tax free. To get to the £18,570 total.

I hope that makes sense.

I would get the best fixed rate you can NS&I is 6.2% for 1 year the best rate today.

Plus get a Santander 5.2% easy access for your emergency fund.

I would stick 90k in NS&I and 10k in Santander.

90k = £5580.00 interest

10k = £ 520.00 interest

Total = £6100.00.

If your pensions are less than £12,470.00 you could earn the interest above and pay no tax.

Select rate order for best rate.

Fixed

https://moneyfactscompare.co.uk/savings-accounts/fixed-rate-bonds/?quick-links-first=false

Easy access

https://moneyfactscompare.co.uk/savings-accounts/easy-access-savings-accounts/?quick-links-first=false

Albermarle

There are differences between ISA savings accounts and non ISA/normal savings accounts. So you need to decide which is best for you.
ISA accounts tend to pay a lower interest rate than the equivalent non ISA account.
Interest from ISA accounts is never taxed but you can earn a certain amount of interest from non ISA accounts without paying tax ( as explained above)
You are limited to adding £20K pa to an ISA and it is a bit more complicated if you want to transfer to another provider.

 circa 50k in a Current Account earning nothing

Whatever you do, just get the money out of the current account and start earning some interest !

LindsayT

Forgot to say, I pay tax on the pensions. Will now read through the posts to see if they make sense to me.

jimjames

£50k in a current account paying nothing when it could be earning 5.2% interest with Santander means you're throwing away at least £2600 per year. That's a very significant amount if you only get a small pension.

Dazed_and_C0nfused

LindsayT said:

Forgot to say, I pay tax on the pensions. Will now read through the posts to see if they make sense to me.

But if you are only paying a smallish amount of tax you could still have some of the savings starter rate band and the savings nil rate band (aka Personal Savings Allowance) available.

Both of which have 0% tax rates.

LindsayT

Thanks for the replies. Just added up my pensions. At the moment, I get £13991.28 after tax.
I've read you can £1000 in interest before paying tax.
As I already pay tax on my pensions, that's why I thought I need an ISA as well as some other savings account.
I thought what I can get tax free was the personal allowance of £12570 plus a £1000 in interest.
How does £18570 come into it?

Dazed_and_C0nfused

LindsayT said:

Thanks for the replies. Just added up my pensions. At the moment, I get £13991.28 after tax.
I've read you can £1000 in interest before paying tax.
As I already pay tax on my pensions, that's why I thought I need an ISA as well as some other savings account.
I thought what I can get tax free was the personal allowance of £12570 plus a £1000 in interest.
How does £18570 come into it?

What you get after tax is of no relevance.

The £18,570 applies to someone who has non savings non dividend income (pensions, earnings, self employment profits etc) of £12,570 or less.

Then can use the Personal Allowance and full savings starter rate band (£5,000 interest taxed at 0%) and the savings nil rate band (£1,000 taxed at 0%).

If you have applied for Marriage Allowance the Personal Allowance drops to £11,310 and the total, with the right type of income, becomes £17,310 instead of £18,570.

Sg28

LindsayT said:

Thanks for the replies. Just added up my pensions. At the moment, I get £13991.28 after tax.
I've read you can £1000 in interest before paying tax.
As I already pay tax on my pensions, that's why I thought I need an ISA as well as some other savings account.
I thought what I can get tax free was the personal allowance of £12570 plus a £1000 in interest.
How does £18570 come into it?

It looks like your gross income is about £14500.

So with whats left from the starter rate for savings and your £1000 allowance means you can earn around £4000 in interest.

This may vary depending on your exact circumstances. 

So even with the full 50k in the top 1 year fix at 6.2% you will still pay no tax.

LindsayT

Thanks again for replies. @Sg28 Thank you for your reply. Will look up the paperwork for the private pension to see what the amount is before tax and take it from there.
Glad I posted about this as it seems I probably don't need an ISA as others have said.