ADVICE RE PSA PLEASE

dec9

I would like a bit of advice please.
I have just got a large amount in inheritance money from my parents death. I have never had such a big amount and I just don't know what to do for best.
I live with my wife and we are both pensioners on state pension and a decent amount of private pension money and we have no mortgage, and are not big spenders.
With the money we have both put the maximum amount in cash ISA's and £50K of premium bonds each.
The question is what do we do with the remaining sum of £160K??
I don't want to invest in stocks and shares as I don't trust them.
I've given as much money as I dare to my kids.
I don't want to buy a big new expensive car.
It looks like We can only put about £40K in a high interest easy access savings account between us without going over the PSA limit, and if we put the full £160K in we will get taxed on it a lot.
Or do you think we should do put the full £160K in  and pay the PSA tax on the £120K? At least we will get some interest if not a lot.
We are 20% tax payers.
Or just put the remaining £120K in and put the rest elsewhere??  But where??
Any help/advice/thoughts would be appreciated.

El_Torro

You say you don't want to invest in stocks and shares but you also say you have large private pensions. Isn't the money in the pension invested in stocks and shares?

If you are adamant that you want to save rather than invest then I think you'll just have to find the best savings accounts for you and take the hit on the 20% tax you'll be paying. You can continue to pay into Cash ISAs in future years. 

Over the long run your cash will lose value to inflation. I'm not sure that matters too much though since you have already passed money on to your kids and your pensions cover your needs. 

EthicsGradient

A quick check - does the "decent amount of private pension money" take you both over £17,570 of income - the £12,570 tax-free allowance everyone gets, plus the £5,000 in which you can get some earned (ie salary or pension) income and get some saving interest free of tax, above the £1,000 PSA? And is the income from the private pensions fixed per year, or could you, for instance, take less of it from the private pensions for a few years, and use the capital you now have to make up for that, until you've sheltered the capital in ISAs in about 4 years time?

Phoenix72

Even if you are liable to tax then surely 80% of something is better that 100% of nothing? Assuming you are both basic rate taxpayers.

nottsphil

Phoenix72 said:

Even if you are liable to tax then surely 80% of something is better that 100% of nothing? Assuming you are both basic rate taxpayers.

I'm struggling to see where the OP has even hinted that they might let some of the capital lye idle.

Phoenix72

nottsphil said:

Phoenix72 said:

Even if you are liable to tax then surely 80% of something is better that 100% of nothing? Assuming you are both basic rate taxpayers.

I'm struggling to see where the OP has even hinted that they might let some of the capital lye idle.

Did this not allude to it - "Or just put the remaining £120K in and put the rest elsewhere??", their assumption being that £120k took them to their PSA limit. So my guess is they were considering leaving £40k idle.

Albermarle

You can have £50K each in Premium Bonds ( if you want) 
The average prize rate ( around 3.8%) is less than you can get in a savings account, but there is no tax, so it works out similar.
 IF you have to pay tax on interest.

How the starting rate for savings works - Money Saving Expert

When choosing savings providers, normally smaller banks and some building societies pay better rates than the big names. Do not worry if you have never heard of them . Feel free to ask for opinions on here about any provider.
Every provider in these comparison tables is covered by the £85K FSCS.
Best savings accounts: 5.1% easy access or 5.5% fixed rates (moneysavingexpert.com)
Best cash ISAs: up to 5.2% easy access, up to 4.83% fixed - MSE (moneysavingexpert.com)
Moneyfactscompare.co.uk | Compare Savings, Mortgages & More

dec9

Sorry if my question isn't clear.

The wife and myself each get more than£17570 each per year from state pension and Private pensions.

We have £160k left after filling our cash ISA's, and Premium Bonds.  Minus the £40K in a joint high interest easy access savings account which I think would take us up the maximum joint PSA tax limit of £2000.

Therefore leaving £120k to try and put somewhere for maximum return. 

Is it worth just putting the £120K into a easy access 5% (at the moment) interest rate savings account (which would now total £160k) and just pay the PSA tax???
Or is there somewhere else more tax efficient

Albermarle

Or is there somewhere else more tax efficient

If you just want to play safe and save the money, then not really.

EthicsGradient

If one or both of you can choose to take less income from your private pensions each year, so that you come back below the £17,570 amount, then that would be tax-efficient - you'd start getting an extra 0% rate band on savings (which can be up to £5,000, if you can get your pension income down to £12,570).

Otherwise, one option could be low-coupon short-term gilts, which have a guaranteed maturity value soon.

Gilt Yields (yieldgimp.com)

These are of most benefit to 40% rate taxpayers, but still have some advantage for 20% payers. The return on them is nearly all capital gains, but gilts are free from capital gains tax. So, for instance, "T26" which matures in Jan 2026 will pay a gross 4.4%, and only a small amount of that would be taxable interest income - you'd get about 4.37% after tax, which is equivalent to 5.46% before tax in a savings account. You could buy similar low-coupon gilts that mature in the upcoming tax years, and when they do, use them to fund ISAs for each of you - eg T26, T26A and TN28. 

Whether that's worth the hassle of setting up an account with a broker who offers these gilts is up to you.

InvesterJones

EthicsGradient said:

Otherwise, one option could be low-coupon short-term gilts, which have a guaranteed maturity value soon.

Gilt Yields (yieldgimp.com)

These are of most benefit to 40% rate taxpayers, but still have some advantage for 20% payers. The return on them is nearly all capital gains, but gilts are free from capital gains tax. So, for instance, "T26" which matures in Jan 2026 will pay a gross 4.4%, and only a small amount of that would be taxable interest income - you'd get about 4.37% after tax, which is equivalent to 5.46% before tax in a savings account. You could buy similar low-coupon gilts that mature in the upcoming tax years, and when they do, use them to fund ISAs for each of you - eg T26, T26A and TN28. 

Whether that's worth the hassle of setting up an account with a broker who offers these gilts is up to you.

I've just done exactly this - Hargreaves Landsown currently have an offer to get a refund on up to £100 of trading fees until 21st June, so it's effectively free to use their platform to buy gilts.