Where to save 300k? Interest earned to pay renting costs for OAP

warranty

Was hoping for some advice on how/where best to save 300k...

An elderly relative (80) owns their own home, they will be left with around 300k after costs once it's sold. The reason behind the sale is that they need to move to sheltered accommodation, this is council owned and they qualify to move there due to a medical need. The costs for the council accommodation will be around 1.2k per month, the aim being to pay for the bulk of the housing costs out of the interest from their savings. Family have POA for finances and health. They have enough in savings to pay for the rent while it's on the market.

Interested in what options you would consider, thanks in advance for any input

Edit: Their income is 9.3k per year state pension + 3.8k attendance allowance, they do currently receive pension credit but this will stop when the house is sold.

dinosaur66

as you have said bulk and not all

nationwide are as safe a high street bank as there is considering the sum is £215k over the govt threshold

i bank with nationwide for this exact reason just in case there are a run on banks i feel my money is safer with the than higher intrest paying accounts.

a 1 year nationwide bond allowing 3 withdrawls for emergencys without losing intrest pays £12,300 for the year on £300k which covers the bulk of the fees.

its conservative but safe

lr1277

While considering the income generated from the money, don't forget about any tax payable, depending on the saver's other income(s).

eskbanker

An annuity might be appropriate, although there's the potential for a conflict of interest if the family are hoping for capital preservation.

warranty

Thanks all, I believe that interest on the savings will be payable as the pension + interest will take them over the limit.

 

I would rather spread the savings over different financial institutions so as not to go over 85k, I don't see any reward in not doing so, only the very small risk that they could lose it all so just not worth it and as we have POA we have to act in their best interests.

I don't even know what an annuity is so will see what Google says about it, in my very unsophisticated mind I was thinking along the lines of 20k in an ISA before April, 20k in a new ISA after April, the rest split into different banks to ensure it's under 85k for the financial protection

warranty

JamesRobinson48 said:

How much State Pension does the person receive?

BTW, you might need to factor in the elderly relative's loss of certain means-tested state benefits once the £300k cash is received.

They are on a very low state pension of around 9.3k per year plus pension credit, they won't be entitled to pension credit once the house is sold

dinosaur66

as far as i am aware you still get DLA which reading between the lines i am guessing he gets  just the attendance allowance part stopped / and full state pension will be fine   / and yes the total will be added up with the savings and all will be taxed at 20% but with the £12500 tax free allowance and the income he will be getting even if he never married  he will still be under inheritance tax threshold and all his costs will be covered no problem

Dazed_and_C0nfused

warranty said:

JamesRobinson48 said:

How much State Pension does the person receive?

BTW, you might need to factor in the elderly relative's loss of certain means-tested state benefits once the £300k cash is received.

They are on a very low state pension of around 9.3k per year plus pension credit, they won't be entitled to pension credit once the house is sold

If that is their only taxable income, i.e. no other private or work pension income, then they can actually earn a decent amount in taxable interest before becoming liable to pay any tax.

The starting point is £18,570 so with £9.3k State Pension, which is actually 5.5% above the standard basic State Pension amount, they are looking at £9,270 in interest before owing any tax.

Wil be a little less from April as Personal Allowance remains the same but her State Pension will increase in the 2025-26 tax year.

NB.  The above assumes your £9.3k figure State Pension figure is correct and you have accidentally understated her State Pension by £775 by assuming it's paid monthly.

Sarahspangles

warranty said:

Was hoping for some advice on how/where best to save 300k...

An elderly relative (80) owns their own home, they will be left with around 300k after costs once it's sold. The reason behind the sale is that they need to move to sheltered accommodation, this is council owned and they qualify to move there due to a medical need. The costs for the council accommodation will be around 1.2k per month, the aim being to pay for the bulk of the housing costs out of the interest from their savings. Family have POA for finances and health. They have enough in savings to pay for the rent while it's on the market.

Interested in what options you would consider, thanks in advance for any input

Have you considered letting the house rather than selling? Acknowledging the risks and that not everyone is up for being a landlord.

When it is sold, for FSCS protection the limit you can save with each bank/building society is £85k, although there is initial higher protection after a house sale i.e. it's fine for it all to go into one account initially until you can move it out. It's then a matter of moving some into an ISA each year to reduce tax payable, and using the top of table accounts for the rest.

If your relative has relatively low pension income he may qualify for the starter savings rate, to reduce tax paid on interest. 

Protection in NS&I savings is not limited, but their interest rates aren't the best. Premium Bonds may be worth looking at when interest rates are moving as he wouldn't pay tax on winnings.

eskbanker

warranty said:

I don't even know what an annuity is so will see what Google says about it

They're basically a method of converting a lump sum into a regular income for life, and are normally associated with pensions, but can be bought as standalone products:

https://www.ageuk.org.uk/information-advice/money-legal/pensions/annuities/

Potentially worth a chat with someone from here:

https://societyoflaterlifeadvisers.co.uk/

warranty

Dazed_and_C0nfused said:

warranty said:

JamesRobinson48 said:

How much State Pension does the person receive?

BTW, you might need to factor in the elderly relative's loss of certain means-tested state benefits once the £300k cash is received.

They are on a very low state pension of around 9.3k per year plus pension credit, they won't be entitled to pension credit once the house is sold

If that is their only taxable income, i.e. no other private or work pension income, then they can actually earn a decent amount in taxable interest before becoming liable to pay any tax.

The starting point is £18,570 so with £9.3k State Pension, which is actually 5.5% above the standard basic State Pension amount, they are looking at £9,270 in interest before owing any tax.

Wil be a little less from April as Personal Allowance remains the same but her State Pension will increase in the 2025-26 tax year.

NB.  The above assumes your £9.3k figure State Pension figure is correct and you have accidentally understated her State Pension by £775 by assuming it's paid monthly.

Thanks, the only other income is attendance allowance which I believe is not means tested - the pension is around £180 per week so I just multiplied by 52 for the annual figure - they currently receive pension credit but that will stop when the house is sold so I haven't included that in any figures. So their income when they move will be 9.3k annual state pension and 3.8k annual attendance allowance, approx 13.1k per year.