Best use of savings for 73 yr old?

Eliza_2

Good morning knowledgeable people!  I would be very grateful for your help as googling and reading Martin's guides is blinding me with information.

I have just over £40k in premium bonds at the moment which was left to me a couple of years ago.  Yet again this month I haven't won a life changing amount so am doing some planning in a range of areas for the forthcoming year.  I am 73, in good health and have a state pension and 3 smallish public service pensions (local gov and nhs) and a little job which together earn me enough to live on.  Due to a tricky marriage breakdown I don't have a house and live in really nice social housing.  No benefits.

Next year I am hopeful of being able to move to another house with another housing association currently being built; this will be more in rent but a much more suitable house and I will still be able to afford it if I tighten my belt. I was thinking of getting another small job to ensure I don't have to tighten too much but instead would like to use that £40k to provide a small monthly income of a pretty regular amount so I can plan.  Even if I don't get that house I'd like to spend more time exploring this wonderful country so enough extra income for a few nights on a campsite by the sea  each month would be brilliant!

I would like to be able to access the capital occasionally for example, one grandaughter will need a car for a job she's training for so I've said I'll help with that.

Please could you advise me of the best way to do what I want?

Thank you.

El_Torro

A savings account that pays the highest interest you can find is probably best. Bear in mind that over the long term the interest you earn won't keep up with inflation so in 10 years time this £40k will most likely be worth less than it is today, especially if you spend the interest you earn. 

Investing in a Stocks & Shares ISA is an option, or even a pension. However you won't get regular income by doing this, investments go up and down. Investments are also for the long term, ideally 10 years or more. 

A pension or S&S ISA that is invested in a fund that specialises in giving high dividends could be an option. These aren't guaranteed either though. If you're not currently comfortable with investing in the stock market this may not appeal to you anyway. 

friolento

You can find all the most current savings rates on moneyfacts.co.uk. Right now, you can expect some £1,900 a year in interest for £40k, before tax if you put all your money into one savings account . You probably qualify for £1,000 tax free interest annually , and will have to pay 20% tax on the remainder. So you’d be left with £1,720 a year or £143 a month maximum in interest.

BUT we are in a declining interest rate environment, so those numbers are optimistic.

You can reduce your tax liability by putting up to £20k a year into an ISA. The drawback with ISAs is that they often pay less interest than non-ISA accounts, so this may not help much.

You could probably earn the most interest by putting as much as you can into Regular Savers though these will require monthly attention, and you need to know what you are doing. There is a superb thread on here about Regular Savers https://forums.moneysavingexpert.com/discussion/6106986/regular-savings-accounts-the-best-currently-available-list/p1

Lastly, you can use some of the £40k capital. If you did, say, draw £200 a month from it, it would last you around 16 years. Bear in mind that inflation will reduce the buying power of £200, and that you obviously wouldn’t be able to get as much in interest if your capital decreases. Still, you are financially ahead of many of your contemporaries 😎

jimjames

El_Torro said:

Investing in a Stocks & Shares ISA is an option, or even a pension. However you won't get regular income by doing this, investments go up and down. 

That's not strictly true. Although investments do go up and down they can also pay a regular income albeit not guaranteed in the same way bank interest is. There are investments that have paid an increasing income for over 50 years and the current level is actually not far off the best bank rates. Whether an investment is suitable for the OP is another matter, if this is their only savings then it may not be.

Albermarle

friolento said:

You can find all the most current savings rates on moneyfacts.co.uk. Right now, you can expect some £1,900 a year in interest for £40k, before tax if you put all your money into one savings account . You probably qualify for £1,000 tax free interest annually , and will have to pay 20% tax on the remainder. So you’d be left with £1,720 a year or £143 a month maximum in interest.

BUT we are in a declining interest rate environment, so those numbers are optimistic.

You can reduce your tax liability by putting up to £20k a year into an ISA. The drawback either ISAs is that they often pay less interest than non-ISA accounts, so this may not help much.

You could probably earn the most interest by putting as much as you can into Regular Savers though these will require monthly attention, and you need to know what you are doing. There is a superb thread on here about Regular Savers  https://forums.moneysavingexpert.com/discussion/6106986/regular-savings-accounts-the-best-currently-available-list/p1

Lastly, you can use some of the £40k capital. If you did, say, draw £200 a month from it, it would last you around 16 years. Bear in mind that inflation will reduce the buying power of £200, and that you obviously wouldn’t be able to get as much in interest if your capital decreases. Still, you are financially ahead of many of your contemporaries 😎

You can reduce your tax liability by putting up to £20k a year into an ISA. The drawback either ISAs is that they often pay less interest than non-ISA accounts, so this may not help much.

That always used to be the case but not so clear cut nowadays.
In fact the best easy access ISA is paying more than a non isa. and the difference for a one year account is only 0.3%.
So best for the OP to keep at least some of their savings in a cash ISA to avoid tax.
OP Have a ( slow) read of this. 
Savings - All Guides - MoneySavingExpert

Eyeful

1. Your life expectancy at 73 is about 16 years. You can check here:
https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/healthandlifeexpectancies/articles/lifeexpectancycalculator/2019-06-07

2. If you want little risk, put your money in a bank or building society savings account or savings bond covered by the FSCS up to £85K.

3. Also you might put the money with NS&I, which will be a loan to the UK government & has 100% protection.

4. Using a tax shelter like a  "Cash ISA" means you avoid paying tax on the interest paid.

5. Best interest rates can be found at either of the two links below.
https://www.thisismoney.co.uk/money/article-1583859/Best-savings-rates-General-savings-Internet-branch.htmlhttps://moneyfactscompare.co.uk/savings-accounts/

6. You can check the safety of the bank or building society, with the link below.
It is about half way down the page and marked "Which banks are linked"
https://www.moneysavingexpert.com/savings/safe-savings/

7. With money there will always be risk attached. With a savings account or savings bond, the risk is that of inflation over time will reduce the buying power of your money.

8. If you want to take more risk with your money, you can consider putting some of it into a global multi asset fund.
Put simple this is a ready made portfolio which has share/bond split. You chose how much risk you are willing to take on. You need to think of holding it for at least 5years, if not 10 years.
You hope that this will at least match inflation if not beat it. These are investments (not savings accounts/bonds),
so there are no guarantee's. You may get back less.

LHW99

Alternatively, if you don't need / plan to leave a legacy when you pass on, you could use it for a purchased life annuity.

Advantages would be certainty of income, and a bit less tax on that income than would be due on a normal annuity.

Disadvantages would be that they are a bit of a niche product, and you will give up whatever amount you use for its purchase.

You could ask on the pension boards here, where there are a number of IFA's (and other knowledgable people) who would be able to answer questions.

https://forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning

friolento

Albermarle said:

friolento said:

You can find all the most current savings rates on moneyfacts.co.uk. Right now, you can expect some £1,900 a year in interest for £40k, before tax if you put all your money into one savings account . You probably qualify for £1,000 tax free interest annually , and will have to pay 20% tax on the remainder. So you’d be left with £1,720 a year or £143 a month maximum in interest.

BUT we are in a declining interest rate environment, so those numbers are optimistic.

You can reduce your tax liability by putting up to £20k a year into an ISA. The drawback either ISAs is that they often pay less interest than non-ISA accounts, so this may not help much.

You could probably earn the most interest by putting as much as you can into Regular Savers though these will require monthly attention, and you need to know what you are doing. There is a superb thread on here about Regular Savers  https://forums.moneysavingexpert.com/discussion/6106986/regular-savings-accounts-the-best-currently-available-list/p1

Lastly, you can use some of the £40k capital. If you did, say, draw £200 a month from it, it would last you around 16 years. Bear in mind that inflation will reduce the buying power of £200, and that you obviously wouldn’t be able to get as much in interest if your capital decreases. Still, you are financially ahead of many of your contemporaries 😎

You can reduce your tax liability by putting up to £20k a year into an ISA. The drawback either ISAs is that they often pay less interest than non-ISA accounts, so this may not help much.

That always used to be the case but not so clear cut nowadays.
In fact the best easy access ISA is paying more than a non isa. and the difference for a one year account is only 0.3%.
So best for the OP to keep at least some of their savings in a cash ISA to avoid tax.
OP Have a ( slow) read of this. 
Savings - All Guides - MoneySavingExpert

I appreciate that there are currently a few outlier ISAs with excellent rates - all listed in the link I provided. But there are also plenty of ISAs with derisory rates, and I stick to my statement that they often pay less interest than non-ISA accounts, particularly if any initial bonus rates expire after a while

Eliza_2

Gosh some really, really helpful advice here.   As I want to keep as much of the capital available as I can, so I can do things like help the grandchildren out, it looks as though splitting it between an isa and another account is possibly the way to go for my particular purposes.  Trading212 has an instant access isa which pays 4.9% so I could put £20k in there and £20k somewhere else for now then after April another isa - or add to that one -  after seeing how things are.  I have a regular savings account with the Co-op but only put £50 a month in there so that's neither here nor there as well as credit union savings which I might add to as it's nice to be able to use my money to give back.

Anything over £100 a month extra income will buy me a week a month at a campsite so happy days!!  Thank you all again!

Albermarle

Eliza_2 said:

Gosh some really, really helpful advice here.   As I want to keep as much of the capital available as I can, so I can do things like help the grandchildren out, it looks as though splitting it between an isa and another account is possibly the way to go for my particular purposes.  Trading212 has an instant access isa which pays 4.9% so I could put £20k in there and £20k somewhere else for now then after April another isa - or add to that one -  after seeing how things are.  I have a regular savings account with the Co-op but only put £50 a month in there so that's neither here nor there as well as credit union savings which I might add to as it's nice to be able to use my money to give back.

Anything over £100 a month extra income will buy me a week a month at a campsite so happy days!!  Thank you all again!

For info, if your total taxable income is above £17570, then you can earn up to £1000 in interest ( so outside an ISA) tax free. If your income is below that ( so from all the pensions and the job added together) you can earn more than £1000 tax free.

theoretica

Beware (of course) of trying to do too much with the same sum of money - if you need extra income for rent, you can't spend too much of the capital helping grandchildren.  And you need to work out what is 'too much'.  I find it easier to think about splitting money into different pots - for instance one pot for your living expenses (you could look into annuities if you want certainty there) and a separate pot which you expect at some point to spend.