Thoughts on monthly interest v yearly for income

misscarlet250

I was made redundant a year and a half ago and am not looking for work.  I am 62 and have a really small pension of £350 a month. 

I have savings I am about to withdraw to live on this year - £16,000.

Separate to the £16,000 I have an isa with £40,000 and other savings with £56,000 Toal £96,000.  In April I am thinking of combining both the 40 and 56 into one none isa account for extra monthly income.  The co op one year fixed term account, currently is 4.5% (hope it doesn’t go down in April).  If it stays at 4.5% I think this could give me an extra monthly income of £370 (ish).  Have I worked it out correctly?

Thoughts would be appreciated about monthly interest - Ive only ever had yearly interest. 

(I do have another isa which will have £89,000 once interest is added in April but Im not looking to draw on that).

Bigwheels1111

You have £185.000 in total.

5 year fixed are still paying a fair rate.

Secure Trust Bank 5 Year Fixed Rate Bond 4.55%.

Interest can be paid away or compounded.

£80,000 = £3640.00 interest.

Close Brothers Savings 5 Year Fixed Rate Bond4.52%

£80,000 =£3616.00 interest.

The rest, I would transfer 20k to Trading212 ISA, 5.03% for new account.

Its easy access.

Sort, rate order

https://moneyfactscompare.co.uk/savings-accounts/5-year-fixed-rate-bonds/?quick-links-first=false&product-favorites-first=false&sort-order=AER&sort-order-text=Rate

https://moneyfactscompare.co.uk/isa/easy-access-cash-isas/?quick-links-first=false&product-favorites-first=false&sort-order=AER&sort-order-text=Rate

That would be my options.

£ 4,200 pension

£ 3,640 interest

£ 3,616 interest.

£11,456 Total, no tax to pay.

A part time job paying £7,114.00 would mean no tax and £160k in the bank in 5 years.

That would get you to retirement with a nice nest egg.

misscarlet250

 Thats interesting and something to think about.  Thank you

Middle_of_the_Road

The Co-op 1year fixed account was one I was looking at, as I've got accounts with them already. 
If at the next BOE meeting the base rate is reduced again, the account might be withdrawn and replaced with one at a lower rate.
You could use the 56k now to open one of the 1 year fixed now, and wait to open another in April.
Most people on here recommend not putting more than 85k with each bank to be fully covered by FSCS protection.

Bigwheels1111

misscarlet250 said:

 Thats interesting and something to think about.  Thank you

You are welcome, Re the 85k FSCS Protection.
85k is covered, but what about interest above that ?.
That is why I said 80k or even 81K would be ok.
Add interest and it’s under 85k.
My 5y, 5y and 7y fixed, plus 15 reg savers, 2 isa’s and a few easy access give me a nice income.
With carers allowance I almost need to pay tax, aghhhhhhhh.

Middle_of_the_Road

Bigwheels1111 said:

misscarlet250 said:

 Thats interesting and something to think about.  Thank you

You are welcome, Re the 85k FSCS Protection.
85k is covered, but what about interest above that ?.
That is why I said 80k or even 81K would be ok.
Add interest and it’s under 85k.
My 5y, 5y and 7y fixed, plus 15 reg savers, 2 isa’s and a few easy access give me a nice income.
With carers allowance I almost need to pay tax, aghhhhhhhh.

The OP would be taking monthly interest, so 85k would be fine with no interest being added to the capital.

misscarlet250

Its taken me years to save this - with 16 years of rubbish interest.  A good couple of years with better interest and just when I want to use it as income the interest rates are going down again … just my luck. 

where_are_we

If you have no earned income, you can put £2880 into a SIPP each tax year which is grossed up to £3600 by HMRC making a gain of £720 each tax year, with most of the £3600 withdrawn each tax year with no tax to pay provided your total income from pensions is less than the personal tax allowance of £12570. You can do this until you are 75 although once your state pension kicks in your gain may be less. Go to the pensions benefits and retirement forum and search "£2880" for more details.

You have 6 weeks of this tax year left to make a contribution otherwise you will lose this years opportunity of a substantial gain. It requires a some work to set up but once done it can be repeated each year and is less onerous going forward.

Are you aware of the 0% starting savings rate band of £5000? This when combined with the personal saving allowance of £1000 means you could have an income of £18570 and pay no income tax. Depending on your financial position it may be advantageous to fully utilise your allowances this tax year. When withdrawing cash it may be best to use your non ISA savings first. ISA`s may be a target in this March`s spring statement.