How best to save large sum

Decor17

Due to inheritance I will be coming into a large sum of money and I have no idea how to bank/save it to avoid lots of savings tax.

I can only put £20k into an ISA each year so I'm not sure what to do with the money that is just sitting. I'm very risk averse so not wanted to invest, I would rather just have it in the bank.

Just wondering what other people have done in similar situations? Or does anyone know where I can get free impartial advice?

Keep_pedalling

How much are we talking about? What sort of pension provision do you have?

Flugelhorn

really good advice is never free

agree with @Keep_pedalling there are other things to look at and it depends on amounts. always things like pensions,  premium bonds (winnings non taxable) , savings accounts, (interest taxable) 

wmb194

Decor17 said:

Due to inheritance I will be coming into a large sum of money and I have no idea how to bank/save it to avoid lots of savings tax.

I can only put £20k into an ISA each year so I'm not sure what to do with the money that is just sitting. I'm very risk averse so not wanted to invest, I would rather just have it in the bank.

Just wondering what other people have done in similar situations? Or does anyone know where I can get free impartial advice?

Depending on how much it is and how much you want to keep as instant access or in fixed rate, fixed term deposits just split it between multiple savings accounts. Keep in mind the £85k FSCS compensation limit (c.£80k if you want to make sure accrued interest is covered).

If it's a really large amount of money and it would be a hassle to split it up you could look at NS&I where 100% of deposits are covered by the Treasury or gilts bought via a stockbroker, again 100% backed by the Treasury.

https://moneyfactscompare.co.uk/savings-accounts/

Angelica123

Decor17 said:

Due to inheritance I will be coming into a large sum of money and I have no idea how to bank/save it to avoid lots of savings tax.

I can only put £20k into an ISA each year so I'm not sure what to do with the money that is just sitting. I'm very risk averse so not wanted to invest, I would rather just have it in the bank.

Just wondering what other people have done in similar situations? Or does anyone know where I can get free impartial advice?

How much are we talking about? What are you goals regarding the money? Decent impartial advice won't be free but if we are talking large sums then it will likely be worth it. Tax on savings interest is not the only thing to consider - you need to consider your overall goals - mortgage, pensions etc....

I would take more time to understand investing and what the risk profile is. There is a huge risk in keeping all your money in cash, that it's value will decrease with inflation. Right now is a very unique scenario regarding savings interest rates beating inflation. I think this is where an independent financial advisor would be really useful. 

Stubod

As above, not really enough detail, but for consideratiion you can stick 50K into Premium Bonds if you are risk averse, and all "winnings" are tax free.....

Eyeful

1. Savings in:
NS&I are 100% protected, you are loaning money to the UK government.
Banks, Building Societies & Credit Unions on the FSCS list are protected up to £85k.
Check using:  https://www.fscs.org.uk/check/check-your-money-is-protected/

FSCS Savings Protection up to £85k, only applies to Banks, Building Societies & Credit Unions.

2. Best savings rates:
https://moneyfactscompare.co.uk/savings-accounts/
https://www.thisismoney.co.uk/money/saving/article-1583864/Best-savings-rates-Isas-Cash-Isa-accounts-fixed-rate-Isas.html
https://www.moneysavingexpert.com/savings/best-cash-isa/#topeasy

3. Tax Free Shelters:
Cash ISA's: £20k max per year at the moment.
NS&I Premium Bonds: £50k max
Pensions

4. Anything to do with money has some form of risk attached. Its just the size & type of risk that changes.
Example:
Savings protected by the FCSC up to £85k is at inflation risk.
This is where your money buys less over time because prices of goods keep going up.
RPI from 1948-2025: https://www.ons.gov.uk/economy/inflationandpriceindices/timeseries/czbh/mm23

5. Free impartial guidance:
https://www.moneyhelper.org.uk/en/savings
https://www.moneysavingexpert.com/savings/which-saving-account/
https://www.citizensadvice.org.uk/debt-and-money/financial-advice/getting-financial-advice/

6. You do not state the amount & that you are very risk adverse.
Depending on your age & how large the sum of money is, you could consider investing a little.
Suggest you at least read the following article:
 https://monevator.com/passive-fund-of-funds-the-rivals/

Hope all this is of help to you.

lr1277

One more thing to be careful about. In the last few months, there was a thread where the poster wanted advice because they were taxed on interest they had not received, yet.

IIRC it was a fixed interest product over more than 1 year. The product was such that the interest was paid in one go at the end of the term, ie after a number of years.

However HMRC taxed them as if they had received the interest yearly. I think they did this by changing the poster's tax code and hence their net pay from income that was taxable at source. However the poster did not have the interest as income to make up for their income shortfall. IIRC.

So if you are paid interest, make sure it is accessible in a form where you can use it to pay the tax bill.

jimjames

Decor17 said:

Due to inheritance I will be coming into a large sum of money and I have no idea how to bank/save it to avoid lots of savings tax.

Just for reference, there is no savings tax. You might pay tax on interest earned outside an ISA but depending on your income you might have at least £1000 you can earn before paying tax anyway. It's generally better to get the most return after tax regardless of whether that means you pay some tax along the way.

Decor17

Thanks everyone for the info and advice. For more detail:  The amount is around £200k. I already have a sizeable DB pension due to my job. I just want to use the funds in the future to help my kids (university/houses etc). Put it towards nice holidays and home renovations. 

Albermarle

Decor17 said:

Thanks everyone for the info and advice. For more detail:  The amount is around £200k. I already have a sizeable DB pension due to my job. I just want to use the funds in the future to help my kids (university/houses etc). Put it towards nice holidays and home renovations. 

Firstly how much tax you might pay should not be your first priority. That should be putting the money to work in the best way for you and your future plans.

You also need to get over this 'very risk averse' mindset.

You say you want to help your kids with house deposits in future. So why would you want to give them smaller deposits, by keeping it all in cash rather than investing some of it ?
In fact keeping it all in cash long term is actually a risk in itself. The risk being that it will run out quicker and/or you can buy less nice things for you and your family.
Cash is great for the shorter term and we all like to have a rainy day fund, but you also need to look at other options.