Interest on Savings, Allowance Understanding Required

Bobblehat

If your main goal is to earn as much interest as possible to live on while not going down the investment route (see eskbanker's posts for why you could use investment!), and minimising eating into your capital in the process, then there are other savings accounts that could help you.

You may have seen many threads and posts on here mentioning Regular Savings (RS) accounts, some of which pay 7.5%, 7%, 6.5%, 6% etc on smaller amounts that can be drip-fed from your £200,000. OK, opening several or even over a dozen accounts that pay a lot more than 4% may not appeal to you, but they would help you minimise eating into your capital and still keep you below the "tax paying threshold". The thing is, you can start with one or two RS accounts, and once you've got the hang of it, expand to as many as you feel comfortable having. It all helps!

EthicsGradient

badmemory said:

You could even put some in premium bonds as that would give you fairly easy access.  I am currently getting more than I would from most easy access accounts.

Premium bonds only work out better in the long run for higher rate taxpayers, which is not the case here (the "equivalent rate" they advertise includes the money paid out in the really big prizes - which any one of us is vanishingly unlikely to ever win. If you only look at the smaller prizes that, say, the max £50k holding has a better than 1 in 4 chance of winning if held for 10 years, rather than "3.6%", it's more like 3.3% (I haven't done a calculation recently, but knocking about 10% off the interest rate is how it typically works out).

Ah - I did do the calculation back in June, when the "3.6%" was announced. It works out as 3.24% (there's about a 7% chance of a win of £5,000 or more in 10 years with the maximum holding, so I ignored prizes of that size and higher).
https://forums.moneysavingexpert.com/discussion/comment/81511892/#Comment_81511892

DRS1

moneytree999 said:

DRS1 said:

moneytree999 said:

EthicsGradient said:

moneytree999 said:

Albermarle said:

If you want the £200K to last many years, then you would be advised to look at investing at least a part of it.

Yes, I need it to last as long as possible ....Ive tried looking at other ways of Investing .. but not sure where to put it ...4% with NS&I is about best i can see ..Im Not sure about investing with a Financial Planner, its a scary thought , if markets crash etc, i can lose the whole lot 

NS&I Bonds currently give 4.04% for 1 year fixed, 3.85% for 2 year fixed. You can do a little better: 4.45% for 1 year fixed, and 4.44% for 2 years: Best savings accounts: 4.75% easy access or 4.53% fixed rate
If you keep each below the 85k FSCS limit, these are guaranteed in case of bank failure - so split the 200k into three or more accounts, eg 85k fixed for 1 year, 85k fixed for 2years, 30k in an easy access account for a year's spending and emergencies.

I gather NS&I are covered for 'Unlimited', not just £85,000, thats why i was thinking of putting the Whole £200k in a 1 year Bond

Being a bit ignorant but what are you going to live on during that year?  Or are you putting the £200k into a bond which pays monthly interest?  Can you live on that?

Ill have enough savings in an 'Instant Account' to last 1 year ( Ill be eating into the £200k every year, to pay rent / Food etc  )

OK As long as you are not locking it all away for a year or however long the term is on your fixed rate account.  One thing to note is that ISAs don't lock away the money even on fixed rate versions (though there may be a penalty for early withdrawals).

If I were you I'd be putting some money in an ISA but that is just because I think it will be easier for the government to tinker with the PSA and the starter rate than with ISAs.  But that is just me.

badmemory

What I didn't want to say is that my premium bonds are currently working out at over 4.5%.  Which for an easy access, which the OP will need some money in, is a good return.  But also think about when ISAs will be a good idea for when taxable income increases.

QrizB

moneytree999 said:

Dazed_and_C0nfused said:

You get £8,000 from the bank.
Any tax payable will depend on your other income overall tax position.  It could be zero tax.

Hi, I wont have an 'Income' .. Ill be living off the £200,000 Till it all goes

How old are you?

How long do you expect it to take you to spend the whole £200k?

What's your plan for once it's all gone?

EthicsGradient

badmemory said:

What I didn't want to say is that my premium bonds are currently working out at over 4.5%.  Which for an easy access, which the OP will need some money in, is a good return.  But also think about when ISAs will be a good idea for when taxable income increases.

Which is (a) good luck, which can't itself be used to judge their suitability for others in the future (b) presumably over a period up till now (how long?) - the advertised rates (including the rare big prizes) were:
Up to Nov 24: 4.4%
Dec 24: 4.15%
Jan-Mar 25: 4.0%
Apr-Jul 25: 3.8%
Aug & Sep 25: 3.6%

Compare that with easy access accounts - around 4.65% in December, 4.5% in April, 4.4% now.

Albermarle

moneytree999 said:

Albermarle said:

If you want the £200K to last many years, then you would be advised to look at investing at least a part of it.

Yes, I need it to last as long as possible ....Ive tried looking at other ways of Investing .. but not sure where to put it ...4% with NS&I is about best i can see ..Im Not sure about investing with a Financial Planner, its a scary thought , if markets crash etc, i can lose the whole lot 

moneytree999 said:

Albermarle said:

If you want the £200K to last many years, then you would be advised to look at investing at least a part of it.

Yes, I need it to last as long as possible ....Ive tried looking at other ways of Investing .. but not sure where to put it ...4% with NS&I is about best i can see ..Im Not sure about investing with a Financial Planner, its a scary thought , if markets crash etc, i can lose the whole lot 

Markets crash to a larger or lesser extent on a regular basis, but four  important points to consider:
1) They never crash to zero, probably the average is about 20%

2) So far historically they have always recovered and then gone ahead upwards
3 ) you can buy hands off multi asset funds that are only partly reliant in the stock market 
4) Your £200k will almost certainly last longer over say a 20 year period if most of it was invested rather than held in a savings account

The reality is that there are risks whatever you do, and being too risk averse is a big risk in itself.

moneytree999

QrizB said:

moneytree999 said:

Dazed_and_C0nfused said:

You get £8,000 from the bank.
Any tax payable will depend on your other income overall tax position.  It could be zero tax.

Hi, I wont have an 'Income' .. Ill be living off the £200,000 Till it all goes

How old are you?

How long do you expect it to take you to spend the whole £200k?

What's your plan for once it's all gone?

61, ..I get State pension when im 67 not that it helps much ..ill still be digging into savings to pay everything ! I reckon it might last 13-15 years......once its gone ...ill just have State pension, and hopefully get 'Rent' paid by Pension Credit or something, or maybe Putin will press the Button around this time 

eskbanker

moneytree999 said:

QrizB said:

moneytree999 said:

Dazed_and_C0nfused said:

You get £8,000 from the bank.
Any tax payable will depend on your other income overall tax position.  It could be zero tax.

Hi, I wont have an 'Income' .. Ill be living off the £200,000 Till it all goes

How old are you?

How long do you expect it to take you to spend the whole £200k?

What's your plan for once it's all gone?

61, ..I get State pension when im 67 not that it helps much ..ill still be digging into savings to pay everything ! I reckon it might last 13-15 years......once its gone ...ill just have State pension, and hopefully get 'Rent' paid by Pension Credit or something, or maybe Putin will press the Button around this time 

Perhaps worth linking back to your previous thread about this, as some of the posts on this one are going over old ground:

https://forums.moneysavingexpert.com/discussion/6616164/im-getting-250-000-inheritance-benefits-will-stop-best-way-to-invest-it

Eco_Miser

moneytree999 said:

QrizB said:

moneytree999 said:

Dazed_and_C0nfused said:

You get £8,000 from the bank.
Any tax payable will depend on your other income overall tax position.  It could be zero tax.

Hi, I wont have an 'Income' .. Ill be living off the £200,000 Till it all goes

How old are you?

How long do you expect it to take you to spend the whole £200k?

What's your plan for once it's all gone?

61, ..I get State pension when im 67 not that it helps much ..ill still be digging into savings to pay everything ! I reckon it might last 13-15 years......once its gone ...ill just have State pension, and hopefully get 'Rent' paid by Pension Credit or something, or maybe Putin will press the Button around this time 

So spending c. £25k a year? The £10k state pension should certainly help with that, halving what you need to draw from the capital each year from year 6.