Confused about best savings account for current circumstances

Inforapennyinforapound

Try to keep it short: 
Wife has been made redundant and due to that received around £10,000. In a few weeks time will receive a lump sum from her pension provider connected with her now ex-employer. Again around £10,000.

so,at the moment she is currently unemployed.

She wants to put the money in an easy access savings account. Where best?  A normal savings account or a cash isa ?

Bearing in mind that she is looking for a job but hoping to claim Job Seekers Allowance in the meantime.

I will be very grateful for any useful suggestions. Thanks

Albermarle

While she is not earning, or has very low earnings, she can earn a very large amount of interest without paying tax.
So a cash ISA is not necessary and non ISA savings accounts tend to offer slightly better interest rates.

However when she starts earning again, she will probably only be able to earn £1000 in savings interest without paying tax ( it could be more or less depending on her salary) .

£20K at 4.5% ( best rate currently available.)  = £900 interest.

Kim_13

Albermarle said:

While she is not earning, or has very low earnings, she can earn a very large amount of interest without paying tax.
So a cash ISA is not necessary and non ISA savings accounts tend to offer slightly better interest rates.

However when she starts earning again, she will probably only be able to earn £1000 in savings interest without paying tax ( it could be more or less depending on her salary) .

£20K at 4.5% ( best rate currently available.)  = £900 interest.

It would of course depend on how much of her personal allowance had been used, and given she has worked for three quarters of the tax year and will receive £20,000 in redundancy/pension payments (of which part will be taxable) I would suggest it is all of it with no Starter Rate for Savings available, therefore PSA would be the only tax free interest for this year too and she should probably get an ISA ready to go, even if not needing to put a significant sum in it at present.

elsien

Job seekers isn’t means tested, so the money will have no impact on that anyway. 

Albermarle

Kim_13 said:

Albermarle said:

While she is not earning, or has very low earnings, she can earn a very large amount of interest without paying tax.
So a cash ISA is not necessary and non ISA savings accounts tend to offer slightly better interest rates.

However when she starts earning again, she will probably only be able to earn £1000 in savings interest without paying tax ( it could be more or less depending on her salary) .

£20K at 4.5% ( best rate currently available.)  = £900 interest.

It would of course depend on how much of her personal allowance had been used, and given she has worked for three quarters of the tax year and will receive £20,000 in redundancy/pension payments (of which part will be taxable) I would suggest it is all of it with no Starter Rate for Savings available, therefore PSA would be the only tax free interest for this year too and she should probably get an ISA ready to go, even if not needing to put a significant sum in it at present.

Yes you are right, I hadn't thought it through properly.

Inforapennyinforapound

elsien said:

Job seekers isn’t means tested, so the money will have no impact on that anyway. 

Really? I never knew that. Someone at DWP told me that when she goes for interview they will ask lots of questions including savings etc to assess what she should get! 

What you say surprises me

Inforapennyinforapound

Kim_13 said:

Albermarle said:

While she is not earning, or has very low earnings, she can earn a very large amount of interest without paying tax.
So a cash ISA is not necessary and non ISA savings accounts tend to offer slightly better interest rates.

However when she starts earning again, she will probably only be able to earn £1000 in savings interest without paying tax ( it could be more or less depending on her salary) .

£20K at 4.5% ( best rate currently available.)  = £900 interest.

It would of course depend on how much of her personal allowance had been used, and given she has worked for three quarters of the tax year and will receive £20,000 in redundancy/pension payments (of which part will be taxable) I would suggest it is all of it with no Starter Rate for Savings available, therefore PSA would be the only tax free interest for this year too and she should probably get an ISA ready to go, even if not needing to put a significant sum in it at present.

So you suggest what? A regular savings account alongside an ISA?

Thanks

elsien

Inforapennyinforapound said:

elsien said:

Job seekers isn’t means tested, so the money will have no impact on that anyway. 

Really? I never knew that. Someone at DWP told me that when she goes for interview they will ask lots of questions including savings etc to assess what she should get! 

What you say surprises me

They misinformed you. That applies to UC not jobseekers.
https://www.gov.uk/guidance/new-style-jobseekers-allowance

Inforapennyinforapound

So it seems at this time a regular savings account would be the way to go for the lump sum at present? Or is it an either /or ?

Many thanks for the feedback

Eco_Miser

A Regular Savings account isn't good for lump sums, as they are very limited in how much can be added each month, although they do tend to have the highest interest. See https://forums.moneysavingexpert.com/discussion/6576962/the-top-regular-savers-discussion-thread/p1

A standard Easy Access account would be the normal place to put a lump sum to which access is required.

Bigwheels1111

I was a carer with 4k earnings from carers allowance.

That left me able to get £14,570 of interest tax free a year.

Your wife will fall below that limit.

I keep my savings in lots of places.

To start with an easy access cash ISA.

Then I run it through 22 regular savers. Between £50 and £1000 a month in each reg saver.