Best thing to do with savings ?

Heytheremrblue

stick it all in ns&i growth bonds for a year at 4.72 %while you think about it

Aretnap

I understand that you can put £50k into premium bonds - tax free winnings.

Cahoot currently offers 5% GROSS - I will have tax to pay on the interest

Don't let the tax tail wag the dog. You can get about 4.5% from an instant access account currently (more on relatively small amounts of money). Even if you paid 20% tax on all of the interest, that still leaves you with an effective rate of 3.6% after you've paid the tax.

Meanwhile the median return on premium bonds is just 3.3%. Unless you get very lucky and hit a big prize you're likely to be worse off than if you just put it in a normal bank account and paid tax on the interest. Premium bonds only really make sense if you're a higher rate taxpayer. And even then, the advantage is not huge.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82104489#Comment_82104489

A good fire and forget option for 1 year, but the resulting interest at £21,240 when added to other ill health pensions and taxable income could slightly push the OP into higher rate tax of 42%.

This would not personally bother me, but OP might not appreciate having to prepare a self assessment tax return to report and pay the tax due in 2027/28 tax year. Also sets the OP up for complicated future half yearly tax payments on account if he continues to invest with taxable interest in mind.

By contrast, investing the £450k in low coupon gilts yielding non taxable returns of between 4 to 4.5%, would produce a higher net return ( and less tax compliance hassle) when taking account of the lower 22% tax rate on savings that will apply from next year.

friolento

https://forums.moneysavingexpert.com/discussion/comment/82104875#Comment_82104875

We haven't been told much about the wife. Is she working? Does she have ISAs? Pension? Does she qualify for the £18,570 tax free interest?

This would not personally bother me, but OP might not appreciate having to prepare a self assessment tax return to report and pay the tax due in 2027/28 tax year.

He'd have to do this anyway if he gets over £10k taxable interest, whether his tax rate is 22% or 42%.

I still think the OP should seek advice from an IFA.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/82104891#Comment_82104891

Which is why I highlighted CGT free low coupon gilts.

This and other forums repeatedly flag how many people dislike having to engage in self assessment, especially where they have never done so in the past.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82104909#Comment_82104909

Not sure that many dislike actually doing it, but there's certainly plenty of fear about the prospect of doing it, as it seems to sound more intimidating than it should! From a rational financial management perspective, it really ought not to be a significant factor in deciding which savings and/or investments are optimal…

MouldyOldDough

https://forums.moneysavingexpert.com/discussion/comment/82104891#Comment_82104891

Wife is not earning any salary except for Carers Allowance

She shares my previously stated £200k both in ISAs and has another £125k in a private pension - not drawing it yet, she is 58

I already receive my works pensions, ill health (£15k index linked)

SacredStephan

https://forums.moneysavingexpert.com/discussion/comment/82104489#Comment_82104489

NS&I increased the rate today to 4.82% (issue 92)

MouldyOldDough

https://forums.moneysavingexpert.com/discussion/comment/82106361#Comment_82106361

What's the downside of putting the whole lot in NS&I @4.82% ?

AH - TAX !

friolento

https://forums.moneysavingexpert.com/discussion/comment/82106354#Comment_82106354

So she is probably entitled to up to £18,570 tax free interest, in addition to her tax free interest in the ISAs