Spring cleaning the finances, need some advice.

former_student

My girlfriend asked me to take a look at her finances to ensure that she had invested her money sensibly and effectively, she wants to buy a house in the future but is not quite ready yet, and she is a basic rate tax payer who enjoys taking a risk from time to time.

Her investments are as follows:

1. £6000 invested in premium bonds.
2. £3000 in an National saving investment account (I have no idea of the interest rate and neither does she).
3. £15,000 in Icesave.
4. £15,000 within an ISA paying 5.5% with her £3000 limit used up for the year.

The only debt she seems to have is a £7000 student loan which she is paying off via her wages. She told me she's uncomfortable with having too much in Icesave and would not mind investing some money long term.

I think her investments are quite good and she is certainly managing hers better than I'm managing mine, does anyone here with more knowledge/experience than me have any advice?

Thanks in advance.

cloud_dog

I read this bit then looked at the 'investment' list and it made me smile.

former_student wrote: »

....who enjoys taking a risk from time to time.

Your GF is conservative and her 'investments' are really savings. Having said that there is absolutely nothing wrong with her approach and as stated if she will be looking to buy a property at some point in the near future then this is the right approach (IMO).

There is some tinkering around the edges she could consider but nothing dramatic. For example she could transfer her ISA to something paying approx 6%.

Similarly, you could look in to the NS Investment Account, which is paying 3.75% gross, you may want to consider moving that to somewhere better. This saving should be declared / comming off her PAYE coding (as far as I am aware) as it is paid gross.

Icesave is a memeber of the compensation scheme so you are covered for 100% of your savings up to £35k, so I wouldn't be too worried. Atm IceSave is one of the top paying accounts.

One thing to consider might be to swap some of her savings, I'm assuming they are instant access ones in to fixed rate savings. Interest rates are likely to come down in the near future so swapping some money in to 1 year fixes (maybe even some in to 2 year fixes might be considered). Just did something similar for my mum who had a few years of ISA contributions with Nationwide and we switched half and half in to 1 and 2yr fixed ISA. Need to bear in mind panalties for withdrawal and the likely hood of her needing the money.

If your GF wasn't going to get a house for another 5 years then maybe, depending on her attitude to risk, she could look to actually invest a percentage of it; more risk for more reward - hopefully.

cloud_dog

Aegis

I'd add to cloud_dog's comments a little to state that as a basic rate taxpayer, your girlfriend's Premium Bonds are unlikely to be working as hard for her as even a fairly mediocre savings account, let alone the top-paying few. Unless she wins big she's probably looking at an "interest" rate of somewhere in the region of 2.5-3% tax free, or 3.13-3.75% equivalent savings account rate, which is extremely poor when rates as high as 6.5% are still available with a 100% chance of "paying out" every month.

Primrose

If your girlfriend is thinking of buying a house within the next five years, I think that is too short a timespan to be considering "investing" any money in the stockmarket, especially with its current volatility.
I think she is not getting good value for money with her premium bonds. She might do better withdrawing £3600 in April and using up her next tax year's allowance in a high interest paying ISA. The other £3000 could be withdrawn and paid into the best One Year Fixed Rate savings bond she can find. By the time that matures, she will be able to use up another tax year's Cash ISA. allowance. I assume she is a taxpayer and she should therefore be using up her tax free allowance every year. She should ascertain what interest she is receiving on her National Savings account and if it doesn't match Icesave's rate, she could consider transferring it there. Incidentally Icesave are now offering a competitive rate on One Year Bonds (6.7% ?)and transferring funds from your Icesave savings account to their One Year Bond is extremely simple and takes about 1 minute. Her savings up to a limit of £35,000 are protected so she shouldn't fear about having too much saved with them.

ailuro2

Added to the above- don't tie too much of her money up too long- there are signs up here in Scotland with all the fixed prices that the market has slowed considerably- your GF needs to be able to access the house deposit funds if she sees the house of her dreams at a good price.;)

Who knows what the future holds- she may end up getting married, having kids, needing a bigger house within a short space of time too-

Like me, she's not a risk taker, but likes good value for money.

( p.s. Perhaps you could take a few tips from her, if your savings aren't quite to healthy??;))

oldfella

leave a small amount in Premium Bonds - maybe a £100 - there is an extremely small chance of a big win, which doesnt improve significantly if you hold a lot

Jonbvn

The £9k in PB's and national savings account are not giving an adequate return. With interest rates likely to fall, we may see an increase in RPI. Therefore NS&I index linked saving certificates seem like a good bet. They are tax-free, and as such are better than most instant access accounts, assuming she is a tax-payer.

dunstonh

nd she is a basic rate tax payer who enjoys taking a risk from time to time.

Not with her savings it appears. The risk in the relationship must be elsewhere

None of the things mentioned are investments. They are all cash based and classed as savings. Premium bonds are naff. Nat savings investment account can be improved upon easily.

The timescale she is looking at doesnt really make it suitable for investments. You really need to be looking at 5 years plus and I assume the intention to purchase is less than that. In which case savings options are the most reliable unless that risk of hers is high enough to put a small amount aside for investing.

former_student

Sorry about the delay in getting back, there were some fantastic responses and I relayed all information from here back to her.

First of all she agrees that the post office savings account is poor and is going to close this account, she is very interested in transferring some of this money into a tax free National Savings accounts, are there any accounts recommended by board members?

She is very concerned about her ISA of 5.5% not doing as well as it could be and she is going to transfer this, she enquired with her bank and there are no penalties for transferring an ISA. She has searched for better ISA's however most wont accept transfers which is proving to be a problem.

She is going to reduce her premium bonds total to £200 with all money minus £2000 going into Ice Save.

She wants to start investing and she is prepared to invest long term, the £2000 is going to be set aside for this reason.

Can anyone offer her any further suggestions advise to the above?
Thanks again.

savingpennies

If you look at Kazza's ISA update on a thread on the ISA forum there are a few ISAs that accept transfers in which beat the current rate your gf is getting, including Icesave and Kent Reliance amongst others. Sorry not good with links.

Jonbvn

former_student wrote: »

First of all she agrees that the post office savings account is poor and is going to close this account, she is very interested in transferring some of this money into a tax free National Savings accounts, are there any accounts recommended by board members?

Yes! Index Linked Saving Certificates (tax-free). She can put up to 15k in these.

former_student wrote: »

She is very concerned about her ISA of 5.5% not doing as well as it could be and she is going to transfer this, she enquired with her bank and there are no penalties for transferring an ISA. She has searched for better ISA's however most wont accept transfers which is proving to be a problem.

Icesave currently have the best ISA offering 6.1% with transfers in allowed. There is a thread on it here.