Lump sum over 35k, how/where to split it up?

roxorx

Hi, I'm coming into some money which will most likely be over 35k. Part of this money will be used to pay off around 10k's worth of debt with CC's/Bank loan etc, the rest I will use for a deposit on a house. I'd like some advice on what is best to do with the remainder if it's 35k or more and would only be put away for a few months, maybe 6 tops?

I've heard about the 35k 'rule', but not sure what type of accounts I should be looking into that would give me at least a few quid back in the time it's sat there?

Also, (not sure which forum to drop this Q into!), the cash is part of my mum's money that her dad left her in his will. Obviously want to avoid any hassle later on in life if she goes into a care home etc, so was thinking of just accepting the cash as a one off give that would be 'to start up in life' with a house. Would this stop them viewing it as her trying to get out of IHT/ care home fees later on?

Tim

roxorx

Anyone got any thoughts on this?

notis7

Although there is a lot of talk about the £35K rule its highly unlikely that a UK bank is going to go bust. It is the last thing the UK economy needs and the government will not allow this to happen....therefore on that basis your money is relatively safe as you are only looking to invest a lump sum for a short period of months..... That said I was and still am an advocate of the bigger players in the market - so my first choice for a fixed savings account at this point in time would be Halifax....They offer the best rate on a fixed web saver 3 month or 6 month compared to the other major players.... If you are more adventurous and want to go down the internet bank providers BM or Icesave have great offers on these short term fixed products!

nicko33

notis7 wrote: »

.They offer the best rate on a fixed web saver 3 month or 6 month compared to the other major players....

Birmingham Midshires (part of HBOS) offer a better 6 month rate

notis7

nicko33 wrote: »

Birmingham Midshires (part of HBOS) offer a better 6 month rate

I know - but they are still a direct provider - no branches

Rafter

Tim,

Given the uncertainty about when you might want to buy a house I'd look at a best buy instant access savings account. If it is not a big uk institution that you choose (that the government would not let fail) then you would be sensible only to deposit £35k in it and then the balance elsewhere.

Also worth using your ISA allowance so some of it isn't taxed.

As far as the inheritance tax question. If your mums estate is above the inheritance tax threshold, then this lifetime gift could potentially be taxable at a later date. If she survives another 7 years then not a problem. Not sure about the care issue though - you may need to get advice on that.

R.

notis7

Tim hi,
Given the uncertainty thus maybe you should consider not putting your money anywhere near a bank or building society because if you deposit the money in Nationwide for example and this organisation goes bust the likelihood of you seeing your money back even though its guaranteed by the FSCS is next to 0!!!!! Reason being the government could not shell out 100 billion!!!!!!

On the other hand, if you believe the UK financial institutions have learnt from the N Rock fiasco then you will stick your money into a short term fixed option which pays above libor and base.....
An instant access product will pay above base but not libor as most best buy offers are currently doing in the instant access market.

Finally putting approximately 1/10 of your savings into an ISA for a short period of time is simply bad advice!!! You will have wasted your tax allowance which you can fill up until April 09 and the return tax free will be pennies not pounds!!!!

roxorx

Cheers for the replies So do I need to do some calculations on weather it's worth sticking 3.6k in an ISA, as opposed to sticking the lot in 2 savings accounts at around 6% each?

[Deleted User]

1. Ordinarily I'd suggest filling up your up your ISA allowance of £3600 for the year - something like the Bradford & Bingley 1 Year Fixed Rate 6.25% however since you unsure how short a period you'll be able to save for I'd suggest to skip this step (assuming you're going to need access to 100% of the money. If not then fill up your ISA, even just in part as you won't be able to get the tax allowance back for this year, next year e.g. if you don't use it you lose it).

2. Split the the rest between the best instant access savings account you can find and step 3 e.g.

Kaupthing Edge 6.50% AER, at least 0.30% (gross) higher than BoE rate until 01/02/2012. You need to have a minimum of £1000 in the account though to get this rate.

http://www.kaupthingedge.co.uk/OurProducts/KaupthingEdgeSavingsAccount.aspx

3. Short term fixed rate bonds, specifically 6 months as you've said look good: e.g.

Birmingham Midshires Direct Internet 6 Month Fixed Rate Bond (Maturity Interest) 6.83% gross/ 6.95% AER for 6 months

http://www.askbm.co.uk/savings/i/fixed/product.asp?id=152

nicko33

notis7 wrote: »

I know - but they are still a direct provider - no branches

I only just noticed you mentioned BM in the first post.
I saw adventurous and IceSave and assumed you were associating adventurous with "foreign".
I don't see why BM would be "adventurous", or why having no branches makes them much different to your recommendation of a Halifax WEB Saver
(unless Halifax let you operate the Web Saver through their branches)

moanymoany

The guy at Lloyds told me last week that there are restrictions on taking large sums of money out of an online account. I think he said £10,000 a month. I know we decided that online was no good to store our cash waiting to buy another house.