40 grand to invest

rutters

I've got an elderly relative who's had to sell her house and move into a care home. She now has £40K to invest . Could anyone recommend where to put it? One single investment would best and I think she can give a lot of notice of withdrawl..

btw ..she won't need to draw on the amounrt to pay for the care.

any info appreciated.
cheers

Shinds

Safest bet is a high interest savings account.

Bradford & Bingley

Egg Savings

ING Direct.

These guys have some of the best rates around.

rutters

thanks

dunstonh

There are thousands of investments avaiable to choose from.

You havent given much info to narrow the options down.

ie, is the investment going to be held until death? Is there an IHT liability? Is security of capital important now or at maturity or death? tax status? what purpose is the investment? Rather than invest is she looking to save on deposit?

rutters

@DD
thanks for replying..it's much appreciated.

I'm not to up on these things (never had savings to invest before) but here goes.

The money will be left until death. We can't risk the value decreasing (low risk only) It will be put in another persons name (normal tax payer) The purpose is to have the money secure whilst earning as much interest as poss.

Thanks again for your help, sorry if the info is a bit basic.

cheers

lisyloo

It will be put in another persons name (normal tax payer)

There are two disadvantages to doing this

1) If the elderly person dies within 7 years then the "gift" will be subject to inheritance tax.
2) Income tax will be payable by the tax payer.

It would seem to me that it would be better for the elderly person to keep the money and leave it in the will to the other person.
The two advantages are
1) If she is not a tax payer then the interest will be tax free.
2) If she has less than £263K worth of assets then it will be free of inheritance tax.

If you want low risk and don't know the term then a high interest savings account would be best.
Alliance & Leicester are offering 5.35% (don't know the top limit for that). ING direct are 5%.
Another possibility is premium bonds.
There may be a lower payout but there is a chance of winning something significant. Prize fund is something like 2.4%. Depends whether you like a gamble.

dunstonh

if the money is being held until death, you could leave it in the relatives name and pick from a range of investments that include equities but have a minimum return on death. You can do this with ISAs, OEICs/UTs and bonds.

If placed in a bond and in trust, then you could reduce or avoid any inheritance tax (if applicable)

If the money is on deposit, you run the risk of it not keeping up with inflation. Last year was the first time in 10 years that savings rates exceeded inflation. With rates expected to decline over the next five years, an deposit based savings account may not be the best thing.

Using the annual gift allowance doesnt mean passing the money over straight away. It is possible to invest into UT/OEIC funds with a record of gift but the money left in a "re" account. ie relative re: grandchild. With a UT/OEIC provider that offers a guarantee of the value or original investment on death, whichever is higher, then that could be considered. It may only be £3000 a year but its a useful way to remove value from the estate.

1) If the elderly person dies within 7 years then the "gift" will be subject to inheritance tax.
2) Income tax will be payable by the tax payer.

It would seem to me that it would be better for the elderly person to keep the money and leave it in the will to the other person.
The two advantages are
1) If she is not a tax payer then the interest will be tax free.
2) If she has less than £263K worth of assets then it will be free of inheritance tax.

Gifting the money has a sliding scale if death occurs in the first 7 years. Having a will in itself doesnt reduce inheritance tax as the value to the estate is the same. It can be used in conjunction with other things to reduce the liability.

Fatboy_NSS

If you have £40k to invest then a deposit account is not going to be where you get the best return. Go see the financial advisor at your bank and see what they advise. Then shop around and see if you can get a better deal on the same product by going direct (ie cutting out the bank's commission).

dunstonh

Go see the financial advisor at your bank and see what they advise

Why on earth see a tied bank advisor? bad products, bad returns?

ashcarrot

Personally i'd put it in a high interest savings account and then let her have access inorder to enjoy retirement.

At that age i'd be trying to make the most of life and ignoring 'investing'.

Shinds

Personally i'd put it in a high interest savings account and then let her have access inorder to enjoy retirement.

At that age i'd be trying to make the most of life and ignoring 'investing'.

a very good point there!