Where to put redundancy money

Amanda65

Hi,

My husband was made redundant a couple of weeks ago and received a financial pay-off equivalent to about 11 months net salary. I have transferred some of the money into PB's in the childrens names and therefore have about £13,000 to invest. He is a 40% tax-payer and I am 25%.

I want to put the money somewhere to earn interest but need to have it fairly accessable as I want to 'draw' the equivalent of his salary each month until he gets back into work. Can anyone recommend a good easy access savings account please. Thanks

PS _ how do I get my message title in bold??

lipidicman

The bold titles are the unread ones!

With income tax you will pay 22% (not 25%)

I was also wondering why do the Premium Bonds in the childrens names as any winnings are tax-free? Also, why premium bonds?

If you can, get some into an ISA to avoid tax and use a high interest instant access internet saver for the rest (best was A&L, but I need to do some up to date research now....)

Hopefully you will be able to manage drawing LESS than the old salary as you may need to rely on this money for a while (though hopefully not!)

Amanda65

PBs are in the childrens names as if my husband needs to sign on the less we have in savings the better therefore we have used the allowance we can give to the children each. We will be drawing less than his previous salary (he works in manufacturing and as we don't have much industry left in the UK this is not the first time it has happened so we are used to living on redundancy money for a while, it's just that I don't know we've always made the best of it before)

lipidicman

Amanda65 wrote:

PBs are in the childrens names as if my husband needs to sign on the less we have in savings the better therefore we have used the allowance we can give to the children each.

Is this a benefits rule rather than the 'tax on savings' rule (where children can earn up to £100 tax free interest on savings gifted from their parents)?

sweetmoneysaver

Hi Amanda65,

I too may be in the same situation as your husband, i.e. a lump sum redundancy payment. With my work I get to see an IFA as part of their support package. It's not until the middle of the month but if I get some good ideas I'll let you know. My first thoughts were an ISA - I know it's a way off but don't forget to do one on 6th April when the tax year changes (as well as now) to maximise your allowance as it will span 2 tax years.
Lipidicman is right on the tax law on children in that they need to earn £100 per year in INTEREST each from money given to them by their parents before they start paying tax. As you are a lower tax payer (although your husband will eventually be 0% if he has a little trouble getting another job, hopefully not!) you could transfer savings into your name for the time being. It might be a good idea to call the citizen's advice bureau and talk to the job centre about the exact situation on what happens about signing on. I know that you need to sign on to get your NI paid but I not sure of the situation in terms of receiving benefit if you have a redundancy payment.
Hope this was of some help. I will let you know more if the IFA has any vreative ideas!
Good luck to your husband on the job hunting front.

Amanda65

Thanks sweetmoneysaver. I would be grateful for any info you get. As far as singing on goes, he is not entitled to JSA for 3 months as he was on a 3-month notice period and has been paid this therefore we are no worse off at the moment than we would have been had he been working - in fact we are slightly better off as his journey to work was costing circa £400 per month in petrol.

I hope it works out for you - it's a very worrying time although I am hoping that it could work in our favour - if he's back to work within the next few months the outstanding monies could clear our credit card (on 0% at the moment) and give us a little nest egg to start building on. Fingers crossed

Amanda65

Lipidicman - yes many benefits are means tested and any savings you have are taken into account when they calculate entitlement. I believe ( and please someone correct em if I am wrong) that we can each give our children £3k per annum without if having any implicatons tax or otherwise, so we have effectively put this money outside our personal finances

lipidicman

Ok, the benefit rules are something I don't really know about. The problem might be that since you have gifted the money to your children it is THEIRS. That is, if you ever need it back to live on then you will then be in breach of the rules, wont you?

Amanda65

I'm hoping that by the time we get to that stage my husband will be back in work (in fact I'm hoping we won't have to claim anything at all!)

lipidicman

Hopefully, and we'll all be hoping for the same!

Froggitt

Amanda65 wrote:

As far as singing on goes, he is not entitled to JSA for 3 months as he was on a 3-month notice period and has been paid this therefore we are no worse off at the moment than we would have been had he been working - in fact we are slightly better off as his journey to work was costing circa £400 per month in petrol.

Depending on the wording on the payoff, it may not count as notice and it may be allowed as part of the £30k tax free. If it says "including 3 months in lieu of notice at £1000 a month" its not good, however if it says "we are giving you £11000 in order to terminate your contract with immediate effect", this can be made tax free (up to the £30k), and he can sign on straight away.