Question
I'm hoping you may be able to advise me as I'm in a difficult situation at present after losing my long standing job due to ongoing illness. I was given a small payout (7k) and want to try and need to live on some of it and save some, hopefully to make as much on it as possible. I already have an ISA with 3k in it on a 3% deal with Halifax from 2010- transferred over to the latest deal they have for 3.2% (I think).
I need my finances to be secure, so cant invest in anything too risky, however I need to maximise interest/money made on it as this money is to live on. I know about ISA's and was thinking of perhaps opening a new ISA for this year as I believe I can do that as the Halifax one is a transfer from 2010, so is 2010's fund. I was thinking of the Santander one of around 3%. Is there something that would make me more money, such as shares/tracker funds?
Any advice would be a great help.Answer
I'm sorry to hear about your situation. I think investing in the stock market is probably the last thing you should do - far too risky given you can't afford to lose money - so you're right to focus on savings accounts.
Cash ISAs can be beneficial as the interest is tax-free. I assume you're a taxpayer for the current tax year (runs from 6 April 2011 until 5 April 2012) due to your earnings from when you were working, so a cash ISA would be of benefit. And, in any case, the rates tend to be competitive so there's really no downside to using a cash ISA over a conventional savings account.
The Santander Flexible Cash ISA currently pays the highest variable rate at 3.30%, which includes a 2.8% bonus over the first year. On the maximum £5,340 allowed contribution this would pay annual interest of £176 - hardly worth getting excited about, but it's the best rate you can currently get on cash without tying up your money.
Opting to tie up your money on a fixed rate will give slightly better rates, up to 4.65% fixed for 5 years within a cash ISA with Birmingham Midshires, but I think this could prove too inflexible given your uncertain situation.
Outside of a cash ISA the current 'best buy' instant access savings accounts are the Derbyshire BS NetSaver at 3.11% and Coventry BS Poppy Online Saver at 3.10%. Like Santander, they both include temporary bonuses so be prepared to shop around when the rates come off the boil.
I'm sorry I can't offer you a more profitable solution, but I don't think there is one that'd be appropriate. You could earn annual dividend income of around 5-6% (net of basic rate tax) by investing in some stock market income funds (e.g. Schroder Income Maximiser), but then stock market falls of around 10% - 20% are not out of the question and I really don't think it's worth you taking such risks (as mentioned above).
As an aside, I'd suggest checking which state benefits you're entitled to (if you haven't already). There's a helpful tool on the http://www.direct.gov.uk/en/diol1/doitonline/doitonlinebycategory/dg_172666 Direct Gov website - may as well try and get some benefit from all the tax you've paid over the years!
I hope things work out.
I'm hoping you may be able to advise me as I'm in a difficult situation at present after losing my long standing job due to ongoing illness. I was given a small payout (7k) and want to try and need to live on some of it and save some, hopefully to make as much on it as possible. I already have an ISA with 3k in it on a 3% deal with Halifax from 2010- transferred over to the latest deal they have for 3.2% (I think).
I need my finances to be secure, so cant invest in anything too risky, however I need to maximise interest/money made on it as this money is to live on. I know about ISA's and was thinking of perhaps opening a new ISA for this year as I believe I can do that as the Halifax one is a transfer from 2010, so is 2010's fund. I was thinking of the Santander one of around 3%. Is there something that would make me more money, such as shares/tracker funds?
Any advice would be a great help.Answer
I'm sorry to hear about your situation. I think investing in the stock market is probably the last thing you should do - far too risky given you can't afford to lose money - so you're right to focus on savings accounts.
Cash ISAs can be beneficial as the interest is tax-free. I assume you're a taxpayer for the current tax year (runs from 6 April 2011 until 5 April 2012) due to your earnings from when you were working, so a cash ISA would be of benefit. And, in any case, the rates tend to be competitive so there's really no downside to using a cash ISA over a conventional savings account.
The Santander Flexible Cash ISA currently pays the highest variable rate at 3.30%, which includes a 2.8% bonus over the first year. On the maximum £5,340 allowed contribution this would pay annual interest of £176 - hardly worth getting excited about, but it's the best rate you can currently get on cash without tying up your money.
Opting to tie up your money on a fixed rate will give slightly better rates, up to 4.65% fixed for 5 years within a cash ISA with Birmingham Midshires, but I think this could prove too inflexible given your uncertain situation.
Outside of a cash ISA the current 'best buy' instant access savings accounts are the Derbyshire BS NetSaver at 3.11% and Coventry BS Poppy Online Saver at 3.10%. Like Santander, they both include temporary bonuses so be prepared to shop around when the rates come off the boil.
I'm sorry I can't offer you a more profitable solution, but I don't think there is one that'd be appropriate. You could earn annual dividend income of around 5-6% (net of basic rate tax) by investing in some stock market income funds (e.g. Schroder Income Maximiser), but then stock market falls of around 10% - 20% are not out of the question and I really don't think it's worth you taking such risks (as mentioned above).
As an aside, I'd suggest checking which state benefits you're entitled to (if you haven't already). There's a helpful tool on the http://www.direct.gov.uk/en/diol1/doitonline/doitonlinebycategory/dg_172666 Direct Gov website - may as well try and get some benefit from all the tax you've paid over the years!
I hope things work out.
Read this Q and A at http://www.candidmoney.com/questions/question540.aspx
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