Author Topic: Qu from my dad  (Read 1922 times)

twojabs

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Qu from my dad
« on: October 26, 2016, 01:55:08 PM »
My dad has a lump sum, around $22k (we are in the UK so this is 18k).

He is risk averse, and so has this in cash savings which are taxed.  The interest rate is 0.7% and tax rate is 20%.

He is 60, and wont get state pension until 65 (though he is collecting a private pension around $1500 (1000) per month.

My question is: what do you recommend he does with this?

webguy

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Re: Qu from my dad
« Reply #1 on: October 27, 2016, 12:12:57 PM »
That's a very general question. What are his needs? Is this all the money he has or extra fun money? Does he have a job? What are his expenses and current income? What's his current asset allocation?

You'll need to provide more information.  It's like me saying; I have $10 in my pocket, what should I do with it?  Well I could buy a sandwich if I'm hungry, or I could give it to a charity, or I could invest it in an index fund...

worms

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Re: Qu from my dad
« Reply #2 on: October 28, 2016, 01:13:47 AM »
If that is his sole income, then it is way below the tax threshold and he should have been reclaiming the tax on the interest.  If his income was below 17,000 then he can fill in form R60 and reclaim four years of tax on the interest.  From April 16, the first 1,000 interest is tax-free and no tax will have been deducted by the bank.

He could move the money to higher paying current accounts, as long as he has enough transactions on the accounts.  That might mean having two accounts and setting up automatic payments between the two to meet the transaction rules. Google the MSE Forum and you will find plenty of threads on how to do this.

Although he is retired, he can still make payments into a pension and get a tax uplift on his contributions.  If he did this from the 22k over the next five years into a SIPP he could then take that back as a lump sum at 65 and use this to defer taking his state pension for a year or two, which would increase the state pension sum for the rest of his life and this probably makes for a better risk-free return on capital than anything else he could do.