Although it’s what I expected, I think it’s fair to say my redundancy payout was good. If I had a life expectancy longer than two years I’d have mitigated the horrible tax bill with a big pension contribution. If I’m on my last legs before 5th April I’ll make the transfer then to ensure the kids get the tax advantage!
As it stands, I have a decent sum of cash and a plan to demolish it over five and a half years. Given my life expectancy offers a 14% chance of seeing 2022, stocks and shares are out as an investment plan. P2P lending has moderately inflexible access arrangements. So I’m effectively tied down to traditional deposit options. This is, after all, firstly my fun money and secondly, presumably, part of my kids’ house buying deposit.
As inflation takes off, exchange rates falter and interest rates remain low I’m effectively facing the perfect storm of knowing my money is losing value in real terms daily. Spending it abroad is a terrible idea! Tough!
In a longer life expectancy world I’d be opening multiple bank accounts to take advantage of decent rates for new customers with the likes of Tesco. One reason for not doing so is my number of direct debits has been savagely reduced by no longer being married thus having no household bills, having claimed on multiple insurance policies that have ceased this cancelling direct debits, and no longer being a member of a trade union. As I no longer have a trade!
The other reason is that I don’t want to make my finances any more complicated for my sister when she comes to act as my executor. Fewer accounts with fewer institutions is a preferred approach.
I could consider Atom Bank paying 2% for two years. Or Ulster Bank offering 1.25% for instant access. Both would be new organisations for me and the Atom option is just a bit too restrictive for my circumstances” Santander 123 does ok, along with their 5% monthly saver rate. But neither Halifax or Santander have anything interesting.
So I’ve opted for an option that I’ve spent most of my working life telling customers and colleague is pretty rubbish. Premium Bonds.
As bank deposit rates have crashed, ERNIE has gradually been elevated to a slightly more advantageous place in the savings league table. No interest, but a tax free prize pot of 1.15%. With the amount I’m intending to move that would generate, with average luck, between one and two prizes a month. At £25 a pop, or maybe more.
I’m a 40% taxpayer this year, thanks to every chancellor of the exchequer in the last 30 years failing to increase the tax free redundancy threshold. Getting a decent rate on savings will trigger a 40% tax bill on interest. Sticking the cash in Premium Bonds avoids this.
I can access the cash within a few days. I already hold an account with £110 in, so it’s no more work for my sister when I’m gone. It adds a little fun to opening the post in the first week of every month. It keeps my finances relatively simple.
Genius it isn’t. Decent investing it isn’t. But it’s better than what I’ve got at the moment, and seems, somehow, to fit my unusual set of circumstances.