AIBU to keep my inheritance in one bank account because of interest rate or am I naive

[JessicaRabbit23]

More ‘am I being naive’ to put all my inheritance into chase bank because the interest rate is so good. Money will be gone in August I after I buy a new house. I know you are only protected up to 120,000 but do big name banks go bust and surely we would get warnings……

It's an old one but a good one: Don't keep all your eggs in one basket.

Just be aware of the tax implications.

As with RBS, it's more likely a big bank would be bought or bailed out, @JessicaRabbit23, purely because they couldn't afford a domino effect which risked the failure of the entire system

I doubt there'd be warnings issued though - at least not to the public - and while the FSCS coverage might work for one institution I can't see there being enough to compensate investors if there was an industry wide catastrophe

However I've seen nothing suggesting that's imminent, so while nobody can tell you what to choose I'd personally risk it for the very short term the money will be in there

Finally, since last December, "temporary high balances" of up to £1.4 million are protected for 6 months if you qualify, precisely to cover needs such as your own

https://www.fscs.org.uk/making-a-claim/claims-process/temporary-high-balances/

?

Apart from paying tax on the interest what tax implications did you mean?

I have 50k in premium bonds so there’s always this basket 😂

That’s all I meant. Most people can only earn £500 a year in interest before paying tax. HMRC have reduced my tax code to almost nil because of my stupidity in this regard.

Chase is a brand name of JP Morgan. There is no way JPM is going bust. They are probably a better credit risk than the UK government. I think you’re very safe.

You should have some of it an a tax free ISA account and top it up annually ( recently - last tax year put some in Virgin at 4.2%) or in an ISA stocks and shares account -I invested £20k in the Vanguard all world fund (maximum risk spread) last week - and it's up 2% already the fund rose by 15,19 and 13% over the past 3 years.

OP is buying a house in August - stocks and shares would be totally inappropriate for this short a timescale.

I'm inheriting around 135k - just waiting for probate to be finalised. I was wondering what amount I'd need to live off the interest split into a monthly amount but when I researched this it would have to be nearer a million pounds to make it worthwhile!

If I were you OP I'd consult an IFA. That's what I intend to do. I'm thinking a 5 year bond and a 2 year bond and another ISA and topping up my existing ISA but I really want to pay off my 0% credit card debt first so as to keep it strictly for vet emergencies. I'm very risk adverse so wouldn't be getting much interest but I'd rather my money was safe.

I also intend to buy a second hand 3.5T lorry which my lovely Mum would have very much approved of.

Please also make sure you update your Will and consider looking at Estate Planning to negate carehome fees in later life and leave as much to your dependants as this is what we have chosen to do and it's because of Mum and Dad doing this that would have prevented the LA from swallowing the lot had Mum survived another 5 years.

Ah right Missed that bit - shares def not the way forward

Put what you can in isas./premium bonds
If you earning 12500+ or more in interest so be it. But should be taxed only on what you get in interest above your tax allowance plus other allowances . Unless paye adjusted due to last year?

It used to be 80k or something per banking group. I think it's gone up now to 100 and something.

That's the amount they'll guarantee to pay you back if it gets nicked. So try and spread it across a couple and make sure they're not in the same banking group. Like lots of banks are retail trading arms of other bigger banks.

Not quite true. Your allowance is £1000 a year or more if you're a non tax payer.

I know it's quite hard to believe on MN but 'most people' don't earn over £50k pa. There's also the £20k cash ISA allowance and seeing as the OP says the money will be gone in August, she'll only earn interest for about 4 months.

If she's a basic rate tax payer, I make that the interest on over £80k will be tax free of tax due to the amount in an ISA and then earning interest that's not reaching the £1k this tax year. She could put the rest in PBs, but that's risky as it's only going to be in for the June, July and August draws at best, so disproportionately affected compared with just putting it in instant access and paying tax on the interest above the £1k.

You are covered up to 1.4mn for 6 months so no issue hereif it's recent and it's August 26

Yes, check out the temporary high balance conditions. If you are protected then it’s probably not worth the effort of moving some of it around.

Does your higher interest rate cover the whole 120k?

Please also make sure you update your Will and consider looking at Estate Planning to negate care home fees in later life and leave as much to your dependants as this is what we have chosen to do and it's because of Mum and Dad doing this that would have prevented the LA from swallowing the lot had Mum survived another 5 years.

I see this posted all the time. I work in healthcare in the community and visit many different types of care home. The ones that basic LA funded are usually horrendous and I cannot fathom this attitude.

I got hammered for Tax, after I had money from the sale of my Late Mums flat. As the eldest it was paid into my Bank account. It wasn't there long as I had to give half to my sister, we then divide our half again to our kids. I was just waiting for all the outstanding bills etc, so not there that long.

My tax bill came in about 2 years later, they lumped it together with my pay., told me I had underpaid my tax

NS&I don't have a maximum limit to savings.
They are backed by the government, unlike high st banks. You'd be able to open an account with them pretty easily as you already have pb's.

It depends how much over 120k you are? Is the money in joint names? how many accounts do you have with one institution?

Take a look at this, from Martin Lewis.
FSCS bank protection limit - Are my savings safe? - MSE

JP Morgan did in fact get close to going bust in the 2008 crash, and was bailed out by the US government to the tune of $25 billon from memory, and was paid more to buy Bear Stearns to bail them out too. So while the OP is almost certainly protected under the £1.4m limit for short term holdings associated with a house purchase, and its also unlikely JP Morgan will fail, given the current volatility and alleged manipulation of US markets its not impossible. From an absolute credit risk perspective, the UK government can always print more money to meet it's obligations, an option not open to JP Morgan!

I have already done everything I can like Isas

This isn’t really true. They reluctantly accepted TARP money which they didn’t need and had no use for. They were asked to buy Bear Sterns as a kind of private sector bail out of a weaker institution.

A world in which JPM goes bust is a world where we are huddling around candles eating cold tins of baked beans. It’s one of those things that’s is so bad there is no point worrying about it. I would 100% trust them above the UK government.

What does that even mean in this context. The money is protected by law. They said that is was a bank account not some sort of investment.

The only concern here is the tax liability for the interest earned. So the op could probably mitigate that, but if it's only going to be in there a short period beforebthey but a house then even that may not be so much of a big deal.

Personally, I wouldn't risk being over the £120k protected limit. I agree it's extremely unlikely that a bank will go under, but why take the risk? I'm sure there are other banks offering a similar rate. Although be careful because some banks are co-owned by the same banking group (e.g., Halifax and Bank of Scotland), so only covered up to £120k combined.