Low interest rates on savings

[baldrick]

Puddy_Tat

Are you sure she can't set up an online account for tax? There's a few different bits of paperwork on the list - passport and driving licence are on there, but there's others.

Appreciate it's not always easy dealing with olds, but she has options. Anxiety is quite common in people of advanced age - has she seen the Dr? It often manifests in inability to make decisions because of cognitive decline which seems to be one of the issues you have to deal with a lot from your posts on here.

 

[smmudge]

i wasn't sure about that - i can't remember giving national insurance numbers to banks etc, but might have done as part of proving identity or something.

Yes they are supposed to and you don't have to give them your NINo for them to do that as far as I know. Here's the long boring HMRC guidance for banks on how to make these returns but at least shows that they have to: Bank and building society interest returns

As she has a spouse's workplace pension, they will get her tax code notifications from HMRC, and if she owes any tax from savings it will be adjusted on that code next year.

She can write to HMRC to give them the info in advance, so they can change her tax code earlier, but if she's getting less than £10,000 in interest she doesn't have to.

 

[Puddy_Tat]

Appreciate it's not always easy dealing with olds, but she has options. Anxiety is quite common in people of advanced age - has she seen the Dr? It often manifests in inability to make decisions because of cognitive decline which seems to be one of the issues you have to deal with a lot from your posts on here.

not sure i want to go in to much detail outside k+s, but anything to do with money / officialdom has never been easy.

Are you sure she can't set up an online account for tax? There's a few different bits of paperwork on the list - passport and driving licence are on there, but there's others.

if i'm reading it right (from here) - my thoughts in red

You’ll need your National Insurance number or postcode (no problem) and 2 of the following:

a valid UK passport (no - she hasn't had a passport since the 1960s)
a UK photocard driving licence issued by the DVLA (or DVA in Northern Ireland) (no - never had a driving licence)
a payslip from the last 3 months or a P60 from your employer for the last tax year (probably - not sure if the work pension generates the equivalent of a pay-slip each month any more but presume it generates a P60 each year if nothing else.)
details of a tax credit claim if you made one (no, fairly sure she has never claimed tax credits)
details from a Self Assessment tax return if you made one (no - not done self assessment.)
information held on your credit record if you have one (such as loans, credit cards or mortgages) (don't think so - mortgage got paid off in full when dad retired, which is 30+ years ago, she doesn't have a credit card and fairly sure she hasn't taken out any loans.)

so think that's a no.

from where i'm sitting, a simple letter at the end of the tax year ought to deal with it, but...

Yes they are supposed to and you don't have to give them your NINo for them to do that as far as I know. Here's the long boring HMRC guidance for banks on how to make these returns but at least shows that they have to: Bank and building society interest returns

thanks for that. i didn't know that banks did that / had to do that / how they did it.

maybe that will help.

 

[AnnO'Neemus]

Ah, that short-lived time in my adult life when I actually had a small amount of savings.

I'm currently about £8k in debt (and that's not counting today's HMRC letter saying I owe £6k in taxes, which is probably wrong).

Hoping to dig myself out of debt this calendar year. And then I will have 11 years till retirement age to save up for my retirement. Hahaha!

I think I'm aiming for the Japanese retirement plan, where old people commit crimes so they will be sent to prison where they will have a roof over their heads and three meals a day.

 

[CH1]

the page i linked to says you need to pay income tax on interest if it's more than £ 1,000 in a tax year, but says you only must register for self assessment if it's more than £ 10,000 in a year. it doesn't really say what to do if it's between the two which I think is the league mum-tat will be in.



i might try that when i've got an hour or two to spare



i wasn't sure about that - i can't remember giving national insurance numbers to banks etc, but might have done as part of proving identity or something.



snag for mum-tat is (if we have understood it right) you need to prove your identity with a passport or driving licence (neither of which she has) to set up a government gateway account.

i think i have done similar in the past (I did have a few years where i was doing self assessment, as i had a fairly unsuccessful spell of self employment alongside a few part time / temporary jobs) and think i just told them the total amount and they didn't ask for detail.



thanks. i think her income is probably above that - she gets a full state pension based on dad's NI contributions, and gets a work pension from his former employer.



that's what i have suggested, but she is concerned that's not enough / not soon enough / that she Will Get Into Trousince I became a (state) pensioner in 2020 the HMRC have written to me telling me how much I owe and sending me a bill (I elected to the written to on HMRC matters).

I would say a Government gateway account would be the simplest way to pay the bill - if there is one to pay.
Three issues arise on interest:
1. Interest on cash ISAs is disregarded
2. as you say there is the £1000 personal allowance for interest
3. there is also the "starting rate for savings" of £5000. This seems to be reduced by any taxable income you have. So for example in my own case I get state pension of (approx) £13,500, but the tax threshold is £12,570 (lower rate)
Therefore I am allowed to get roughly £3,930 of interest IN ADDITION to the £1000 personal allowance before paying tax.

On the other hand I do have to pay tax on the state pension which exceeds the £12,570 personal allowance (a matter of about £200).
I simply got a bill and paid via the Gateway.
HMRC do know what interest is paid on bank accounts so should not need to be declared.

 

[Elpenor]

Just on payslips from pension payments , as I understand it pensions are only required to provide one payslip per tax year but YMMV.

A P60 should still be issued

 

[kabbes]

It’s probably worth writing to HMRC. They do tend to respond eventually. Tell them that you think you (as she) might need to pay tax (with details as you described) but you don’t have the ID that they require so can’t set up an online account. They’ll probably just send you the right tax form to fill out.

 

[teuchter]

The HMRC page that Puddy_Tat linked to specifically says

If you’re employed or get a pension, HMRC will change your tax code so you pay the tax automatically.

It doesn't look too me like there's any problem to worry about.

 

[Maltin]

I agree with smmudge and teuchter. I don’t think your mum needs to worry as HMRC will have the info and will work out the tax due and how to recover it, which would likely be through amending the tax code for her workplace pension.

As CH1 notes, hopefully your mum uses ISAs and any interest from that is tax free so possibly there isn’t any tax liability anyway.

I expect the only issue would be if she has interest from offshore bank accounts which might not be reported to HMRC.

I did wonder myself how I dealt with tax on interest that I have earned but saw that HMRC just updated my tax code.

 

[Puddy_Tat]

Thanks to all for the thoughts.

i don't think mum-tat is in the realms of offshore accounts

I have passed on relevant links, and suggested that it will probably all get sorted out eventually, but dropping them a simple letter saying ' I have received X amount of interest / dividends, please get back to me if you want more detail' come early April, and not sending copies of everything at this stage, will probably be the best bet - the letter may not be necessary but will* stop any worrying.

the years i needed to do an online tax return, i just told them how much i'd got as interest, and they didn't get back to me and ask me for copies of statements and so on.

* - maybe.

 

[teuchter]

You could also point out to her that her situation is not any different to the millions of other people in the country who have bank accounts but don't do tax returns.

 

[Hollis]

Just a reminder to check old workplace money purchase pensions!

I have just checked mine from my last job - which is fully invested in a global index tracker - they're charging me 1% pa for doing so.

I can get exactly the same thing through my SIPP for 0.15% pa. So that ones getting transferred..

 

[Silas Loom]

An extra 5k ISA allowance is always useful, even if it has to be invested in useless British-listed firms.

Hope that some managed fund products for this appear on Interactive Investor before year-end. I keep reading that the FTSE is massively undervalued so maybe a 250 tracker?

Any thoughts, investment sages?

 

[Winot]

An extra 5k ISA allowance is always useful, even if it has to be invested in useless British-listed firms.

Hope that some managed fund products for this appear on Interactive Investor before year-end. I keep reading that the FTSE is massively undervalued so maybe a 250 tracker?

Any thoughts, investment sages?

They seem to be having a consultation first so doubt it'll be ready for this tax year.

 

[kabbes]

It might be ready before April 2025. You never know. The consultation finishes in June and I’m sure that the big platforms have already been planning for it for at least a year.

My plan for independent living involves a proportion of my investments being in UK equity income funds anyway, because these (a) are aligned in currency with my needs; and (b) offer high income returns, due to UK companies being so cheap compared to international peers. So for me, I’ll just be shifting some of these funds into the UK ISAs

Funds for you to consider:

Man GLG Income Professional D
- The best of the bunch, I’d say. Consistently high returns (averaged 7.7%pa over the last seven years) and its current income yield is 5.3%

Artemis Income I
Schroder Income Maximiser L
- Both do okay (averaged 5.9% and 4.9% respectively over the last seven years). Current income yields are 4.0% and 7.3% respectively

Vanguard FTSE UK Equity Income Index
- Only averaged 4.2% over the last seven years and income yield only 5.3%. But it’s much less correlated with the wider market, because the general equity UK income index includes lots of companies that tend to operate out of cycle, like miners.

IFSL Marlborough Multi Cap P
Premier Miton UK Multi Cap B
- Poor performers over the last seven years (2.3% and 3.3% respectively) because the UK mid market has done so poorly. But if you want exposure to the mid market, they might be well placed to give it to you. Income yields are 5.2% and 5.3% respectively.

I keep track of 90 funds across multiple sectors of the market, ranging from general global equity to alternatives to bonds. 8 of these funds are UK equity income funds, so here's their summary:

UK equity income	1-year	3-year	5-year	7-year	Overall rank	Income paid
Man GLG Income Professional D	12.04%​	10.62%​	7.28%​	7.69%​	31​	Monthly
Artemis Income I	9.79%​	8.59%​	8.00%​	5.88%​	44​	Jun, Dec
Schroder Income Maximiser L	11.90%​	13.04%​	5.56%​	4.87%​	51​	Jan, Apr, Jul, Oct
Aviva Investors UK Listed Equity Income 2	9.00%​	5.74%​	6.39%​	4.54%​	52​	Jun, Dec
Vanguard FTSE UK Equity Income Index	6.17%​	10.77%​	6.51%​	4.21%​	62​	Jun, Dec
Premier Miton UK Multi Cap Income Fund B	-4.19%​	-1.21%​	3.35%​	3.34%​	68​	Jan, Apr, Jul, Oct
Premier Miton Monthly Income C	8.35%​	9.04%​	4.65%​	2.45%​	80​	Monthly
IFSL Marlborough Multi Cap Income P	5.61%​	1.05%​	2.75%​	2.34%​	84​	Mar, Sep

 

[pbsmooth]

I keep track of 90 funds across multiple sectors of the market, ranging from general global equity to alternatives to bonds.

are you Hargreaves Lansdown?

 

[kabbes]

are you Hargreaves Lansdown?

Money = srs bsnss

 

[kabbes]

By the way, just to give you a flavour of how hard it is to beat the index, the 7th and 9th best performing funds over seven years were, respectively, Vanguard’s equity index tracker for the developed world ex-UK and Fidelity’s worldwide equity index tracker. The ones that beat these were mostly the funds that happened to go heavy in the Magnificent Seven. Shout out to Premier Miton’s European Opportunities Fund, though, which was second overall. That’s impressive when you don’t have access to any US tech at all over the period

 

[kabbes]

The FT’s take on the new UK ISA:

The UK ISA announcement: pretty much meaningless

But please click anyway

www.ft.com

Worth reading just for the fact that it includes an “Arse-covering graph”, an “Arse-covering graph cont.” and a graph labelled “Is there any useful information here?”

Their conclusion, unsurprisingly: “from an investor perspective, the UK ISA is likely to be just a tax bung to high earners, rather than a materially reshaping the domestic retail market for UK assets”

 

[Silas Loom]

By the way, just to give you a flavour of how hard it is to beat the index, the 7th and 9th best performing funds over seven years were, respectively, Vanguard’s equity index tracker for the developed world ex-UK and Fidelity’s worldwide equity index tracker. The ones that beat these were mostly the funds that happened to go heavy in the Magnificent Seven. Shout out to Premier Miton’s European Opportunities Fund, though, which was second overall. That’s impressive when you don’t have access to any US tech at all over the period

Wooden spoon in my portfolio goes to Bailie Gifford Global Discovery B, which is still 53% down on late 2021. I don’t insist that funds beat indexes, or even biscuit tins, but they should probably do better than that.

 

[gentlegreen]

Savings are theoretically a lot safer than investments but still disconcerting when there's no high street presence ...

I'm moving my life savings around and MBNA (Lloyds) was highlighted on Moneysupermarket and the highest interest I could see for a "normal" bank ...
You set the account up and there's not even any online viewing of it - even via LLOYDS - and it's a "business" account - just text confirmation for transactions - quite disconcerting ...

I suppose it's reassuring that my test payments were bounced back to Santander with a text on my phone saying it appeared not to be my designated account - and I got through on the phone quickly and it appears I somehow gave the wrong sort code for my designated Santander current account ... so it sort of feels like my life savings won't vanish into the ether ...

The simplest fix is to create a brand new account and the old one will self-delete in 14 days...

My ISA is moving from Santander (a bank I was able to physically visit yesterday) to Tesco who also have no high street presence or even a current account now - but I'm fairly comfortable with them after quite a few years ...

 

[wtfftw]

The FT’s take on the new UK ISA:

The UK ISA announcement: pretty much meaningless

But please click anyway

www.ft.com

Worth reading just for the fact that it includes an “Arse-covering graph”, an “Arse-covering graph cont.” and a graph labelled “Is there any useful information here?”

Their conclusion, unsurprisingly: “from an investor perspective, the UK ISA is likely to be just a tax bung to high earners, rather than a materially reshaping the domestic retail market for UK assets”

unpaywalled

https://archive.ph/SE1WR

 

[Hollis]

Wooden spoon in my portfolio goes to Bailie Gifford Global Discovery B, which is still 53% down on late 2021. I don’t insist that funds beat indexes, or even biscuit tins, but they should probably do better than that.

I also have the literal misfortune of owning that fund, with about the same % loss.

I think when you've got that level of loss you have to ask yourself if the fund is just a dud, or if you bought it at the wrong time.

With this one it seems to be a combination of both... as it clearly got into 'bubble territory' and was being hyped by the finance media... but it's also done shit the last year, rather than show signs of recovery like some other of my dog funds.

I'm far more wary now of buying anything that has shown recent strong performance! I'd rather go for slow and steady.

 

[Silas Loom]

I also have the literal misfortune of owning that fund, with about the same % loss.

I think when you've got that level of loss you have to ask yourself if the fund is just a dud, or if you bought it at the wrong time.

With this one it seems to be a combination of both... as it clearly got into 'bubble territory' and was being hyped by the finance media... but it's also done shit the last year, rather than show signs of recovery like some other of my dog funds.

I'm far more wary now of buying anything that has shown recent strong performance! I'd rather go for slow and steady.

View attachment 415125

I almost wonder if recent bad performance is a good indicator of value.

But I’m baffled how a fund can bubble like that without being horribly overexposed to a single crap buy.

 

[Hollis]

I almost wonder if recent bad performance is a good indicator of value.

I think you also have to be wary of that! I have occasionally tried to time market trackers when a market is looking undervalued (regression to mean and all that... ). However I am forever burnt by an experience during the dot-com boom when I 'bottom-chased' a company (Marconi) all the way down to it's liquidation.. got a cheque in the post for 9p.

 

[kabbes]

I also have made all these mistakes and come to realise that I’m shit at trying to time anything. My best bet is to identify the proportion I want to allocate to each sector, find the funds in that sector that seem to have the best and most sustainable performance, make sure they aren’t just buying the same stocks as each other and then simply buy them as and when I can afford them without trying to get clever about timing it.

 

[kabbes]

I've had my ISA for two and a half years now and it's lost money. And it still keeps showing me this graph with a line going up saying your money is predicted to get to £xxxxx by 2033!!!

Ive just got it in a fully managed Nutmeg, am I doing something wrong? I'm going to shift it into a cash ISA otherwise. This is stupid.

Important lesson here for anyone still watching along, regarding the long-term nature of how corporate profits gradually become equity returns, despite the alarming volatility of year-to-year prices. The time somebody is most likely to lose their nerve is precisely at the capitulation point of the bottom of the market, but in the end companies make profits and profits get paid. This graph is the return of a worldwide index fund over the last six months.



Point 1 is the date of the above post, which is when faith was almost lost. Point 2 is where we are now. The gain between these two points is 17% (in five months). And that’s really just reflecting the earnings growth that hadn’t really been incorporated during the rises in bond yields.

 

[CH1]

This could be good news for Co-op Bank customers wanting to save.

Coventry Building Society agrees terms to buy Co-op Bank for £780m

Coventry Building Society has agreed terms to buy The Co-operative Bank for £780m as a wave of consolidation sweeps through the mid-sized banking sector.

www.cityam.com

 

[Silas Loom]

Yay! My Interactive Investor portfolio is now at parity with the biscuit tin comparator. Only losses now are inflation and opportunity cost.