Hi Everyone,
New here and to Trusts on a whole, looking around i am finding that interest rates on Trust accounts are significantly low compared to other accounts, why is this and are there ways around it?
Kind Regards
Johnny
Hi Johnny,
Welcome to the forum.
There are a very limited number of banks that offer current accounts to trustees, so I suspect that due to a lack of competition, they can get away with paying very little interest.
If the trustees are looking to generate a little more interest without taking on investment risk, National Savings and Investments (NS&I) have several products that may be worth considering and which can be opened in the name of the trust/trustees. The trustees can find out more about which products are suitable and more about NS&I at www.nsandi.com.
If the trustees were to consider using NS&I’s products, I would suggest that they retain the account with Metro Bank for day to day banking purposes, as the NS&I products don’t facilitate payments or transfers to third parties, or direct debits.
If the trustees want to retain access to the funds, they may specifically wish to consider moving some of the capital to NS&I’s Income Bonds which pay 2.85% gross/2.89% AER, variable. The capital in Income Bonds remains accessible, just like the instant-access account the trust holds with Metro Bank and the trustees can elect for the interest paid directly to the trust’s account with Metro Bank.
The trustees could also consider tying the money up for a year in NS&I Guaranteed Growth Bonds which pay 4% gross fixed for one year. The capital is tied in for one year, so the trustees wouldn’t be able to access these funds and would of course need to be certain that they retain sufficient capital in the Metro Bank account to cover any potential costs or planned outgoings over that period.
Finally, and again, subject to the objectives of the trustees and the terms of the trust, they may wish to seek advice from a suitably qualified Independent Financial Adviser (IFA). An IFA can help the trustees to consider whether it would be appropriate to invest a portion of the capital for growth or income and would construct a suitable investment portfolio and an appropriate tax structure for doing so.
Hope this helps.
Adrian
1 Like
Hi Adrian,
Thank you so much for your reply and such an invaluable source of information, in relation to the NS&I Guaranteed Growth Bonds would any gained interest infringe on my entitlement to means tested benefit do you know? I understand that any interest gained is taxable if outside my Personal Allowance (which it will not be) just not sure in regards to the means tested benefit entitlement.
Kind Regards
Johnny
Hi Johnny,
The answer to your question really depends on the terms of the trust, the means tested benefits you receive, the level of interest generated and your other sources of income.
I’d be happy to take a look if you’re comfortable to share the trust deed with me and tell me a little more about your situation.
My email is adrian@sylvanfinancial.co.uk or you can reach me on 07595595593 if you’d like to discuss.
Best wishes,
Adrian