Our lives have been turned upside down as a result of my wife being diagnosed with serious cancer. Our financial plans for our retirement are no longer valid. If we each take a £20,000 cash Isa, could I access hers, should the worst happen before April 2020? Sadly it’s a very real possibility.
Firstly, I’m really sorry to hear about your awful situation.
If you are planning to keep this money in cash rather than in a stocks and shares Isa, you may find that some current or savings accounts provide a good alternative to a cash Isa. However, one longer term advantage of an Isa is that on death they can be transferred to a spouse or civil partner and they will retain their tax-free status.
A basic rate taxpayer can now earn up to £1,000 in interest each year, tax-free, lessening the need for a specific tax-free product like a cash Isa. This is worth bearing in mind if the total amount of interest you and your wife are likely to earn from investments outside tax-free products this year is less than £1,000 each.
If that is the case, a straightforward non-Isa based joint savings or current account will mean you won’t pay any tax on the interest and it will be easy for you both to access. Accounts such as the Santander 123 account or the Marcus account from Goldman Sachs, which is paying 1.5% AER (including a bonus rate of 0.15% gross for the first 12 months), are worth considering.
The only cash Isas paying reasonable interest tend to be fixed-term offers. Some may charge a penalty for early withdrawal that could negate most of the benefits of tying the money up in the first place. At the time of writing the highest interest rate on a one-year fixed rate cash Isa is 1.85% AER with Kent Reliance.
If your wife does take out an Isa, to access her account you would need to have a lasting power of attorney in place. If you have not done this, apply at the government’s website: gov.uk/power-of-attorney. There are two powers of attorney relevant to you: ‘property and financial affairs’ and ‘health and welfare’, which each cost £82 to set up.
Best Isa rates
|Instant access||Coventry Building Society||Easy Access Isa Online 2||1.50%||£1 minimum deposit. Rate includes 0.35% bonus until 31 August 2020||Online|
|One-year fixed rate||Al Rayan Bank||Fixed-term deposit cash Isa||1.61%||£1,000 minimum deposit. Expected profit rate||Online, postal, branch, telephone|
|Two-year fixed rate||Shawbrook Bank||Two-year fixed-rate cash Isa||1.81%||£1,000 minimum deposit. Allows Isa transfers||Online|
|Five-year fixed rate||Shawbrook Bank||Five-year cash Isa fixed-rate bond - Issue 16||2.30%||£1,000 minimum deposit. Allows Isa transfers||Online|
Source: Moneyfacts 17 May 2019