Money Market Account

1socrates1

I would like to know the pros and cons of a money market account versus a fixed bond (in terms of possible interest) and that of the Investec high 5 account.

dunstonh

Money market accounts offered by the banks often are not marketed. Typically they are fixed term deposits in the same way as the product you call fixed bond. The rate is governed by a different mechanism so you often find a difference between the money market fixed term deposits and the branch retail fixed term deposits.

1socrates1

So which would you recommend?

dunstonh

both are fixed term deposits. Best rate would be the key driver. Although many money market linked ones have no accessibility (apart from death).

cheerfulcat

Money market accounts have ( unless this has changed ) one advantage over term deposits in that if you deposit more than £50,000 the interest is paid gross, and can be rolled over gross. A taxpayer would of course have to declare this.

1socrates1

Thanks cheerfulcat.

opinions4u

cheerfulcat wrote: »

Money market accounts have ( unless this has changed ) one advantage over term deposits in that if you deposit more than £50,000 the interest is paid gross, and can be rolled over gross. A taxpayer would of course have to declare this.

It doesn't have to be a specific money market account.

Fixed term accounts can have their interest paid gross for deposits of £50k plus if the bank chooses to do so, and the account meets "Qualified Time Deposit rules". Halifax Guaranteed Reserve always used to allow this option (and probably still does).

As you rightly point out, the interest paid is still taxable and it is the account holder's responsibility to pay what's due.

dunstonh

Fixed term accounts can have their interest paid gross for deposits of £50k plus if the bank chooses to do so, and the account meets "Qualified Time Deposit rules". Halifax Guaranteed Reserve always used to allow this option (and probably still does).

I had to read up on that earlier in the year after a number of FTDs starting saying they would only pay the interest gross on deposits of 50k and over. Clarification was issued by the HMRC in March but many seem to do that now. (I havent checked all but it seems to be the case in the ones I did check).

cheerfulcat

opinions4u wrote: »

It doesn't have to be a specific money market account.

Fixed term accounts can have their interest paid gross for deposits of £50k plus if the bank chooses to do so, and the account meets "Qualified Time Deposit rules". Halifax Guaranteed Reserve always used to allow this option (and probably still does).

As you rightly point out, the interest paid is still taxable and it is the account holder's responsibility to pay what's due.

Hi, o4u,

Thanks for that. As I say, it's been a while since I had a mm account. As I recall it at the time it was a distinct advantage because you could have a weekly term account and roll the gross interest over indefinitely.

As dh says in post 2, the interest rates may be different from those available on " normal " fixed term accounts; they are based on the LIBOR IIRC.

jamesd

Money market accounts are also a little less safe than term deposit accounts, with some having a chance of losing capital if the investments they hold decrease in value. It's uncommon but it has happened.