What is the best way to invest £40,000?

clio2008

Hi all,

Ive got a question, asking on behalf of my neighbor, and it is:

What is the best way to invest £40,000?

With the new financial year beginning on 6th April 2010 I am aware that most banks will come out with new offers and products. I am unsure as to what to do with the money for the mean time. I am thinking of putting it in my savings for now and waiting to see what products become available in the new financial year before tying the money down.

I am looking for an account where I can leave the money in for 2 years max, the interest should be paid back into the lump sum, which should mean the lump sum plus interest is paid out at the end of term. I also want an account where I can go into the branch and contact them by phone when I need to discuss anything. This is purely because I am aware of some accounts which are only accessed via the internet.
I also do not want an account where the money is at risk or linked to the stock market.
I am with the Nationwide at present but the rates are very very low hence I am looking to move the money somewhere else.

Any advice will be appreciated.

Thanks

cte1111

Carefully?

clio2008

cte1111 wrote: »

Carefully?

LOL! I agree with that, now will you tell me what to do with the other 40G ;-)

dunstonh

With the new financial year beginning on 6th April 2010 I am aware that most banks will come out with new offers and products.

You wouldnt want to buy your investments from a bank anyway. So, thats not much of an issue. Whole of market investments tend to be relatively stable nowadays without the need to come in with special offers.

I also do not want an account where the money is at risk or linked to the stock market.

So, in other words you dont want to invest it but save it. With your term of just 2 years, that makes sense.

G_M

I am thinking of putting it in my savings for now

Excellent plan - but won't you neighbour object? It is, after all, his/her money!

Check out the FSA site to find best accounts, and don't let your neighbour ignore this year's tax free allowance via an ISA if not already used up.

Devin_Shockwell

If it were me I'd be looking to split the money.

Invest the maximum for this year (2009-2010) in to an ISA, £5100 if you are over 50 otherwise it's a limit of £3600. Then in the next tax year past 5th April (2010-2011) invest the maximum limit of £5100 (regardless of age). Santander offer 3.5% for the first year which is pretty damn good. So time it right and you could invest either £8700 or £10200 in one account over two tax years, as taken from the Santander website...

If you use your Flexible ISA for your 2009/2010 Cash ISA allowance you can use the same account for your 2010/2011 Cash ISA allowance

In a crude calculation that would give about £305 return on the first year for a £8700 investment and £360 on £10200. Also if the Bank of England base rate increases so would your interest! The beauty of this ISA with Santander is it'll never go below 3.5% in the first year, but it can go up! As for the remaining money, sounds like a regular savings account would do you proud.

clio2008

My neighbor thanks all you guys for helping with advise. She thinks with the financial state of affairs she is best putting the rest of the money under her mattress lol

She thinks she will do some more research e.g. maybe speak to an independent financial advisor. She will definately be splitting the money inbetween banks/accounts to ensure she gets the best rate.

Thanks again all for helping out

ray123

If your neighbour wants security and a guaranteed return:

1) Open 3 Lloyds vantage accounts currently paying 4%, placing 7k in each account = 21k.

2) AA savings account has an instant access online account paying 3% / Lloyds has an 'incentive saver' (with some restrictions) paying 3%.

3) If aged 50 or over, place 5.1k in Alliance & Leicester Flexible ISA, currently paying 3.5% tax free (equivalent to 4.38% for a basic rate taxpayer). Then top up with another 5.1k in new tax year.
http://alliance-leicester.co.uk/savings/flexible-isa.aspx

For investments, I have always been informed that the money should be invested for a minimum of 5 years, so i would advise that she avoids this option, as she wants access to the money within 2 years max.

She is v lucky to have such a helpful neighbour!

C_Mababejive

Surely it depends on your neighbours age/income/tax status?