Where to put a lump sum?

steve-o_3

Hi, I've been visiting this site for ages now, but until now, this is the first time I've posted on here.....so be gentle with me!!! :rolleyes:

To cut a long story short, at only 26 I've been lucky enough to make a few bob on my last house (I bought it just before the property boom in 2001!)

Anyhoo! I now have a rather large lump sum (for someone my age!) and am unsure what to do with it? For the first time ever, I've been able to save some money and am comfortable with what I live off :j . I have about £30k currently sat in my lloyds TSB online saver (making about 4.6% interest before tax). I've already maxed out on my cash ISA (£3k in Halifax 5%) and my share ISA (£4k in Trust funds) for this year, so can't put any more in them, I also currently drop £250 a month out of my online saver into my lloyds TSB regular saver (8% interest). I've paid a nice £30k lump off my new mortgage, but am keen to make some savings for the future rather than put it ALL into my mortgage. My plan is to have money to hand should I need it, but as an ideal, be making a good retirement fund for myself / kids etc (not that I have kids just yet!!!)

After all this I'm left with about £30k. I'm fairly young and need to know my money is safe, :A hence I have taken all the risk I'm willing to take by investing in my unit trusts (£4k as mentioned above) however I have heard property bonds are doing well??? I basically think I'm just looking for a good account (preferably accessible online) that returns 5% or more and will accept large lump sum deposits like the one I have.

I've found a couple of accounts like the one I think I need and my best so far is The Manchester Building Society's 90 day notice account. Its not accessible online, but it returns over 5% and seems pretty straight forward, it will just make it a pain to move money around as access to it isn't easy.

If anyone has any suggestions on what I can do with my lump sum that will give a decent return with little risk, I'd be very happy to hear your thoughts!!!

Thanks in advance. :T

Steve.

ReportInvestor

Hi Steve and welcome to the site,

Congratulations on getting your "last house" at age 21. How old were you when you bought your first one .

Seriously, my reply to LSM below also suits you:

I'd put your £30K into any of the following:

Birmingham Midshires 5.2% Internet Easy Access issue 6 (includes 0.65% introductory bonus).

Or Yorkshire BS 5.1% Internet Saver.

Or Chelsea Call-Direct 20 Tracker Issue 2 - 5.25% (but requires 20 days notice & the rate includes a 0.5% 12 month introductory bonus).

Then in April 2007 & every subsequent April I'd add another £3K into the best paying mini-cash ISA going at the time to ensure gross interest on most of your money.

Some advice. Avoid notice accounts - especially more than 30 days. They don't pay the top rates any more and just give the financial institution a chance to shaft you by reducing rates and stinging you for a 90 Day penalty when you object by going elsewhere.

If you have time to fiddle around with your money, open something like a Coventry current account paying decent interest and then use it to fund loads of these high paying regular savers @ £250 per month each e.g.

Ipswich BS 8.25%
Halifax 7%
Abbey 7%
Leek BS 6%
Principality BS 6%

steve-o_3

Sorry, maybe I wasn't totally clear!

I bought my first house when I was 21 for £60k, I sold it last year and made a good £70k on it!!! (You know, did the whole "property developer" job on it, but lived there as I did it!)

I met my fiance 3 years ago and we wanted our own place, so we sold my house last year, paid £30k into the new one we got together and saved as much as I could in all the usual places (ISA's etc).

I'm now stuck with £30k lump sum I'm not sure what to do with? I don't mind a limited amount of risk, but I'm open to suggestions as I'm totally baffled as to what to do with it!

We live quite comfortably on what we earn, we save monthly as it is and overpay on the mortgage too, so it would be nice to try and make a good nest egg for the future while we have the opportunity before we get itchy feet and buy a stupid sports car or something!!!

Can any of the online savers you mentioned be used to feed the regular savers you mention?

Can I open as many regular savers as I want with loads of different people and do I need to have current accounts with them as well?

Are there any of these regular savers that go on forever? My lloyds TSB ends in 2 years and defaults to a low interest account.

What would you do with £30k???

ReportInvestor

The Coventry First Current Account (5.22% includes 0.85% 12 month bonus) could be set up to feed the various regular savers. None of the regular savers I quote require a current account at the same institution and all are just for 12 months.

The Coventry First requires regular monthly funding of £250 minimum - perhaps from an existing current account. You could make Coventry your linked account (for easy monthly withdrawals) if you set up the Birmingham Midshires internet account with your £30K.

Or just keep it simple with the BM account on its own .

Liz_the_Whizz

I can't see anything on the Manchester website above 2.25% - can anyone help?

Leighthal

The Coventry First requires regular monthly funding of £250 minimum - perhaps from an existing current account. You could make Coventry your linked account (for easy monthly withdrawals) if you set up the Birmingham Midshires internet account with your £30K.

Isn't it 1k per month for this account?

ReportInvestor

Apologies, it is. So you might have to make it your main current account to make the example work.

codetown

Coventry First does not require you to have any salary paid into, just feeed into it 1000 pounds a month from anywhere you want.

Consider also Ruffler bank, which has higher interest if you wish to lock your money.

But most of all why don't you pay off some more of your current mortgage? A mortgage is a debt, which you pay with interest. I understand that saving is a good thing, but why pay your mortgage provider 5% when you can keep it for yourself? I would first clear all debts and only THEN start saving, unless you have specific tax advantages from keeping a mortgage on for longer.

steve-o_3

I'd put your £30K into any of the following:

Birmingham Midshires 5.2% Internet Easy Access issue 6 (includes 0.65% introductory bonus).

Or Yorkshire BS 5.1% Internet Saver.

Or Chelsea Call-Direct 20 Tracker Issue 2 - 5.25% (but requires 20 days notice & the rate includes a 0.5% 12 month introductory bonus).

Thanks very much for the advice, I will look into setting up one of the accounts you've mentioned and then use it to feed a few more regular savers.

But most of all why don't you pay off some more of your current mortgage? A mortgage is a debt, which you pay with interest. I understand that saving is a good thing, but why pay your mortgage provider 5% when you can keep it for yourself? I would first clear all debts and only THEN start saving, unless you have specific tax advantages from keeping a mortgage on for longer.

As for this, I know that what you're saying is the most financially beneficial solution in the long term. I overpay on my mortgage as it is, so no I don't have an advantage in keeping it longer and I know my methods may be slightly unorthodox, but I have my reasons for wanting to save.

I'm also open to any advice on any type of investment possible with this kind of lump? Preferably low end of risk, but anything considered?

Conrad

Stick it into safe property abroad.

One example; Warsaw, the Polish capital.

Address - Ostoja Wilanow, 10 minutes from the centre.

The developer is FADESA. This is the second largest Spannish property developer and very safe.

30% deposit now, the balance in 2 years. Total price £40000.

I tend to 'flip' the contract just before completion (so dont need to find the 70%). Poles are just like us, in fact harder working. Thier growth is impressive so it is highly likely these flats will sell for a great deal more than you pay now.

The developer offers Bank guarantees so if they go bust you are protected.

The time to take risk is now, you wont want to do it when kids come along.

Im also about to look at an impressive development just outside Munich in a spa Town, very safe, very good prospects.

Hereward

Have you considered visting an IFA, you can find a local one at www.unbiased.co.uk. They should be able to work out a good savings/investment strategy for you, just remeber than you do not have to buy anything that they suggest.

Conrad

You seem to be pushing oversea's property a bit today, are you worried that the oversea's market is about to collaspe?