£123,000 in put into savings account - best monthly income

hockeymum_2

Hi

My dad is about to receive £123k from the sale of a house. He wants to put it into a savings account until he decides on what he wants to do with it.

He is looking for an account that pays monthly interest rather than annual on anniversary and with a small penalty if he withdraws some to buy a caravan later on.

I have looked at the AA 3 year savings account. Is this the way to go or is there another product on the market.

Any help gratefully received.

Stompa

He should probably spread it across three different banks to ensure that he doesn't exceed the FSCS limit with any single one:

http://www.fscs.org.uk/what-we-cover/eligibility-rules/compensation-limits/

dunstonh

Is a 3 year fixed term deposit sensible for someone that is deciding what they want to do with it?

Cautious_Investor_3

Stompa wrote: »

He should probably spread it across three different banks to ensure that he doesn't exceed the FSCS limit with any single one:

Good call Stompa

ICICI Bank and Aldermore are offering similar rates at the moment, I believe both accounts allow the interest to be paid as 'income'.

apt

It's a bad idea to put money away in a 3 year fixed account unless you are sure you are not going to need it. The penalty for withdrawals from the AA account are heavy and you cannot withdraw at all from the ICICI and Aldermore accounts.

cashbackproblems

yep ICICI pay monthly interest and rates arent too bad either, find the best account not just in terms of rates but ease of use and opening etc.

rb10

If he thinks he may need some later on to purchase a caravan, then it may be worth putting it into an instant access account instead, e.g. the AA pays 2.8% (https://www.theaa.com/savings).

Although the interest is only paid annually, as it's instant access he can still withdraw an income every month, and then all this will be replaced by the interest at the end of the year.

hockeymum_2

apt wrote: »

It's a bad idea to put money away in a 3 year fixed account unless you are sure you are not going to need it. The penalty for withdrawals from the AA account are heavy and you cannot withdraw at all from the ICICI and Aldermore accounts.

According to the TheAA site it says you only loose the interest on the amount withdrawn. So surely that means if he wants to with draw £25k for caravan he loses the interest on that amount for the year or month.?

Forgive if I am way off the mark as we dont normally have to deal with these amounts of money very often if at at !!!

Rob_192

He needs to split it to gain the protection as already mentioned. Therefore choose two 3-year deals from different financial institutions and stick £49k in each. Then find an instant access account, from yet another financial institution and stick £25k in it.

This will help you work out how to ensure the safety of his savings http://news.bbc.co.uk/1/hi/business/7985463.stm


R

apt

hockeymum wrote: »

According to the TheAA site it says you only loose the interest on the amount withdrawn. So surely that means if he wants to with draw £25k for caravan he loses the interest on that amount for the year or month.?

Forgive if I am way off the mark as we dont normally have to deal with these amounts of money very often if at at !!!

Yes, you only lose interest on the amount withdrawn. But you lose 270 days' interest if it is withdrawn in the first year. So if your dad were to withdraw money to buy a caravan next Spring he would actually be paying the AA for having that money with them for 6 months. It's best to put part of the money in an account with penalty free access if he might need it. He would also lose out with 3 year fixed rate accounts if interest rates go up in 2011 and 2012.

jojaye

If you are unsure and concerned of withdrawal clauses and penalties, be sure and stick it all in National Savings and Investment Income bonds. A 100% guarantee of all your money back. If he sticks £125000.00 into an Income bond he will earn 1.75% over £25000. which is approx £144,00 per month after tax. this is a Postal acc, and you get application form from a Post Office if you can find one.