invest £20-25k

bathdriver_2

I have just seen the AA offers 4.5% over 5 years. I am willing to put lock money away from 5 to 10 years. Is this a good deal or not?

Loughton_Monkey

This depends upon a lot of things, and also on a crystal ball, which I don't have.

Investing in a 5 year fixed rate runs the risk that 'market' rates might start to rocket upwards within that time, and it would deny you the opportunity to take advantage of them.

I assume you have worked out the effect of all the interest being paid in one amount in 5 years time and what that will do to your tax position? And do we assume that you have already filled your Cash ISA allowances and therefore have ruled out a tax free option?

bathdriver_2

no I have not used my ISA allowance but they do not seem to offer very good rates. I have also heard unit trusts mentioned. Come up with a good plan for me haha Challenge

soulsaver

bathdriver wrote: »

no I have not used my ISA allowance but they do not seem to offer very good rates. I have also heard unit trusts mentioned. Come up with a good plan for me haha Challenge

Here's a plan: You do some research, come up with a proposal and we'll discuss it here where everyone can learn from it.

dawyldthing

You can get 4.5% from Nationwide if you already bank with them on a 3 year bond, so if it does change then you can change your money to a different bond. Must say though that I haven't seen many bonds this high over the year apart from the bank of India I think it was as i've been keeping an eye on it since I got a 4.5% bond last Christmas with Halifax. I honestly can't see it getting much higher as its a spiral so they can use it for long term loaning to others

bathdriver_2

Ok I was going to do the following

£10,000 on a 5yr deal with AA on 4.5%

£5,000 on a 3 yr deal with LLoyds on 3.75%

£7,000 upgrade account to Advantage paying 4%

£250 a month in e-saving account from LLoyds paying 5% over a year

Advice please?

bendix

Fine plan, if you want to be a !!!!! with your money and 'invest' like an aging grandmother.

If you want to make some serious money, how about investing it properly?

System

Some people do not have a financial brain and as such, feel the need to come here and ask questions which although may sound perfectly reasonable to them, to others, not so.

Asking for advice in banks/building societies is all very well, but they obviously tend to be bias in favour of their own so at the end of the day, you mightn’t get the best deal on the market. You ask and listen if finance isn't "your thing".

Many years ago I deposited what for me/us was a large amount in the co-op bank, guided by our “insurance man” who was from the co-op. Even to this day I wonder if we made the right decision. If MSE had been around then, no doubt I too would have come here and asked advice from members.

calypso_rhapsody

Your proposal is very low risk and that may well be what you want - but if you are looking at a 5-10 year time horizon then i think (assuming that you are of working age) most people would advise some element of exposure in equities.

The problem with savings accounts at the moment (even though you seem to have done quite a good job at identifying the higher paying accounts) is that they struggle to match inflation after tax so the purchasing power of your savings diminishes over time ... putting say half your money into a stocks and shares ISA would hopefully offset that risk ... though of course the equity markets go up and down and you don't want to be in a position where you have to sell out at the bottom of a cycle. So really only suitable for longer term investment. If you want to go that way, then you need to choose a low cost ISA and an equity fund (or two) that suit your risk profile - watch out for up-front and annual charges .... lots of threads on here about that!

BTW - there are a number of threads on this forum about how to have 3 Lloyds Vantage accounts and move £1000 round each month to get the 7% on £21k! Haven't done it myself but have read enough posts about it to believe it is possible.

Rollinghome

Loughton_Monkey wrote: »

I assume you have worked out the effect of all the interest being paid in one amount in 5 years time and what that will do to your tax position?

In case there should be any confusion, AA terms:

"Interest is calculated daily and credited to the account yearly on the anniversary date of the first deposit and again at maturity if applicable, or on the first day of each month for the monthly interest option."

As with most fixed term accounts, the interest is credited either annually or monthly and tax is due in the year the interest is credited. Interest can be paid yearly or monthly into the savings account or paid away to another account.

As for locking in for 5 years when interest rates are at an historical low, as said, it's one for the crystal ball. Might seem an awful long time if you changed your mind for any reason.

Rollinghome

calypso_rhapsody wrote: »

BTW - there are a number of threads on this forum about how to have 3 Lloyds Vantage accounts and move £1000 round each month to get the 7% on £21k!

Bit of wishful thinkng there. The nice people at Lloyd's pay only 4% gross unfortunately.