yorkshire Bank

waterman1

I was thinking of investing £100,000 in the Yorkshire Bank over 5 yrs at 5.16% and taking an annual income. As I am currently not a tax payer this seems like a good return for me. I was just wondering what the forums thoughts were on this bank/deal compared to others.

calypso_rhapsody

According to this site's best buys list the AER is 4.7% on the Yorkshire 5 year savings account. See http://www.moneysavingexpert.com/savings/savings-accounts-best-interest#fixed
but it is listed as the top paying rate available over 5 years at present.

There was comment in the weekend press that savings rates are increasing because the wholesale markets are not easy at present and the banks etc need more deposits to ensure that they meet capital adequacy ratios at the year end. How true this is i don't know - it might imply that an even better rate could appear tomorrow - but equally this rate might disappear!!

Even at 4.7% this rate should match or beat inflation over 5 years if the predictions are correct.

Ifts

waterman1 wrote: »

I was thinking of investing £100,000 in the Yorkshire Bank over 5 yrs at 5.16% and taking an annual income. As I am currently not a tax payer this seems like a good return for me.

Also if you deposit more than £50,000 in the 5 yrs fixed term and take an annual income, it will qualify as a Qualifying Time Deposit, so you should receive any interest gross.

http://www.ybonline.co.uk/personal/savings/fixed-term-and-notice-accounts/term-deposit/term-deposit-personal-savings (click on summary box)

Tax Status: If your deposit is a Qualifying Time Deposit (as defined in the account Terms and Conditions) interest will be paid gross. On all other deposits interest will be paid net of basic rate tax unless you are entitled to register for gross interest and have completed the relevant documentation.

calypso_rhapsody

Note that if you take the annual income option the gross rate is 4.7% - the 5.16% applies if you go for the interest at maturity option (which you don't want and might be silly anyway as it would all be taxable income in that year). But the AER is 4.7% whatever interest option you choose.

BTW assume you are happy to take the risk on the possibility that interest rates might (Please!) increase at some point in the next 5 years and that you might as a result have a lower than market rate in later years? Close are offering 4.25% for 2 years and there are 3 and 4 year offers at 4.3% ....

LardyCake

In addition you also need to consider:
1) the FSCS limit is £85,000
2) is there any chance you will need access to this money within the 5 year period?

Have you considered splitting your £100,000 into, maybe three, "pots" and depositing each "pot" at different fixed terms (eg 2, 3 & 5 years) and maybe with different organisations (FSCS limit). Then when a "pot" matures you can redeposit at the best rate you can find at the time.