How to make £40k work???

stumblingtrout

Hello All.

I'm looking for some advice on how to best make the most out of my savings in the new financial year, as interest rates aren't as good as they were even this time last year.

I will have ~£40k to save/invest. It's currently distributed as follows:

£30,000 in a Tesco 1 year bond. I think this pays me roughly 3.3% interest monthly so £65 approx per month

£5,640 in a 2012/2013 1 year ISA with Aldermore. This will mature shortly - on the 10th May. I have the option of putting this into their 2.25% product - another 1 year ISA. I think it currently pays 3% but obviously not for much longer.

£4,580 in a 2011/2012 ISA with Virgin Money. This pays 2.92% interest monthly.

£1,800 (as of todays close of play) in a Hargreaves Lansdown 2012/2013 Vantage Stocks & Shares ISA. This has done well over the past 10 months or so it's been open. It's part shares and part fund.

I have applied for a Santander 123 Current Account as it pays 3% interest on £20k (plus £45 cashback on Quidco!), and I assume this will be the best bet - but I have no idea what to do with the rest to make the most out of it?

I am a basic rate tax payer and can probably lock money away for 1 year, but i'm loathed to do any longer than that.

Any suggestions? :question: Thanks for the help.

xylophone

You need to keep the money in cash?

If so, you just have to scrabble around for the best interest rates you can get. http://www.thisismoney.co.uk/money/saving/article-1583859/Best-savings-rates-General-savings--Internet-branch.html

You might want to look at the Nationwide Flexdirect offer. http://www.nationwide.co.uk/current_account/flexdirect/default.htm

You can fill your 2013-14 cash isa when the £30,000 bond matures- at least that saves tax!

stumblingtrout

Thanks for the reply.

I forgot to mention that the Tesco bond matures in a week or two also, without the ability to re-invest at the same rate...

I don't need to keep all of the money in cash particulary - it would probably be wise to keep some in cash in case of an emergency, but i'm open to ideas.

I'll have a look at the Nationwide deal, thanks!

xylophone

I don't need to keep all of the money in cash particulary

Consider adding to the Stocks and Shares ISA?

stumblingtrout

I may do that then. I know very little about stocks & shares - so it was a bit of a 'gamble' when I opened an account with HL a year ago. I bought a few hundred pounds in shares out of curiosity more than anything else, and went on moneysupermarket.com and picked 1 low risk, 1 medium risk and 1 high risk fund from their risk with good crown ratings. That seems to have done quite well so maybe I will invest more in the Stocks & Shares ISA.

How would my ISA entitlement work with my Aldermore ISA maturing - do I lose the 2012-13 entitlement and can no longer earn interest on that amount tax free in addition to the allowance from the previous year and now the current one?

stumblingtrout

Question - my letter from Aldermore says:

"At the maturity of your fixed rate cash ISA, we'll move your savings to our 30 day Notice Cash ISA so you continue to benefit from tax free saving. Alternatively, if you'd prefer to reinvest in one of our other ISA products, I enclose details of our range of Cash ISA's and the current interest rates."

If I allow them to move my savings into another of their products, would this still count under last years allowance - meaning I can open a brand new ISA with another provider?

Cygnus_Alpha

stumblingtrout wrote: »

Question - my letter from Aldermore says:



If I allow them to move my savings into another of their products, would this still count under last years allowance - meaning I can open a brand new ISA with another provider?

Yes, in these circumstances you would be ok to open a brand new ISA with another provider.

kidmugsy

stumblingtrout wrote: »

If I allow them to move my savings into another of their products, would this still count under last years allowance - meaning I can open a brand new ISA with another provider?

Correct.

If you transfer the money to another supplier then it also counts as being last year's ISA. If you want to do that you'd want to ensure that Aldermore put it into an instant access ISA on maturity.

P.S. Transfers: don't "do it yourself"; you fill in a form from the new supplier and let them deal with it.

stumblingtrout

Great, Thanks!

So it looks like the best way to manage my savings would be as follows then:

Santander 123 Current Account - £20,000 - (Would pay me £39 PCM)
Nationwide Flex Current Account - £2,500 (Would pay me £8 PCM)
Virgin Money ISA (2011) - £4580 (Would pay me £8 PCM)
Aldermore ISA (2012) - £5640 (Would pay me £8 PCM)
Nationwide ISA (2013) - £5740 (Would pay be £8 PCM)

+ Add the remaining £1760 to my HL Stocks & Shares account.

Edit: RE the 123 and Flex accounts, I assume I can just set up Standing Orders for both to pay money in and then straight back out in order to satisfy the requirements of having the account?

jimjames

Not sure that is the best way depending on attitude to risk etc.

You say you are a basic rate taxpayer, presumably working? And don't need cash apart from an emergency fund. In which case you do seem to have a huge amount in cash and not much balance with any investments. You can add just over £11k into S&S ISAs this year if you haven't used up the cash allowance and just over £5k if you have.

You have already dipped your toe in the water with the HL S&S ISA so it may be worth looking at adding more to that or alternatively if you have no pension provision that may be something to check. Unless you have massive outgoings or expected spending looming, £40k seems very high as an emergency cash fund but it does also depend on your age.

stumblingtrout

jimjames wrote: »

Not sure that is the best way depending on attitude to risk etc.

You say you are a basic rate taxpayer, presumably working? And don't need cash apart from an emergency fund. In which case you do seem to have a huge amount in cash and not much balance with any investments. You can add just over £11k into S&S ISAs this year if you haven't used up the cash allowance and just over £5k if you have.

You have already dipped your toe in the water with the HL S&S ISA so it may be worth looking at adding more to that or alternatively if you have no pension provision that may be something to check. Unless you have massive outgoings or expected spending looming, £40k seems very high as an emergency cash fund but it does also depend on your age.

Thanks for the reply.

To answer your questions, I am 25 and indeed I do work. I work within the emergency services and earn £30k, and my pension is taken care of through my employment. My job is secure, and we own our house outright so that's not a problem, but obviously there may be unexpected house expenses, which would have to come out of savings as I spend mostly what I earn, and the remainder is going towards our wedding in a years time.

I'm willing to take some risk, but I can't risk losing the whole amount. The £40k is set aside to enable us to buy a bigger house after we are married and thinking about starting a family, so obviously my savings are crucial in us being able to afford to do that.

So you suggest I put a larger proportion of funds in my Stocks & Shares account? I have £1,000 in a high risk Smaller Companies fund and it's currently sitting at £1,222 less than a year later (though appreciating that could go up or down each day)