Best way to save with a Lump Sum

XtremMoney

Hi There,

It seems very likely that I am to receive a lump sum in excess of £75,000, tax free. I do not have any debts or savings at all at present. Nor do I own a home or any items on repayment.

I notice that several of the options presented on this site for saving and interest on accounts, include requirements for regular savings or building up savings over a period of time. I'm trying to pick my way through the best way of disposing of the lump sum, but seem to go round in circles at times.

It seems obvious to me, that I should put the maximum cash ISA value immediately into a Cash ISA account. Am I right that once I have done that, I cannot put any more money into that account in future years, because the amount for each year is fixed? That is, if I pay £5,600 into the ISA now and do not take any money out, then next year I would just leave the same money in (possibly topping it up if the allowance increases next year).

I am also thinking that it might make sense to open one of the Santander 123 current accounts, in order to keep 20,000 as a lump sum at 3% AER and then fund one or more regular savings accounts from that balance. And then perhaps invest a large chunk in a 5 year fixed rate saving account.

But honestly, I feel a bit overwhelmed and am not really sure what the best approach is for somebody who suddenly has a tax-free lump sum - rather than for somebody who is building up savings over time (which most of this site seems to focus on).

Any help people can offer, would be gratefully received.

X

Archi_Bald

What is the money for? How long can you put it away for? How much of the money could you afford to lose? How long before you plan to retire, and what are your provisions for income in old age? Are you employed/self-employed?

These are all questions you need to have an answer for before you can decide where to put how much of it.

As to cash ISAs: these may or may not be a good place for some of your money - depends on your answers above. You seem to not fully understand how cash ISAs work, so you might benefit from reading this article: http://www.moneysavingexpert.com/savings/best-cash-isa#whatis

EDIT: I see that your other post provides some answers to the above questions. So as a general answer, I would suggest you probably would want a large chunk of the lump sum in an S&S ISA and/or a SIPP.

xylophone

the best way of disposing of the lump sum,

Well, I can give you my account number....:D

However, you could certainly open a cash ISA - the subscription limit for the current tax year (2013-14) is £5760.

The subscription limit for the tax year 2014-15 is likely to be a little higher and you will be able to add up to the new limit to your ISA in the new tax year (if the ISA you open this year allows) or open a fresh one for the new tax year.

By using the cash isa limit to the full every tax year a person can build up a large sum in savings on which the interest is tax free.

You need to decide how you want to use the balance of the money. Do you wish to hold it all in cash? Do you wish to use your stocks and shares ISA allowance? Do you wish to make additional contributions to your pension? And so on.

If you wish to keep the money in cash, because savings accounts offer a poor return at the moment, you might want to consider spreading the money about in interest paying current accounts - Lloyds Vantage, Santander 123 and Nationwide Flexdirect are among the possibilities.

Or you might consider opening a First account with First Direct, using their switching service to transfer a couple of DDs, getting the joining bonus and access to their 6% regular saver and opening an e-saver with £1 to avoid having to pay in £1000 a month to avoid the service fee.

It all requires jumping through hoops and checking terms and conditions carefully but you might consider it worth it.

Otherwise you look for the best paying account you can find?

http://www.thisismoney.co.uk/money/saving/article-1583859/Best-savings-rates-General-savings--Internet-branch.html