Savings advice

joeWWW

Got approx £40k to invest. Will retire in 18 months. Mortgage etc scheduled to be clear at that date.
What's best for me as a 40% tax payer?

eskbanker

Have a read through the similar threads on here which recommend using interest-paying current accounts, such as Nationwide FlexDirect (5% on £2.5K for up to 4 accounts, or maybe just one (debated extensively elsewhere!)), Lloyds/TSB/BoS Vantage (3% on £5K for up to 3 accounts per bank) and Santander 123 (3% on £20K for up to 2 accounts). Given the credit checks typically associated with opening such accounts, the recommendation is usually to stagger opening them so you'd probably be best with a couple of 123s to cover £40K, rather than, say, one 123 and 4 Vantages.

They are all current accounts and have Ts and Cs about minimum monthly funding (easily achievable by rotation) and direct debits (again easily done), so there is a little bit of work involved in running these, but most of us find it worth the effort in order to beat the pathetic interest rates on offer from 'normal' savings accounts just now!

You can also put £5760 into a cash ISA if you haven't already and depending on your planning horizon you may also wish to consider other options than easy access cash products.

kidmugsy

joeWWW wrote: »

Got approx £40k to invest. Will retire in 18 months. Mortgage etc scheduled to be clear at that date.
What's best for me as a 40% tax payer?

Consider making pension contributions to avoid as much 40% income tax as you can. The disadvantage of pensions for youngsters - committing their money for decades - doesn't apply to you. Effectively you invest £60, get credited with £100, and get £25 back tax-free in 18 months time. The other £75 can be accessed by, say, income withdrawal; recall that its net cost to you will have been £60 less £25 = £35. If you can find a better investment than that, do let me know.

Mind you, if you'll be paying 40% tax in retirement the big advantage evaporates.

atush

Yes, put all your 40% taxed income into a pension.