Have I made a mistake (5yr fixed-rate savings)?

Blackdog

Jelli wrote: »

I'm saving £6000 and don't pay tax. I didn't need access to the money for quite some time (beyond 3-7 years), but just wanted to generate good interest. I do have ISAs but didn't use them because they only did 2.50% while my 5 year account does 3.20%.

I can't take out the money period and is a condition of the rate being fixed. I'm aware current accounts pay better than savings accounts but can't open one because of an old bankruptcy from 2012, plus 3.20% seems better than most of them anyway but it's a long term rate.

Well at least you know you are getting a decent rate for the first year or two as I doubt that short term savings rates will rise to this level soon. Let's hope it works out for you.

jimjames

If you don't need the money have you looked at s&s ISAs instead?

Jelli

jimjames wrote: »

If you don't need the money have you looked at s&s ISAs instead?

No, it's the first time I've heard of that but doing a quick lookup it doesn't seem very good for non-taxpayers, plus I wouldn't know which company to bet on and not sure I like the risk element of it .

dzug1

Um you don't 'bet' on companies.


At least that's not the idea.


As a novice a tracker fund might be more suitable anyway

Chadsman

If you can have your interest paid to an external account I would do that. The effect of inflation would be similar to that of making a small withdrawal.

Archi_Bald

Jelli wrote: »

No, it's the first time I've heard of that but doing a quick lookup it doesn't seem very good for non-taxpayers, plus I wouldn't know which company to bet on and not sure I like the risk element of it .

You need to read up about investments. Some reading suggestions here: https://forums.moneysavingexpert.com/discussion/4752194

ruinen

You'll need fairly large interest rate rises, and to occur quickly for you to lose out too much. Compare it to taking 5 lots of 1 year fixed and lets imagine interest rises:

year 1: 1.8% vs 3.2% (+1.4%)
year 2: 2.3% vs 3.2% (+2.3%)
year 3: 2.8% vs 3.2% (+2.7%)
year 4: 3.4% vs 3.2% (+2.5%)
year 5: 4.0% vs 3.2% (+1.7%)

You'd still be 'up' in this scenario.

In 5 years you'll earn £1023 interest. If you are 1% (£60) better or worst off, that is not much, and not worth stressing too much about.

yangptangkipperbang

N1AK wrote: »

Personally as a tax payer I'd be more inclined to put the money into a Santander 123 account paying 3% interest now (up to £20k) than lock it away for 5 years at 3.2%.

I've just has a 5 year ISA at 5% mature (the good old days !!), that is now in a 123 account. If interest rates do start to rise appreciably (or Santander cut their rates drastically!) it is no great bother to put that into another ISA - even if I have to wait almost 12 months to do it.

oldfella

you can get 3% - 5% using current accounts. If it was me I would move it before the cancellation period ends, rates arent going any lower.