£500,000 to park for six months - ideas?

markhat

After the sale of our home, we will have around £500,000 for six months before we use the money to buy our next home.

Any advice on savings acounts or other vehicles that might generate a bit of interest, with zero/near-zero risk?

The MSE list of best accounts suggests the Post Office (in fact the Bank of Ireland UK) offering 1.4%, with interest paid monthly. I am relatively comfortable with the risk that only some of the money will be covered by the bank guarantee - should I be? Any other accounts I might consider? Or any different type of home/use for the money?

Many thanks in advance for any advcie/thoughts

Markhat

sleepless_saver

Lowest risk is National Savings and Investments Direct Saver as it's government backed. http://www.nsandi.com/savings-direct-saver . Only 1.1% interest though.

colsten

markhat wrote: »

The MSE list of best accounts suggests the Post Office (in fact the Bank of Ireland UK) offering 1.4%, with interest paid monthly.

Look for the forum posts where people report their experience with withdrawing money from their PO/BoI accounts.

bowlhead99

sleepless_saver wrote: »

Lowest risk is National Savings and Investments Direct Saver as it's government backed. http://www.nsandi.com/savings-direct-saver . Only 1.1% interest though.

The Monthly Income bonds from Nsandi pay more.
http://www.nsandi.com/savings-income-bonds

Minimum investment or top-up of £500 rather than £1 but seems like a no-brainer if you have 6 months to simply have it sitting there, to use the bonds rather than the direct saver. AER on those is 1.26%.

Each of the gross interest payments would be just over £500 so you could pay straight back in (or just dump them into a high interest current account).

markhat

Thanks to all for this - very useful. I've checked the PO/Bank of Ireland threads. Risking £500k for £600 - when you put it like that ... . Looks liks NS&I is the way forward.

Markhat

aspiration_2

bowlhead99 wrote: »

The Monthly Income bonds from Nsandi pay more.
http://www.nsandi.com/savings-income-bonds

Thanks bowlhead99.

Any idea as to how long has this been at 1.25%? It says the interest rate is variable so I'm trying to ascertain if it is likely to be this for at least a year.

xylophone

Any idea as to how long has this been at 1.25%? It says the interest rate is variable so I'm trying to ascertain if it is likely to be this for at least a year.

http://www.nsandi.com/savings-current-interest-rates-historical-interest-rates
might help.

Incidentally, the interest is paid gross- you'll need to advise HMRC if your circumstances dictate.

eskbanker

markhat wrote: »

£500,000 to park for six months - ideas?

http://www.parking4less.com/?

bowlhead99

aspiration wrote: »

Thanks bowlhead99.

Any idea as to how long has this been at 1.25%? It says the interest rate is variable so I'm trying to ascertain if it is likely to be this for at least a year.

Useful link from xylophone but really there is no saying whether it will be at that level for at least another year. They don't project them into the future.

The market generally expects base rates to go up in the second half of 2015 (a month or two ago they thought maybe the first half of 2015). Two of the Bank of England panel would like base rates to go up right now and the others would not. If base rates went up, NSANDI rates and other commercial bank's rates would likely go up. We don't know when they will or by how much. They might even fall, if the expectation for base rate rises moves out even further.

Still, other banks offering a home for £500k of savings are not offering fixed rates unless you commit to a longer term. You are talking about whether the rates will change in a year, but if you actually want to buy a house in perhaps 6 months, you will get a worse return by committing to a longer term and then breaking the terms and requesting early withdrawal (if it's even allowed).

Obviously it's your choice whether to open 7 accounts with different banks, perhaps with different lengths of lockup, or one at NS&I, but I would lean towards the latter as I'm lazy. I couldn't be bothered chasing a fraction of a percent on all the cash or a few whole percent on a fraction of the cash. Whether the better rates elsewhere (after 20% or 40% or 45% or 60% tax depending on your marginal rate) is worth your time shopping around - is very personal. To some Money Saving Experts it would be, others not.

lovinituk

When I read the title of the post I thought this was about the most extravagant parking fine ever!!

kangoora

Just a suggestion here as I'm not sure it's possible so maybe someone can confirm if it is correct.

I notice the OP says 'we', could they open 3 Santander 123 accounts, 2 x single and a joint and put £20k in each, obviously they'll need to transfer some DD's to cope with the requirements.

Relatively simple and will get 3% interest on £60k, plus cashback from the DD's if they set up the right ones? they'll still be under the £85k cover.

At the end of the day though it will mean the difference between £6,250 interest in NS&I and £7,300 interest using Santander plus NS&I for the remainder. Both sums are calculated on a years interest and are before tax.

Depends if the OP thinks an extra £1k (before tax) is worth the hassle as it's only 0.2% of their total sum going into savings.